Jeff Bezos is America's Greatest CEO

A blog about business and economics.
Jan. 30 2013 4:29 PM

The Peculiar Genius of Jeff Bezos

Amazon.com founder and CEO Jeff Bezos with NASDAQ president and CEO Bob Greifeld (right)
Amazon.com founder and CEO Jeff Bezos with NASDAQ president and CEO Bob Greifeld (right)

Photo by Frank Micelotta/Getty Images for Amazon.com

Some people interpreted my post yesterday on Amazon's slim and falling earnings as a slam on the company, but while I do find it a bit baffling, I'm by no means a critic. And I'm certainly not trying to give anyone stock advice. The only investment-related advice I would give on this point is that Amazon's sky-high price-earnings ratio compared with rival retailers or rival tech companies illustrates the point that investing is hard and the stock market is weird.

What Bezos has put together is a real achievement. A great business leader is someone who builds a great company, and Amazon is unquestionably a great company. It's taken a lot of skill to build it. And one of Bezos' most impressive skills is extracting patience from Wall Street. Everyone would feel much better about, say, Facebook if they weren't trying so hard to show large and growing profits. But for all Mark Zuckerberg's considerable virtues as a founder and CEO, he hasn't persuaded Wall Street to take on faith that if he just makes his company as great as possible it'll all work out in the long run. Part of the challenge here is that the obvious long-term strategy for Amazon—drive all rivals out of business with ultra-low margins, then exploit some barrier to entry to hike prices and earn monopoly profits—is probably illegal, so you can't articulate it publicly. The point is that almost any young company could be more amazing if it were able to deliver consistent shareholder value (which Amazon has done through higher share prices) without needing to turn large profits or even demonstrate earnings growth. But that's a hard trick to pull off.

Advertisement

Justin Fox has some wise thoughts about how he did it, but this is tough stuff to replicate.

The obvious contrast is Apple, which is operating something like the reverse of Amazon's corporate charity. Apple sells stuff for much more than it costs to build. They could plow that money into giant dividends for their owners, but they don't. The dividends are modest. They could plow that money into loosely related ventures the way Google has with Android and the self-driving cars, but, in fact, Apple's R&D spending is modest and seems tightly focused. They could plow the money on quixotic efforts to compete with market leaders the way Microsoft does with Bing but, again, they don't. Apple's ventures always have a clear relationship to its core business, and when they try to compete with market leaders it's for specific strategic reasons.

For his trouble, Tim Cook has amassed the greatest stockpile of corporate cash in human history and an almost comically low P/E ratio. In other words, while the company may be stronger than ever in terms of its product portfolio, as a financial undertaking the company underperforms. As a guy who uses an iPhone, an iPad, a MacBook Air, and a Thunderbolt Display on a daily basis, I sure wish Cook knew how to get away with Bezos' low prices and thin margins.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Foreigners

More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

iOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.

Why Greenland’s “Dark Snow” Should Worry You

Three Talented Actresses in Three Terrible New Shows

The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.

Jurisprudence

Happy Constitution Day!

Too bad it’s almost certainly unconstitutional.

The Ungodly Horror of Having a Bug Crawl Into Your Ear and Scratch Away at Your Eardrum

My Father Was James Brown. I Watched Him Beat My Mother. Then I Married Someone Like Him.

  News & Politics
Weigel
Sept. 17 2014 12:02 PM Here It Is: The Flimsiest Campaign Attack Ad of 2014, Which Won’t Stop Running
  Business
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
  Life
Outward
Sept. 17 2014 1:59 PM Ask a Homo: Secret Ally Codes 
  Double X
The XX Factor
Sept. 17 2014 1:26 PM Hey CBS, Rihanna Is Exactly Who I Want to See on My TV Before NFL Games
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
  Arts
Brow Beat
Sept. 17 2014 1:01 PM A Rare, Very Unusual Interview With Michael Jackson, Animated
  Technology
Future Tense
Sept. 17 2014 12:35 PM IOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.
  Health & Science
Bad Astronomy
Sept. 17 2014 11:18 AM A Bridge Across the Sky
  Sports
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.