Investment Diversification Lessons on Amazon’s Jeff Bezos – The King of The World

Investment Diversification Lessons on Amazon’s Jeff Bezos – The King of The World

Amazon has successfully become one of the most valuable companies in the world by market share making Jeff Bezos the king of the world, according to me. But I am not surprised. Why? Because I have been following his growth trajectory and operating style for a long time to know that this will happen sooner or later. And yes, I am a big fan of Jeff. I wondered why it didn’t happen sooner. Apple, Microsoft, and Alphabet have been Amazon’s biggest hurdles in some specific domains, but hey, it scaled through, beating the competition. So, what’s Amazon’s strategy?

Amazon focused on retail, B2B (business to business) commerce, cloud services and one important thing – diversified investment and acquisitions portfolio. For the B2B and retail, Amazon carefully creates structures that incur low spending to beat prices of competitors hence taking over the market space.

Most key users of the Amazon retail platform are those taking advantage of retail arbitrage. You get goods from Amazon slightly cheaper than the competition and resell on other retail outlets. People involved in this retail arbitrage have been known to make millions of dollars annually. They sell and distribute their strategies to other wannabes in the business and this leads to more arbitragers and the numbers keep rising.

All from the cheap structure/infrastructure built by Amazon. Note that Amazon also created the AWS (Amazon Web Services) to serve as the base for the retail angle of their business. But guess what, they made it “extra-large’ in that it could be sold to other users. And guess which category makes the bulk of this user group? The B2B clan – more money.

Payments for Amazon’s AWS has not only covered the expenses involved in operating it but covers the cost of sustaining Amazon’s retail unit. And in 2018, AWS grossed $7.2 billion in domestic (U.S.) sales (revenue).

But enough of Amazon’s central business. We are only interested in Jeff Bezos’s investments diversification strategy in this article.

Jeff Bezos’s diversification and investments strategy is the key.

While growing up, I used to have people tell me that the best way to make money is to set up a business, focus on it with all your might – not mind the number of years that goes by, and you’ll be successful.

If you stray out of this advice, you’ll be tagged “Jack of all trade and master of none”. This means you have no clue about what you are doing which means you are bound to fail. This advice has been proven to be not only wrong BUT misleading.

Amazon has successfully shown that it’s OK to diversify. They have consistently built their investment portfolio over the years which have culminated to billions of dollars in net worth. Their investment portfolio aside their retailing has been one of the major driving forces behind their growth trajectory. Do you think Jeff is making money from Amazon ALONE? Forget it. He runs his own private venture capital firm called Bezos Expedition and has become a big-time investor in Twitter, Business Insider, Google, Airbnb, Uber, Workday, and tons of other startups and companies. And he is the owner of The Washington Post which he acquired for $250 million back in 2013. He acquires companies in virtually any sector you can think of – real estate, transportation, robotics, food, retail, entertainment, etc.

The best way to become a billionaire is to watch and learn how billionaires operate and draw up lessons you can adopt. Below are a few lessons from Amazon/Jeff Bezos.

You Don’t Have To Be Expert In it – Just Get In!

In 2010, Bezos started a firm called Blue Origin. Its focus was human spaceflight. All Bezos wanted was to explore space travel. He knew nothing concrete about space travel and planetary astronomy. He also had no idea how cinematography works, but he had Amazon.com, a place where you get good movies, toys, and more.

You don’t have to become an expert in a field before you venture into it. I have seen rich folks open hospitals but they are not doctors. The key here is management. Get a good manager then all you’ll do is check progress reports – which everyone can do.

Don’t Worry Yourself With The Numbers, Just Watch The Internal Growth

As long as the internal growth is fine and the money keeps coming, then forget the stock price. Most times, stock prices are just a facade. Most Nigerian companies’ stocks never grow beyond N0.89 per share yet they still keep making money. MTN’s stocks dropped in May 2019 because of EFCC’s investigation but guess what? They added 2.1 million new subscribers and grew their service revenue by 13.4% in the same month.

According to Bezos:

The stock is not the company. And the company is not the stock. And so, as I watched the stock fall from $113 to $6, I was also watching all of our internal business metrics — number of customers, profit per unit … every single thing about the business was getting better. And so, while the stock price was going the wrong way, everything inside the company was going the right way.

Treat Investments As A Life Goal

The word expedition means “a journey taken by a person or group of persons for the purpose of exploration or research…” Bezos’s private investment company is called Bezos Expedition. He made himself get addicted to acquiring and investing companies.

It is now a life passion for him. No matter the wealth he has amassed, Bezos keeps buying companies. If it shows a sign of profitability or even growth, he’ll buy it. And there is only one outcome with this character trajectory – being the king of the world which he has become.

Small Is Better When It Comes to Nigeria

Sometimes it might be complicated investing or buying already established companies due to a series of documentation, paper works, background, and financial investigations, etc. In fact, in Nigeria, it might be more difficult to buy a company than run one. However, you can start with tech-based firms (online) that have shown signs of profitability.

I recently came across a guy who wanted to sell his online platform (in the gaming niche). So we talked. He showed me record trails, analytics, registered and paying users, etc. The online platform gets approximately N400,000 in revenue monthly. That’s almost N5 million annually. He already has a working system that brings in that revenue. If you acquire it, invest more money into expanding that system, you might triple the revenue stream. In the eyes of Bezos, it’s gold!

Do you want to grow like Bezos? Treat investments diversification as a priority. Don’t be scared to buy startups. You can buy a platform that has no good PR (public relations). They are not featured on Tekedia or the national dailies. But they have a good revenue stream. You can buy a company with weak stock prices with promising internal operations and you’ll make more in the long run. You don’t have the money, save monthly. You can start saving a fixed amount yearly, so at the end of the year, you can buy businesses, no matter how small, as long as they are profitable or they have a good income stream.

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2 thoughts on “Investment Diversification Lessons on Amazon’s Jeff Bezos – The King of The World

  1. We can say all we think or like about Jeff, but it will take someone getting into his head and climbing into his skin, to truly understand how he does it. What you read/hear from him can never capture what happens whenever a key decision is to be made. Same is applicable to all the great guys out there.

    So the idea of getting a good manager can only work if you have the clarity of purpose and visioning capabilities, you cannot hire anyone to do such for you, else it becomes that person’s vision. To be able to identify great leaders and wonderful managers is a privilege only few people are bestowed with; do not think it’s easier than running the business itself.

    Sound judgement is more or less the most important quality anyone for big things must have, and it comes from within. You can hire hundreds of advisors and consultants, but someone must make the final call; everything hinges on the person’s ability to make this all important call.

    Most times it’s a wild goose chase when you try to replicate what another person did, especially when it has more to do with internal qualities or excellence of the soul, than learned skills and observations.

    The uniqueness of each human makes everything more complex and interesting too.

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