Jeff Bezos on strategy

“We’ve had three big ideas at Amazon that we’ve stuck with for 18 years, and they’re the reason we’re successful: Put the customer first. Invent. And be patient.”

“There are two kinds of companies: Those that work to try to charge more and those that work to charge less. We will be the second.”

“Your margin is my opportunity.”

“A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.”

Why the best products don’t always win, AKA how to build a moat around your business

Sachin Rekhi lists 3 reasons better products don’t always win:

  • Switching costs: too expensive to switch to the better product.
  • Lack of distribution: your product is better but you can’t get it to the customer.
  • Network effects: everyone is using the other company’s product, and that matters.

The same points can be viewed as a defensive strategy: If you want to build a moat around your product, make sure it has high switching costs and network effects, and lock up distribution.

Many successful companies have done this. But as customers, we fear and resent lock-in. The alternative strategy is typified by Amazon: relentless focus on generating value for customers, resulting in remarkable trust and brand promise.

Guess which age group matters most?

Via The Ad Contrarian:

In a society in which half of consumer spending is done by people over 50; in which 75% of financial assets are controlled by people over 50; in which 62% of all new cars are bought by people over 50; in which 94% of all CPG categories are dominated by people over 50, the fact that the average [advertising] agency has almost no one of this age is incomprehensible. It is a testament to narcissism, delusion, prejudice and stupidity.

Is your company truly disruptive? Try this simple litmus test

Zach Abramowitz thinks that disruptive companies should be able to answer this question:

Five years from now, people will not know how they managed without [company x] because before [company x] existed people did __________, and now that [company x] exists people do _________.

This is ingenious. Try it for your company – it’s fascinating. Here’s how I answered it for Seeking Alpha:

Five years from now, serious investors will not know how they managed without Seeking Alpha because before Seeking Alpha existed, investors purchased stocks ignorant of the insights of other smart investors, and now that SA exists they consider the insights of other smart investors before purchasing stocks.

The litmus test of a great business model

From Betaworks’ John Borthwick: VCs are judging startups by the wrong metrics by Pandodaily’s Errin Griffith:

“All too often a business model is a tax on the user flow inside a product,” he [Betaworks’ John Borthwick] said. Google’s business model of paid search results is so successful because it goes with the grain of the users’ workflow. Google invested a lot in making their search ads really good, he said.

Doing things that don’t scale

From Paul Graham’s Do Things that Don’t Scale:

One of the most common types of advice we give at Y Combinator is to do things that don’t scale. A lot of would-be founders believe that startups either take off or don’t. You build something, make it available, and if you’ve made a better mousetrap, people beat a path to your door as promised. Or they don’t, in which case the market must not exist.

Actually startups take off because the founders make them take off. There may be a handful that just grew by themselves, but usually it takes some sort of push to get them going… The most common unscalable thing founders have to do at the start is to recruit users manually.

Wow, that brings back memories. In the early days of Seeking Alpha I remember personally reaching out to bloggers to ask whether I could republish their posts, and explaining to each one how it would get them a larger audience. It was a ton of manual work that wasn’t scalable.

Making other people successful

From Sean McNulty’s Farewell For Now Seeking Alpha:

Outside of enjoying the journey, my writing for Seeking Alpha has been profitable in a multitude of ways.

First, it assisted in being hired for internships with Global Securities and Morgan Stanley during which I learned a tremendous amount.

Second, it forced me to think through investment ideas far more in depth than I otherwise would as well as provided me with real time feedback via Seeking Alpha commentators. The latter of which provided the most value, as I have grown to have tremendous respect for the commenters and have often engaged in extensive discussions with them in private messages…

Third, it actually turned out to be financially profitable. When I first began writing for Seeking Alpha, there was no payment system set up for contributors. It has been a pleasure to watch the website grow in popularity, and I greatly appreciate Seeking Alpha implementing a payment system, which has had a noticeable effect on the quality of the content.

Perhaps every company has a goal that ultimately reduces to (at least) one of these: provide basic necessities; make other people successful; give other people pleasure. Which is yours?