Here are the highlights of Amazon Shareholder Letter:
Table of Content
- 1 Amazon AWS customer value creation was $38 billion in 2020. Bezos’ ballpark math goes like this:
- 2 Amazon Prime value per subscriber is $630. Here’s that math based on time is money.
- 3 Bezos will focus on a new vision for Amazon employee success. He said:
- 4 Aside from training and coaching, Amazon outlined the following data approach to safety:
- 5 Bezos doesn’t want Amazon to be typical.
Amazon AWS customer value creation was $38 billion in 2020. Bezos’ ballpark math goes like this:
AWS is challenging to estimate because each customer’s workload is so different, but we’ll do it anyway, acknowledging up front that the error bars are high. Direct cost improvements from operating in the cloud versus on premises vary, but a reasonable estimate is 30%. Across AWS’s entire 2020 revenue of $45 billion, that 30% would imply customer value creation of $19 billion (what would have cost them $64 billion on their own cost $45 billion from AWS). The difficult part of this estimation exercise is that the direct cost reduction is the smallest portion of the customer benefit of moving to the cloud.
The bigger benefit is the increased speed of software development – something that can significantly improve the customer’s competitiveness and top line. We have no reasonable way of estimating that portion of customer value except to say that it’s almost certainly larger than the direct cost savings. To be conservative here (and remembering we’re really only trying to get ballpark estimates), I’ll say it’s the same and call AWS customer value creation $38 billion in 2020.
Amazon Prime value per subscriber is $630. Here’s that math based on time is money.
We offer low prices, vast selection, and fast delivery, but imagine we ignore all of that for the purpose of this estimate and value only one thing: we save customers time. Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes.
Compare that to the typical shopping trip to a physical store – driving, parking, searching store aisles, waiting in the checkout line, finding your car, and driving home. Research suggests the typical physical store trip takes about an hour. If you assume that a typical Amazon purchase takes 15 minutes and that it saves you a couple of trips to a physical store a week, that’s more than 75 hours a year saved. That’s important.
We’re all busy in the early 21st century. So that we can get a dollar figure, let’s value the time savings at $10 per hour, which is conservative. Seventy-five hours multiplied by $10 an hour and subtracting the cost of Prime gives you value creation for each Prime member of about $630. We have 200 million Prime members, for a total in 2020 of $126 billion of value creation.
Bezos will focus on a new vision for Amazon employee success. He said:
Despite what we’ve accomplished, it’s clear to me that we need a better vision for our employees’ success. We have always wanted to be Earth’s Most Customer-Centric Company. We won’t change that. It’s what got us here. But I am committing us to an addition. We are going to be Earth’s Best Employer and Earth’s Safest Place to Work.
In my upcoming role as Executive Chair, I’m going to focus on new initiatives. I’m an inventor. It’s what I enjoy the most and what I do best. It’s where I create the most value. I’m excited to work alongside the large team of passionate people we have in Ops and help invent in this arena of Earth’s Best Employer and Earth’s Safest Place to Work. On the details, we at Amazon are always flexible, but on matters of vision we are stubborn and relentless. We have never failed when we set our minds to something, and we’re not going to fail at this either.
Aside from training and coaching, Amazon outlined the following data approach to safety:
We’re developing new automated staffing schedules that use sophisticated algorithms to rotate employees among jobs that use different muscle-tendon groups to decrease repetitive motion and help protect employees from MSD risks. This new technology is central to a job rotation program that we’re rolling out throughout 2021.
Our increased attention to early MSD prevention is already achieving results. From 2019 to 2020, overall MSDs decreased by 32%, and MSDs resulting in time away from work decreased by more than half.
We employ 6,200 safety professionals at Amazon. They use the science of safety to solve complex problems and establish new industry best practices. In 2021, we’ll invest more than $300 million into safety projects, including an initial $66 million to create technology that will help prevent collisions of forklifts and other types of industrial vehicles.
Bezos doesn’t want Amazon to be typical.
There’s an interesting passage that talks about democracies and even references a marriage.
We all know that distinctiveness – originality – is valuable. We are all taught to “be yourself.” What I’m really asking you to do is to embrace and be realistic about how much energy it takes to maintain that distinctiveness. The world wants you to be typical – in a thousand ways, it pulls at you. Don’t let it happen.
You have to pay a price for your distinctiveness, and it’s worth it. The fairy tale version of “be yourself” is that all the pain stops as soon as you allow your distinctiveness to shine. That version is misleading. Being yourself is worth it, but don’t expect it to be easy or free. You’ll have to put energy into it continuously.
The world will always try to make Amazon more typical – to bring us into equilibrium with our environment. It will take continuous effort, but we can and must be better than that.