As an investor, I believe that in order to become better, I must read -- and read a lot. But the reading has to be purposeful. The material doesn't necessarily have to specifically be about investing, but it should enable me to learn more about society, people and, of course, business.
From an investing standpoint, Warren Buffett is required reading, regardless of how you invest. However, today, I'm not talking about Buffett but another CEO who has provided an immense of amount of business knowledge over his career. More importantly, like Buffett, this CEO and business titan has actually taken the time to share his knowledge and thinking with everyone else through annual shareholder letters.
I'm talking about Jeff Bezos, founder and CEO of Amazon (AMZN) . Even though -- to my deep regret -- I have never invested in Amazon (and sadly doubt that I will get an opportunity to do so at an acceptable price to me), Bezos' short, but succinct letters to shareholders are a must read for anyone interested in business. (Amazon is holding in TheStreet's Trifecta Stocks and Growth Seeker portfolios.)
Bezos' shareholder letters are usually 5-10 pages, and they are light and easy to read. Read them all. He started writing these letters in 1997 and they are all available on the Amazon investor relations web page.
You'll learn some really fascinating things. Consider these facts from Amazon's early years:
-- By 1998, Amazon had built a business with a billion dollars in revenue "with just $30 million in inventory and $30 million in net plant and equipment."
-- Amazon was focused on becoming "the world's most customer-centric company."
There are also lessons that I would argue even the best business schools in the world don't teach, or fail to grasp. For example, Bezos is constantly reminding Amazon employees to "be afraid, to wake up every morning terrified." Most MBAs would probably say Bezos' is talking about being afraid of the competition. Wrong. Instead, he wants Amazon to be afraid of its customers. Bezos' genius is in his reasoning:
"Our customers have made our business what it is, they are the ones with whom we have a relationship, and they are the ones to whom we owe a great obligation. And we consider them to be loyal to us - right up until the second that someone else offers them a better service." (emphasis added).
Competition can't harm you much if you are taking excellent care of your customers. Most of us are taught to think that even in commodity businesses, it's all about price. Wrong again. If a customer is taken good care of, he's not going to change associations to save a few nickels.
It will take you less than two hours to read all of Bezos' letters and they will teach you a lot. If I were a professor, I would make them required reading. And if you are interested in business and investing, they are required reading.
We will discuss another "must-read" CEO in our next column.