How Jeff Bezos’ Early Risk-Taking Paid Off for Investors
Written by
J. Arky
Edited by
Amber Barkley
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Jeff Bezos is currently one of the richest people in the world. Thanks largely to Amazon, Bezos has built an empire, one with a far reach and highly profitable returns. This type of wealth and status was not always the norm for Bezos, who, in his early days, took some chances to get his company off the ground. That little online retailer is now valued at a market cap of nearly $2.5 trillion.
Nathan Brunner, the CEO at boterview and a tech entrepreneur himself, said, “Jeff Bezos doesn’t get enough credit for the risks he took. He decided to quit one of the highest-paying jobs in the world, senior V.P. at D.E. Shaw, to launch an online bookstore.”
Looking at where Bezos is now, Brunner added, “Any sane entrepreneur would surely cash out their money and go on vacation. But Bezos has continued to keep the vast majority of his money invested in Amazon.”
So how did Bezos turn an early internet bookseller into a global online shopping center? The short answer is that he rolled the dice on a few opportunities — some which fizzled out, but others created wealth not just for him, but his backers, as well.
Investment in Fulfillment Centers
As Bezos started to venture out on his own and build Amazon from the bottom up, he eventually had to scale up. Toward the end of the 1990s, Bezos took the leap and put a lot of money behind Amazon’s fulfillment centers in order to ramp up distribution unlike any company on the internet had ever done prior.
“At that time, the company was burning cash and the investment was very risky,” Brunner said. “From an outside perspective, it looks reckless. But Bezos had a long-term vision, and that risk ultimately allowed Amazon to grow and dominate the e-commerce landscape.”
Launching Amazon Marketplace
In 1999, Amazon Marketplace was introduced by Bezos. This was a platform that allowed products from third-party sellers to be listed on Amazon. To the business world, this was viewed as a move that came with inherent risk, because it had never really been done before then.
“This was a huge gamble, because it opened the door to competition within Amazon’s own website,” Brunner said. “The bet ultimately paid off, as Marketplace helped Amazon expand its product selection and gain a … competitive advantage by accessing its competitors’ sales data.”
Creating Amazon Web Services
Bezos had a bold idea that wasn’t guaranteed to pay off: Amazon Web Services (AWS), a cloud platform that launched in 2006, a time when “the cloud” was not as well known as it is today.
“Cloud computing was then just emerging, and hence dangerous,” Brunner said.
That’s because the economy and countless analysts believed that Amazon’s focus was primarily on e-commerce, with this new venture detracting from the main day-to-day operations.
“Bezos recognized that companies needed scalable computing power and saw an opportunity to offer Amazon’s existing data infrastructure to businesses of all sizes,” Brunner explained. “AWS would eventually become one of Bezos’ most profitable bets, transforming Amazon from an online reseller into the dominant force in cloud computing.”
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