Friday, May 13, 2016

Is it Amazon or Amazing?

I have been so impressed with my investment in Amazon lately that I pulled out an old book interview with David Shaw to reread the part where he discusses hiring Jeff Bezos.  If you aren't aware of what D. E. Shaw & Co. is then all you need to know is that they are pretty much some of the smartest investors on the planet and basically invented the concept of high frequency trading.

It is not hard to see in hindsight why Shaw saw so much potential in Bezos when he first hired him because they basically have very similar views on how to achieve success.  It is clear to me now that Bezos just like Shaw was very interested in using technology, speed and volume to benefit from massive economies of scale that would drive competitors to either emulate them or be forced out of business.

Amazon is known for being a retail juggernaut but I think Amazon's real secret is their desire to leverage technology to bring massive economies of scale to every market that they can get their hands on.  Whether it be shipping, television or cloud computing the result is always the same...drive out competitors by offering superior pricing power.  The success that they have achieved with this business model is undeniable and is attracting very high profile partnerships with amazing companies in their own rights such as Salesforce and Netflix.

Why is Amazon so successful?

The answer to this question for me is simple.  This undaunting success of Amazon is so characteristic of companies led by visionary founders such as Steve Jobs with Apple or Elon Musk with Tesla.  The desire and hunger to navigate the financial equivalent of deep ocean tempests and come out on the other end wiser and stronger is something only a founder is willing or able to do.  I see Amazon continuing to achieve great success so long as Bezos is at the helm.

Is it too late to get involved?

Based on my own past experiences I would not be adding to my investment in Amazon here at all time highs.  The nature of the technology business is fickle and the crowd that has quickly rushed in to enjoy Amazon's success will just as quickly rush out at the slightest hint of failure.  There is a difference between investing in a great company and being able to profit from that investment.  Remember, when it comes to investing, patience, patience, patience.