Jeff Bezos: Future: Real Estate Doesn’t Obey Moore’s Law

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In his 2000 Annual Shareholder Letter, in a paragraph titled Future: Real Estate Doesn’t Obey Moore’s Law, Jeff Bezos discussed Amazon’s optimism about the future of e-commerce and the company itself. Bezos cites several reasons for this optimism:

  1. Rapid improvements in technology: Moore’s Law and similar trends are making computing power, storage, and bandwidth cheaper and more powerful, allowing Amazon to enhance the customer experience through features like personalization
  2. Limited online competition: While traditional retailers are using technology to cut costs, they are not focusing on transforming the customer experience like Amazon
  3. Large potential market: Bezos believes that 15% of retail commerce could eventually shift online, offering Amazon a significant growth opportunity
  4. Strong company foundation: Amazon highlights its brand, customer relationships, technology, infrastructure, finances, talent, and dedication to customer focus as key advantages in this “infant industry.”

Here’s an excerpt from the letter:

Let’s move to the future. Why should you be optimistic about the future of e-commerce and the future of

Industry growth and new customer adoption will be driven over the coming years by relentless improvements in the customer experience of online shopping.

These improvements in customer experience will be driven by innovations made possible by dramatic increases in available bandwidth, disk space, and processing power, all of which are getting cheap fast.

Price performance of processing power is doubling about every 18 months (Moore’s Law), price performance of disk space is doubling about every 12 months, and price performance of bandwidth is doubling about every 9 months.

Given that last doubling rate, will be able to use 60 times as much bandwidth per customer 5 years from now while holding our bandwidth cost per customer constant.

Similarly, price performance improvements in disk space and processing power will allow us to, for example, do ever more and better real-time personalization of our Web site.

In the physical world, retailers will continue to use technology to reduce costs, but not to transform the customer experience. We too will use technology to reduce costs, but the bigger effect will be using technology to drive adoption and revenue.

We still believe that some 15% of retail commerce may ultimately move online.

While there are no foregone conclusions, and we still have much to prove, today is a unique asset.

We have the brand, the customer relationships, the technology, the fulfillment infrastructure, the financial strength, the people, and the determination to extend our leadership in this infant industry and to build an important and lasting company. And we will do so by keeping the customer first.

The year 2001 will be an important one in our development. Like 2000, this year will be a year of focus and execution. As a first step, we’ve set the goal of achieving a pro forma operating profit in the fourth quarter.

While we have a tremendous amount of work to do and there can be no guarantees, we have a plan to get there, it’s our top priority, and every person in this company is committed to helping with that goal. I look forward to reporting to you our progress in the coming year.

As I usually do, I’ve appended our 1997 letter, our first letter to shareholders. It gets more interesting every year that goes by, in part because so little has changed. I especially draw your attention to the section entitled ‘‘It’s All About the Long Term.’’

We at remain grateful to our customers for their business and trust, to each other for our hard work, and to our shareholders for their support and encouragement. Many, many thanks.

You can read the entire letter here:

Jeff Bezos – Amazon 2000 Annual Shareholder Letter

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