18 Investing Lessons from Jeff Bezos’s Amazon Annual Shareholder Letters
Where Business Genius Meets Investor Wisdom.
Amazon’s annual shareholder letters offer rare investment insights from one of business history’s most incredible value creators, Jeff Bezos (1997-2000), and later from Andy Jassy (2021-2023).
Beyond typical corporate communications, these letters revealed Bezos’s thinking about building long-term growth and creating enduring shareholder value, transforming Amazon from an online bookstore into a global powerhouse.
These letters are not just corporate communications; they provided a roadmap for identifying exceptional businesses and understanding what makes them worth owning for decades, not just quarters.
By studying Bezos's wisdom, investors can learn to distinguish between merely renting stocks and truly owning pieces of remarkable “dreamy businesses” built for sustained growth and customer delight.
The letters resonated highly with us, and the themes outlined below were similar to how we invest at Vision Capital Fund. We wanted to share these highlights with you.
1 | Stocks as part owners of businesses
“What Do You Own? At a recent event at the Stanford University campus, a young woman came to the microphone and asked me a great question: “I have 100 shares of Amazon.com. What do I own?” I was surprised I hadn’t heard it before, at least not so simply put. What do you own? You own a piece of the leading e-commerce platform.”
- 1999 Amazon Annual Shareholder Letter
2 | Focus on the long term and creating shareholder value
“It's All About the Long Term. We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.” - 1997 Amazon Annual Shareholder Letter
3 | Be a long-term investor with an owner mindset instead of a short-term renter of stocks
“Long-term thinking is both a requirement and an outcome of true ownership. Owners are different from tenants. I know of a couple who rented out their house, and the family who moved in nailed their Christmas tree to the hardwood floors instead of using a tree stand. Expedient, I suppose, and admittedly these were particularly bad tenants, but no owner would be so short-sighted. Similarly, many investors are effectively short-term tenants, turning their portfolios so quickly they are really just renting the stocks that they temporarily “own.”
- 2002 Amazon Annual Shareholder Letter
4 | The market is a voting machine in the short-term, and a weighing machine in the long-term, find companies that can keep weighing heavier
“So, if the company is better positioned today than it was a year ago, why is the stock price so much lower than it was a year ago? As the famed investor Benjamin Graham said, ‘‘In the short term, the stock market is a voting machine; in the long term, it’s a weighing machine.’’ Clearly there was a lot of voting going on in the boom year of ’99—and much less weighing. We’re a company that wants to be weighed, and over time, we will be—over the long term, all companies are. In the meantime, we have our heads down working to build a heavier and heavier company.”
- 2000 Amazon Annual Shareholder Letter
5 | Higher or lower stock prices over the short-term do not warrant any celebration
“As I write this, our recent stock performance has been positive, but we constantly remind ourselves of an important point– as I frequently quote famed investor Benjamin Graham in our employee all-hands meetings “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” We don’t celebrate a 10% increase in the stock price like we celebrate excellent customer experience. We aren’t 10% smarter when that happens and conversely aren’t 10% dumber when the stock goes the other way. We want to be weighed, and we’re always working to build a heavier company.”
- 2013 Amazon Annual Shareholder Letter
6 | Focus on free cash flows, rather than GAAP accounting earnings
“In that 1997 letter, we wrote, “When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we’ll take the cash flows.” Why focus on cash flows? Because a share of stock is a share of a company's future cash flows, and, as a result, cash flows more than any other single variable seem to do the best job of explaining a company's stock price over the long term.”
- 2001 Amazon Annual Shareholder Letter
7 | Focus on free cash flow per share, not earnings, as working capital and capital expenditures are not factored
“To our shareholders: Our ultimate financial measure, and the one we most want to drive over the long-term, is free cash flow per share. Why not focus first and foremost, as many do, on earnings, earnings per share or earnings growth? The simple answer is that earnings don’t directly translate into cash flows, and shares are worth only the present value of their future cash flows, not the present value of their future earnings. Future earnings are a component—but not the only important component—of future cash flow per share.
Working capital and capital expenditures are also important, as is future share dilution. Though some may find it counterintuitive, a company can actually impair shareholder value in certain circumstances by growing earnings. This happens when the capital investments required for growth exceed the present value of the cash flow derived from those investments.
Cash flow statements often don’t receive as much attention as they deserve. Discerning investors don’t stop with the income statement.”
- 2004 Amazon Annual Shareholder Letter
8 | Focus on operating leverage, keeping fixed costs fixed, negative working capital, and high inventory turnover
“Since we expect to keep our fixed costs largely fixed, even at significantly higher unit volumes, we believe Amazon.com is poised over the coming years to generate meaningful, sustained, free cash flow.”
- 2001 Amazon Annual Shareholder Letter
“Since many of our costs, such as software engineering, are relatively fixed and many of our variable costs can also be better managed at larger scale, driving more volume through our cost structure reduces those costs as a percentage of sales.”
- 2003 Amazon Annual Shareholder Letter
“We also like the fixed cost nature of original programming. We get to spread that fixed cost across our large membership base. Finally, our business model for original content is unique. I’m pretty sure we’re the first company to have figured out how to make winning a Golden Globe pay off in increased sales of power tools and baby wipes!”
- 2014 Amazon Annual Shareholder Letter
“We have a cash generative operating cycle because we turn our inventory quickly, collecting payments from our customers before payments are due to suppliers. Our high inventory turnover means we maintain relatively low levels of investment in inventory—$480 million at year end on a sales base of nearly $7 billion.
Amazon.com’s free cash flow is driven primarily by increasing operating profit dollars and efficiently managing both working capital and capital expenditures. We work to increase operating profit by focusing on improving all aspects of the customer experience to grow sales and by maintaining a lean cost structure.”
- 2004 Amazon Annual Shareholder Letter
9 | Knowing the future growth of free cash flow per share, will determine if current stock prices are attractive
“If you could know for certain just two things--a company’s future cash flows and its future number of shares outstanding--you would have an excellent idea of the fair value of a share of that company’s stock today. (You’d also need to know appropriate discount rates, but if you knew the future cash flows for certain, it would also be reasonably easy to know which discount rates to use.)
It’s not easy, but you can make an informed forecast of future cash flows by examining a company’s performance in the past and by looking at factors such as the leverage points and scalability in that company’s model. Estimating the number of shares outstanding in the future requires you to forecast items such as option grants to employees or other potential capital transactions. Ultimately, your determination of cash flow per share will be a strong indicator of the price you might be willing to pay for a share of ownership in any company.”
- 2001 Amazon Annual Shareholder Letter
10 | Find and own dreamy businesses whose products and services customers love, can grow large with strong capital returns, and can be highly durable.
“A dreamy business offering has at least four characteristics. Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time– with the potential to endure for decades. When you find one of these, don’t just swipe right, get married.
Well, I’m pleased to report that Amazon hasn’t been monogamous in this regard. After two decades of risk taking and teamwork, and with generous helpings of good fortune all along the way, we are now happily wed to what I believe are three such life partners: Marketplace, Prime, and AWS. Each of these offerings was a bold bet at first, and sensible people worried (often!) that they could not work. But at this point, it’s become pretty clear how special they are and how lucky we are to have them. It’s also clear that there are no sinecures in business. We know it’s our job to always nourish and fortify them.”
- 2014 Amazon Annual Shareholder Letter
11 | Find and own truly customer obsessed businesses, for they keep experimenting, reinventing to avoid their decline
“True Customer Obsession There are many ways to enter a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality. Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples. Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture best creates the conditions where all of that can happen.”
- 2016 Amazon Annual Shareholder Letter
12 | Great businesses can have near unlimited upside when they do very well, different from baseball, asymmetry drives power laws, where a few winners account for most returns
“Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.”
- 2015 Amazon Annual Shareholder Letter
13 | Accessing quality can be taught; one must recognise what good looks like, articulate high standards
“Recognition and Scope What do you need to achieve high standards in a particular domain area? First, you have to be able to recognize what good looks like in that domain.
“Intrinsic or Teachable? First, there’s a foundational question: are high standards intrinsic or teachable? If you take me on your basketball team, you can teach me many things, but you can’t teach me to be taller. Do we first and foremost need to select for “high standards” people? If so, this letter would need to be mostly about hiring practices, but I don’t think so. I believe high standards are teachable. In fact, people are pretty good at learning high standards simply through exposure. High standards are contagious.
Bring a new person onto a high standards team, and they’ll quickly adapt. The opposite is also true. If low standards prevail, those too will quickly spread. And though exposure works well to teach high standards, I believe you can accelerate that rate of learning by articulating a few core principles of high standards, which I hope to share in this letter.”
- 2017 Amazon Annual Shareholder Letter
14 | Have and maintain relentlessly high standards
Perhaps a little less obvious: people are drawn to high standards– they help with recruiting and retention. More subtle: a culture of high standards is protective of all the “invisible” but crucial work that goes on in every company. I’m talking about the work that no one sees. The work that gets done when no one is watching. In a high standards culture, doing that work well is its own reward– it’s part of what it means to be a professional. And finally, high standards are fun! Once you’ve tasted high standards, there’s no going back.
Insist on the Highest Standards. Leaders have relentlessly high standards– many people may think these standards are unreasonably high.”
- 2017 Amazon Annual Shareholder Letter
15 | It will be harder and longer than you think, crucial to have realistic beliefs
“A close friend recently decided to learn to do a perfect free-standing handstand. No leaning against a wall. Not for just a few seconds. Instagram good. She decided to start her journey by taking a handstand workshop at her yoga studio. She then practiced for a while but wasn’t getting the results she wanted. So, she hired a handstand coach. Yes, I know what you’re thinking, but evidently this is an actual thing that exists. In the very first lesson, the coach gave her some wonderful advice. “Most people,” he said, “think that if they work hard, they should be able to master a handstand in about two weeks. The reality is that it takes about six months of daily practice. If you think you should be able to do it in two weeks, you’re just going to end up quitting.” Unrealistic beliefs on scope– often hidden and undiscussed– kill high standards. To achieve high standards yourself or as part of a team, you need to form and proactively communicate realistic beliefs about how hard something is going to be something this coach understood well.”
- 2020 Amazon Annual Shareholder Letter
16 | Writing concisely forces clarity, brilliance, and quality, and the process cannot be rushed
“Six-Page Narratives. We don’t do PowerPoint (or any other slide-oriented) presentations at Amazon. Instead, we write narratively structured six-page memos. We silently read one at the beginning of each meeting in a kind of “study hall.” Not surprisingly, the quality of these memos varies widely. Some have the clarity of angels singing. They are brilliant and thoughtful and set up the meeting for high-quality discussion. Sometimes they come in at the other end of the spectrum. In the handstand example, it’s pretty straightforward to recognize high standards. It wouldn’t be difficult to lay out in detail the requirements of a well-executed handstand, and then you’re either doing it or you’re not.
The writing example is very different. The difference between a great memo and an average one is much squishier. It would be extremely hard to write down the detailed requirements that make up a great memo. Nevertheless, I find that much of the time, readers react to great memos very similarly. They know it when they see it. The standard is there, and it is real, even if it’s not easily describable. Here’s what we’ve figured out. Often, when a memo isn’t great, it’s not the writer’s inability to recognize the high standard, but instead a wrong expectation on scope: they mistakenly believe a high-standards, six-page memo can be written in one or two days or even a few hours, when really it might take a week or more! They’re trying to perfect a handstand in just two weeks, and we’re not coaching them right.
The great memos are written and re-written, shared with colleagues who are asked to improve the work, set aside for a couple of days, and then edited again with a fresh mind. They simply can’t be done in a day or two. The key point here is that you can improve results through the simple act of teaching scope– that a great memo probably should take a week or more.”
- 2020 Amazon Annual Shareholder Letter
17 | Continuously maintain your distinctiveness despite persistent pressures to conform, it is worth it
“In what ways does the world pull at you in an attempt to make you normal? How much work does it take to maintain your distinctiveness? To keep alive the thing or things that make you special?
I know a happily married couple who have a running joke in their relationship. Not infrequently, the husband looks at the wife with faux distress and says to her, “Can’t you just be normal?” They both smile and laugh, and of course the deep truth is that her distinctiveness is something he loves about her. But, at the same time, it’s also true that things would often be easier – take less energy – if we were a little more normal…
We all know that distinctiveness – originality – is valuable. We are all taught to “be yourself.” What I’m really asking you to do is to embrace and be realistic about how much energy it takes to maintain that distinctiveness. The world wants you to be typical – in a thousand ways, it pulls at you. Don’t let it happen.
You have to pay a price for your distinctiveness, and it’s worth it. The fairy tale version of “be yourself” is that all the pain stops as soon as you allow your distinctiveness to shine. That version is misleading. Being yourself is worth it, but don’t expect it to be easy or free. You’ll have to put energy into it continuously.
The world will always try to make Amazon more typical – to bring us into equilibrium with our environment. It will take continuous effort, but we can and must be better than that.”
- 2020 Amazon Annual Shareholder Letter
18 | In business and investing, compound interest is the world's eight wonder: understand it, earn it, and don’t pay it. Return is the component, time is the exponent.
“Albert Einstein is sometimes credited with describing compound interest as the eighth wonder of the world (“He who understands it, earns it. He who doesn’t, pays it”). We think of iterative innovation in much the same way. Iterative innovation creates magic for customers. Constantly inventing and improving products for customers has a compounding effect on the customer experience, and in turn on a business’s prospects.
Time is your friend when you are compounding gains. Amazon is a big company with some large businesses, but it’s still early days for us. We will continue to be insurgent—inventing in businesses that we’re in, in new businesses that we’ve yet to launch, and in new ideas that we haven’t even imagined yet. It remains Day 1.”
- 2021 Amazon Annual Shareholder Letter (Andy Jassy)
In conclusion, it was apparent that Jeff Bezos knew very early on what a great business would look like, and he probably might have even done very well as a long-term investor, had he not started Amazon.
But Bezos took the giant leap and, with Amazon, has created far more impact than one could have envisioned in shareholder value and jobs, allowing even more businesses and startups to develop and build on top of their technological, marketplace, logistics, cloud infrastructure, and many more to come.
These timeless principles from the Amazon letters offer a framework for identifying exceptional businesses worth owning for decades. They also gave insights into how Amazon has consistently navigated the innovator's dilemma by embracing several principles that Bezos articulated in his shareholder letters.
Investors can apply these lessons by focusing on customer obsession, free cash flow per share growth, and long-term thinking to build strong investment portfolios of “dreamy businesses” that can keep growing, reinvesting, compounding, and presenting attractive asymmetric returns.
PS: You can download the respective individual Amazon Annual Shareholder letters via the Amazon Investor Relations website, or here via one combined PDF to read.
16 March 2025 | Eugene Ng | Vision Capital Fund | eugene.ng@visioncapitalfund.co
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An absolutely amazing post! Thank you!
One of the best I have read on investing lessons.
Great job