Bezos Warns Investors: Amazon to Suffer “Multi-Billion-Dollar” Losses

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On Thursday morning, Amazon CEO Jeff Bezos warned investors that the company will likely endure massive, costly failures in the pursuit of penetrating new markets.

“Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures,” Bezos said in his annual letter to shareholders.

“We will work hard to make them good bets, but not all good bets will ultimately pay out.”

And as the company grows, he says those “bets” will only get bigger and bigger over time. Each corporate experiment that Amazon conducts has a chance of combusting, and eventually (or inevitably) there will be a multi-billion-dollar back blast that scares off investors – even if it really shouldn’t.

In Amazon’s case, failure means success. Because in order to keep growing, Bezos knows that his company needs to expand its horizons.

New products, new services, new industries – all essential parts of his business plan going forward.

And in pursuit of those new ventures, Amazon will likely blow through huge piles of cash on projects that don’t work out.

They’ll not only fail; they’ll collapse in spectacular fashion.

But that’s okay, though – it’s part and parcel of being of one of the largest corporations in the world, and if nothing else, confirmation that cash is flooding in elsewhere.

After all, if Bezos and Co. can survive a multi-billion-dollar loss, then they must be doing something right in their core business.

In his letter to shareholders, he made note of two Amazon products – the Fire phone and Echo – both of which were developed at roughly the same time, and candidly remarked that the former was an utter “failure.”

Back in 2015, Amazon discontinued the phone and absorbed a $170 million loss for their efforts.

But Bezos also said that the nonstarter product created a teachable moment for his company, and led to future business down the road:

“(We) were able to take our learnings (as well as the developers) and accelerate our efforts building Echo and Alexa.”

In addition to his warning of future failed ventures, Bezos also discussed the influence of third-party sellers on Amazon.com, whose sales grew 4% in comparison to first-party sales (Amazon products).

He specifically placed the blame on Amazon.com’s robust tools that were made available to merchants (for free) on their online store, empowering third-parties more than intended.

“We could not foresee with certainty what those programs would eventually look like, let alone whether they would succeed, but they were pushed forward with intuition and heart, and nourished with optimism,” Bezos said.

Published since 1997, his annual letter to investors has revealed some of the methods behind Amazon’s volcanic growth over the years, and the most recent edition was no different.

By showing his hand, Bezos hopes to prepare investors for losses in new divisions come earnings season. This time, he’s getting out ahead of what could be some surprising numbers for shareholders, and unlike Apple’s Tim Cook (who published a similar letter months ago), he’s providing insight into what will keep his company on top of its game.

Cook, by comparison, blamed poor Chinese consumers and Trump’s tariffs for their issues.

Bezos did the complete opposite – claiming his company’s past and future failures with pride, using them as fuel to launch AMZN investors to moonshot gains.

And even if you disagree with the guy politically, or about how he runs his ant colony-like warehouses, you’ve got to admit…

…He’s one heck of a CEO, and as long as he continues to “fail gracefully” in the right places, Amazon looks to be destined for even more consistent growth.

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