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April 21, 2006

Weighing Amazon's vision

Posted by Monica Soto at 11:11 AM

Amazon.com CEO Jeff Bezos today released his annual letter to shareholders.

The gist? The online retail giant is good at measuring things. (They love to weigh every little thing at this company.)

But Amazon has made some bets in recent years that cannot be measured or weighed in a math-based sort of way. A prime example:

It has continued to lower prices for customers over time -- it began this process in 2000 -- as it has become more efficient in the way it picks, packs and ships items, while also achieving the benefits of scale.

(Conventional wisdom would be to stop giving so much of the store away at this point.)

It has also made significant investments in technology and free-shipping promotions, all of which have served to chip away at the bottom line, at least for the short-term.

Amazon has consistently tried to point investors to the long-term. Bezos continued to defend this approach in his annual letter:

Math-based decisions command wide agreement, whereas judgment-based decisions are rightly debated and often controversial, at least until put into practice and demonstrated. Any institution unwilling to endure controversy must limit itself to decisions of the first type. In our view, doing so would not only limit controversy ... it would also significantly limit innovation and long-term value creation.

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