A Tale of Two Companies
January 2022
During the DOTCOM crisis of the late 1990s, NBC aired a special broadcast with internet entrepreneurs before they were going to pull the plug. The host Tom Brokaw asked one of the men if he was even able to spell “profit”. After a few moments of silence, the man replied. “P-R-O-P-H-E-T.”
The vision of this “prophet” was not fully understood. One writer of The Washington Post described him as feverishly awkward and refused to report on his business idea. After leaving the newspaper, the man bought The Washington Post.
Jeff Bezos became one of the most influential people in the world. His long term thinking that applied to Amazon, Blue Origin and other ventures is epitomised by The Clock of the Long Now. Funded by him and currently under construction, it is designed to keep time for 10,000 years, reminding future generations on the importance of longevity.
In the same vein, at the end of every letter to shareholders, Bezos attached the original 1997 letter titled “It’s All About the Long Term” sharing ideas like “Customer Obsession” and the importance of size as the crucial prerequisite to fully exploit the business model. Before stepping down as the CEO of Amazon, he ends his last letter in 2021 with the phrase. “It remains Day 1.”
Often criticised for exploiting his employees, avoiding taxes and having an unfair monopoly position, many of Amazons business decisions were made intuitively, resembling a Startup culture. Bezos differentiates between Type 1 decisions that are irreversible and Type 2 decisions in which one can return to the starting point easily. Those Type 2 decisions have to be made quickly by individuals or small groups. Most organisations at a certain size treat every decision like a Type 1 decision which has the consequences of inertia, risk aversion and the resulting lack of innovation.
The avoidance of Power Point presentations in favour of narrative scripts also ensures that ideas are thought through. After reading those proposals silently in small groups each person can reflect individually without falling into groupthink. While other companies ask the marketing firm what to do next. Amazon (and to an even greater extend Apple) offers the customer products that they never asked for. Those can become failures like the Fire Phone that in turn lead to the very successful Amazon Echo.
"Market research doesn't help. If you had gone to a customer in 2013 and said, 'Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?' I guarantee you they'd have looked at you strangely and said, 'No, thank you.'"
Jeff Bezos
The rise of Netflix and Disney Plus, which both run on Amazon Web Services, shifted the focus from physical products towards visual entertainment. In our attention economy, even the investments of Big Tech into self driving cars are investments into digital services. Rather than dominating the automotive industry, Apple Car and Zoox can be seen as two more hours per day in which customers watch Amazon Prime. The subscription is the goal.
While there are many more examples of Jeff Bezos eclectic approach, what sets him apart is the combination of the humanities, science and business. With competitors trying to emulate the Amazon model, due to the monopoly position almost everyone is bound to fail or be bought. The two types of companies according to Bezos are those that work to charge more and those that work to charge less. While Amazons position is clear, maybe the alternative is even more promising.
“You have eternity for you”, Steve Jobs told Bernard Arnault, a french businessmen and possibly the worlds richest man, two years from now. “Because I sell iPhones. Will they still be around in 25 years? But what I am sure of is that the world will continue to drink Dom Pérignon.”
As the founder of the LVMH group, Bernard Arnault understands the power of names, myths and locations. Starting with the acquisition of Christian Dior, his portfolio now includes 75 maisons including Louis Vuitton, Bulgari and Hennessy. The success of his venture can be summarised in two words: creating desire.
The definition of luxury contradicts almost everything that Silicon Valley stands for. Controlled channels, personalised services, longevity and scarcity go against the automated, data driven tech world. Even expensive status symbols like the iPhone don’t fall into the definition of luxury because after the planned obsolescence its worth fades with every update.
Brick and mortar is still the future for prestigious brands, offering a place between work and home that Big Tech is trying to merge into one. With a “buy less, buy better” attitude, the customer of tomorrow searches for exceptional experiences. Emotion beyond ownership. Creativity beyond trends. The fastest growing segments include fine food, travel, hospitality and cannabis.
In todays world, no one is too big to fail and Bezos is very aware of that. History has shown that the average lifespan of similar companies is around 30 years instead of 380 years (Dom Pérignon). The key to “prolonging the demise”, according to him is to obsess over customers and move the heavy industries to outer space.
And while one can argue what the best business model is, there is one thing that shines without marketing, packaging or PR:
“Art is luxury at its best. It is unique, universal, cosmopolitan, timeless, and holds its value. It is a vehicle for “self-actualization,” according to Maslow’s hierarchy of needs. It is typically not functional. But, as such, it is indispensable.”
Erwan Rambourg
READ MORE
Invent and Wander: The Collected Writings of Jeff Bezos (2020) by Walter Isaacson
Future Luxe: What’s Ahead for the Business of Luxury (2020) by Erwan Rambourg
