Once, it only sold books, but now it has evolved into a global giant in e-commerce retail and cloud computing. Looking back on Amazon's growth history, if we had to summarize it in one word, it might be long-termism. Many outstanding entrepreneurs worldwide have been labeled long-termists by the media, but the most representative is still Amazon's Jeff Bezos.

As the fourth article in the series on the NASDAQ “Seven Sisters”, this article will introduce Amazon.

01. From Selling Books to Selling 'Everything'

In 1999, Bezos said in a speech at the American Booksellers Association, "We don't see ourselves as just a bookstore or a music store. We hope that people can buy whatever they want here." One of the most important principles of Amazon's business model is that customer experience comes first. Specifically, it focuses on providing lower prices, more flexibility, and convenience to create value for customers. By 2004, Amazon had become the largest online store, with products ranging from books, CDs, clothing, and electronics, attracting more and more online buyers. The Prime membership program and Kindle products played crucial roles in its expansion; billions of dollars spent on research and development and powerful data centers laid the foundation for Amazon's entry into the cloud computing field.

Behind this is Amazon's widely discussed flywheel effect. It is rumored that the sketch of this model was first outlined by Amazon founder Bezos on a napkin.

The specific logic of Amazon's "growth flywheel" is: By reducing the cost structure, prices are lowered, enhancing the shopping experience for buyers and attracting more buyers and traffic. More buyers attract more sellers, enriching product categories and improving seller experience, creating a virtuous cycle that drives more platform traffic.

02. Long-Termism I: Continuous Investment in Building Logistics Moats

Amazon's business encompasses e-commerce, cloud computing, hardware, e-books, streaming media, physical stores, etc. The industry believes that Bezos has created a new way of doing business, specifically that he is indifferent to short-term profits and pursues only growth. Amazon recorded losses for many years before finally turning a profit a few years ago, with profits fluctuating significantly.

In fact, Bezos invests all profits in the future. He spares no effort in building moats for the company, even if it negatively impacts short-term profits. Many companies, after going public, can be swayed by share prices and tempted to cater to short-term profits. However, Bezos made it clear in his first shareholder letter upon Amazon's 1997 IPO that he would not be swayed by Wall Street and would unhesitatingly choose long-term value over short-term profits.

Bezos practices what he preaches, evident in Amazon's decisions to build its logistics network and invest in cloud computing.

Today, logistics is a crucial moat defending Amazon's position as a powerful commercial empire and a dominant player in e-commerce.

At the end of 2023, The Wall Street Journal reported that internal Amazon documents showed that the company had delivered over 4.8 billion packages in the US by Thanksgiving 2023 and predicted it would deliver approximately 5.9 billion packages by the end of the year, surpassing UPS's previous forecast of nearly 5.3 billion, making Amazon the largest parcel delivery company in the US.

Earlier, Amazon topped the 2023 Transport Topics/SJ Consulting Group list of the world's top 50 freight forwarders.

03. Long-Termism II: Becoming the World's Largest Cloud Service Provider

While e-commerce provides Amazon's foundation, cloud services offer its imagination.

In 2008, AWS was a small division within Amazon. At the time, the company's plan to invest heavily in cloud computing faced internal skepticism. Critics questioned why an online retailer would invest so much in cloud computing.

CEO Andy Jassy couldn't provide a definitive answer but was convinced of the future of cloud computing: "We're inventing something special that will create enormous value for customers and Amazon. We must seize the initiative before our competitors and make a long-term commitment to investing in AWS."

Fifteen years later, AWS generates annual revenues of tens of billions of dollars. If Amazon had slowed its investment in AWS in 2008-2009, it would be a very different company today.

However, it should be noted that AWS faces increasing competition from Microsoft and Google. Through low pricing, Google Cloud is aggressively stealing customers from AWS. Due to its lack of software business, AWS already has a disadvantage in profitability compared to Microsoft Azure and now faces fierce competition from large models.

Therefore, Amazon's positioning in the AI era will determine its future development. Based on Amazon's recent moves, it appears to be committed to long-term infrastructure services.

On April 13, 2023, Amazon, which had been relatively quiet in the AIGC space, suddenly joined the generative AI race.

Amazon CEO Andy Jassy boldly declared that large language models and generative AI are crucial to Amazon's future decades, and that AWS is investing heavily in them. Unlike other cloud service providers rushing to compete on speed, AWS has taken a more measured approach, delivering a combination of services.

Focusing on large models: Introducing Amazon Bedrock and Amazon Titan to help businesses improve efficiency and innovation. For AI training: Offering two cost-effective virtual machine instances, EC2 Trn1n and EC2 Inf2, specifically optimized for generative AI, to help businesses save on training and inference costs. Releasing Amazon CodeWhisperer, an AI coding assistant, for free to individual users.

Instead of directly tackling large models like most cloud service providers, Amazon has taken a broader machine learning approach, addressing industry pain points through product application scenarios and industry ecosystem services.

04. Conclusion: Amazon Remains Committed to Long-Termism

Over the past decade, AWS has pursued a restrained approach, adhering to a service ethos of being a tool rather than a caregiver, choosing its battles wisely. This is a form of professionalism that eschews speculation and emotional manipulation in favor of patience and strategic focus.

In the new round of generative AI competition, we continue to see Amazon's unhurried approach and commitment to long-termism, focusing on underlying ecosystem services and machine learning.

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