In Praise of Jeff Bezos

 | Aug 06, 2013 | 3:00 PM EDT  | Comments
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The purchase of the The Washington Post by Jeff Bezos for $250 million has sparked an enormous outpouring of praise for him and his leadership of Amazon (AMZN).

It's also brought out an equal amount of snark from critics who don't like him or Amazon's business model.

Even with these two divergent views of him and his leadership of Amazon, it's undeniable that Bezos' stature in tech has definitely been raised several notches in the past year. He is now regularly lauded by many in the press. What he's most praised for is his commitment to the long-term. Laudatory Bezos articles almost always cite his 1997 letter to shareholders preceding Amazon's public offering. No question that Bezos had a vision for "e-tailing" before anyone else, and he executed it to perfection.

Yet, critics persist. Despite steadily rising revenues for Amazon, these critics constantly point out how Amazon has yet to show meaningful profits for all its years of success. While this is true, it's important to look at how much Bezos has plowed cash flows back into capital expenditures (such as distribution centers). Take away those reinvestments and you have steadily rising cash flows as well tied to the higher revenues.

I would say I'm a reformed Bezos snarker. Anyone who just dismisses Amazon's accomplishments over nearly 20 years just doesn't seem to be seeing what an important enterprise Bezos has built.

I don't think I fully appreciated Bezos or Amazon until a few weeks ago. I was researching the gaming industry in China and Japan and spoke with a game publisher who told me about the industry in Japan. He told me that every game publisher there -- large and small -- uses Amazon Web Services (AWS) as their rent-a-server for cloud capacity. He told me that there's no way anyone will ever be able to compete with AWS in this type of flash cloud capacity. The investment in servers would be too great. And the pricing from AWS is so low that no one would be able to stand the losses for so many years after entering that business.

In the meantime, Japanese gamers go up and down. Some have hits, others have misses. But AWS keeps collecting the tolls -- and think how many other businesses around the world.

Someone else told me last year that Apple (AAPL) would never have been able to launch its iCloud service, if not for the excess server capacity they it rented from both Amazon's AWS and Microsoft (MSFT).

Bezos created that AWS business out of an abundance of frustration for the fact that someone else couldn't provide such a service to Amazon in its early days.

Not bad for a side business.

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