A handstand is the perfect balance of strength, balance, focus, and discipline. And while I, unfortunately, don’t have a funny video for you, a free-standing handstand captures well many ideas inherent in Amazon’s culture (which is why Bezos mentioned them in his latest letter to shareholders). And given that Amazon is my largest public equity position, I thought it prudent to spend time this week reflecting on the letter.

Business & Money

Looking at the “Marketplace” section, I think it’s worth pointing out a common misconception. Many people I speak with seem to have this idea that Amazon is “killing the little guy.” In other words, making it incredibly hard for small businesses to compete. But I think reality says the exact opposite. In 2017, over 300,000 SMBs started selling on Amazon Marketplace. In just one day, Prime Day 2017 to be specific, SMBs sold 40 million items on Amazon, an increase of 60% YOY. 140,000 of the SMBs selling on Amazon surpassed $100,000 in sales last year.

The fact of the matter is that Amazon enables SMB merchants in a way that the world has never seen (of course Alibaba and JD have quickly followed suit for the Chines market, Mercado Libre in Latin America, etc).

If you want to defend main street, or point fingers at big companies, you’re better served looking at Walmart or Costco.

Now whether those SMBs will ever reach meaningful scale is another question. The definition of meaningful is, of course, completely subjective. But I’m talking about tens or hundreds of millions in revenue. For any SMB starting to reach serious scale, I think it’s fairly obvious that you have to go direct to consumer. Because if you don’t, Amazon will be ruthless about creating a private label version of whatever you sell and trying to take the market.

Human Progress & Philosophy

In software development, you have the concepts of features and bugs.

A feature is something deliberately built into the product that adds value to the user. Filters on Instagram are a feature that allow users to post better pictures.

Bugs are mistakes; a flaw in the code that detracts from the user experience. When we first released DogsterApp, pictures posted to the feed were often stretched and distorted depending on dimensions of the picture. Clearly a bug.

But sometimes it’s less clear whether something is a feature or a bug. Take this section from the shareholder letter:

One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’.

In high growth technology companies, the rapid rate of development, deployment, and iteration is a feature. You have to move fast if you want to stay ahead of the market and keep up with customer expectations.

In life more broadly, the process by which ‘yesterday’s wow becomes tomorrow’s ordinary’ might be considered a bug. It’s often referred to as the hedonic treadmill, or the tendency for humans to remain at a relatively stable level of happiness despite positive or negative events or circumstances. So when you get that big promotion, you get a momentary spike in happiness, but then you return to your normal baseline.

You might think of it in terms of happiness vs pleasure.

I’ve always thought of pleasure as fleeting and temporary. There’s an element of striving, an element of hedonism. Scientifically, you might think of it in terms of increased dopamine levels.

While happiness is more persistent, a satisfaction or contentment with what you already have, vs striving for more.

And while business and commerce might always be driven by an element of pleasure-seeking, it feels like living a good life might reside on the other side of that equation.

My Latest Discovery

I absolutely love Career Choice!

For hourly associates with more than one year of tenure, we pre-pay 95% of tuition, fees, and textbooks (up to $12,000) for certificates and associate degrees in high-demand occupations such as aircraft mechanics, computer-aided design, machine tool technologies, medical lab technologies, and nursing. We fund education in areas that are in high demand and do so regardless of whether those skills are relevant to a career at Amazon.

Especially that part about “regardless of whether those skills are relevant to a career at Amazon.” You’re all fully aware of my stance on continual learning, and I think more companies would be served by adopting a similar approach.

I think some executives might say “what is the return on investment, particularly if those employees leave and apply those skills elsewhere?” And it’s a reasonable critique. But it seems that having employees with a natural thirst for learning is better than not.