In his final letter to shareholders, Amazon CEO Jeff Bezos on Thursday laid out a broad imaginative and prescient for the way forward for the corporate, committing to prolong Amazon’s well-known obsession over its prospects to the identical degree of care for its employees.
Bezos pointed to the recent union election outcome at one in every of Amazon’s Alabama warehouses for example of why the corporate needs to handle challenges inside its workforce. Last week, Amazon secured sufficient votes to defeat a historic unionization drive at its Bessemer, Alabama, warehouse, which if profitable, would have represented the primary union at a U.S. Amazon facility.
“While the voting outcomes had been lopsided and our direct relationship with employees is robust, it is clear to me that we’d like a better imaginative and prescient for how we create worth for employees – a imaginative and prescient for their success,” stated Bezos, who will step down as CEO in the third quarter, turning the helm over to Andy Jassy, CEO of Amazon Web Services. Bezos will transition to govt chairman of Amazon’s board.
Amazon has famously held a core set of leadership principles, chief amongst them being “buyer obsessed.” In the longer term, Bezos stated he desires Amazon to do the identical for its employees.
“Despite what we have completed, it is clear to me that we’d like a better imaginative and prescient for our employees’ success,” Bezos stated. “We have at all times needed to be Earth’s Most Customer-Centric Company. We will not change that. It’s what received us right here. But I’m committing us to an addition. We are going to be Earth’s Best Employer and Earth’s Safest Place to Work.”
In his new position as govt chairman, Bezos stated he plans to deal with how to make Amazon’s warehouses safer. Roughly 40% of work-related accidents are sprains or strains principally due to repeating the identical motions and are widespread amongst new employees, he added.
To assist cut back some of these accidents, Amazon is growing automated staffing schedules that rotate employees by way of completely different jobs that use different muscle-tendon teams. The firm expects to start deploying the expertise later this yr.
Bezos additionally took steps to ease shareholders’ fears about what a reimagined focus for the corporate would possibly imply for Amazon’s future. He reiterated that it “stays Day 1” and highlighted continued development at Amazon, together with that the corporate now counts 200 million Prime subscribers, up from 150 million initially of final yr.
“If any shareowners are involved that Earth’s Best Employer and Earth’s Safest Place to Work would possibly dilute our deal with Earth’s Most Customer-Centric Company, let me set your thoughts relaxed,” Bezos stated. “Think of it this fashion. If we will function two companies as completely different as shopper ecommerce and AWS, and do each on the highest degree, we will definitely do the identical with these two imaginative and prescient statements. In truth, I’m assured they are going to reinforce one another.”
You can learn the total letter under:
To our shareowners:
In Amazon’s 1997 letter to shareholders, our first, I talked about our hope to create an “enduring franchise,” one that might reinvent what it means to serve prospects by unlocking the web’s energy. I famous that Amazon had grown from having 158 employees to 614, and that we had surpassed 1.5 million buyer accounts. We had simply gone public at a split-adjusted inventory worth of $1.50 per share. I wrote that it was Day 1.
We’ve come a great distance since then, and we’re working tougher than ever to serve and delight prospects. Last yr, we employed 500,000 employees and now instantly make use of 1.three million individuals world wide. We have greater than 200 million Prime members worldwide. More than 1.9 million small and medium-sized companies promote in our retailer, they usually make up shut to 60% of our retail gross sales. Customers have linked greater than 100 million sensible dwelling units to Alexa. Amazon Web Services serves hundreds of thousands of shoppers and ended 2020 with a $50 billion annualized run fee. In 1997, we hadn’t invented Prime, Marketplace, Alexa, or AWS. They weren’t even concepts then, and none was preordained. We took nice danger with each and put sweat and ingenuity into each.
Along the best way, we have created $1.6 trillion of wealth for shareowners. Who are they? Your Chair is one, and my Amazon shares have made me rich. But greater than 7/8ths of the shares, representing $1.Four trillion of wealth creation, are owned by others. Who are they? They’re pension funds, universities, and 401(ok)s, they usually’re Mary and Larry, who despatched me this notice out of the blue simply as I used to be sitting down to write this shareholder letter:
I’m approached with comparable tales on a regular basis. I do know individuals who’ve used their Amazon cash for faculty, for emergencies, for homes, for holidays, to begin their very own enterprise, for charity – and the checklist goes on. I’m happy with the wealth we have created for shareowners. It’s vital, and it improves their lives. But I additionally know one thing else: it isn’t the most important a part of the worth we have created.
Create More Than You Consume
If you need to achieve success in enterprise (in life, truly), you have got to create greater than you devour. Your aim needs to be to create worth for everybody you work together with. Any enterprise that does not create worth for these it touches, even when it seems profitable on the floor, is not lengthy for this world. It’s on the best way out.
Remember that inventory costs are usually not concerning the previous. They are a prediction of future money flows discounted again to the current. The inventory market anticipates. I’m going to swap gears for a second and discuss concerning the previous. How a lot worth did we create for shareowners in 2020? This is a comparatively simple query to reply as a result of accounting methods are arrange to reply it. Our internet revenue in 2020 was $21.three billion. If, as a substitute of being a publicly traded firm with 1000’s of householders, Amazon had been a sole proprietorship with a single proprietor, that is how a lot the proprietor would have earned in 2020.
How about employees? This can also be a fairly simple worth creation query to reply as a result of we will take a look at compensation expense. What is an expense for a firm is revenue for employees. In 2020, employees earned $80 billion, plus one other $11 billion to embrace advantages and varied payroll taxes, for a complete of $91 billion.
How about third-party sellers? We have an inside workforce (the Selling Partner Services workforce) that works to reply that query. They estimate that, in 2020, third-party vendor income from promoting on Amazon had been between $25 billion and $39 billion, and to be conservative right here I’ll go together with $25 billion.
For prospects, we now have to break it down into shopper prospects and AWS prospects.
We’ll do customers first. We provide low costs, huge choice, and quick supply, however think about we ignore all of that for the aim of this estimate and worth just one factor: we save prospects time.
Customers full 28% of purchases on Amazon in three minutes or much less, and half of all purchases are completed in lower than 15 minutes. Compare that to the standard buying journey to a bodily retailer – driving, parking, looking out retailer aisles, ready in the checkout line, discovering your automotive, and driving dwelling. Research suggests the standard bodily retailer journey takes about an hour. If you assume that a typical Amazon buy takes 15 minutes and that it saves you a couple of journeys to a bodily retailer a week, that is greater than 75 hours a yr saved. That’s necessary. We’re all busy in the early 21st century.
So that we will get a greenback determine, let’s worth the time financial savings at $10 per hour, which is conservative. Seventy-five hours multiplied by $10 an hour and subtracting the price of Prime provides you worth creation for every Prime member of about $630. We have 200 million Prime members, for a complete in 2020 of $126 billion of worth creation.
AWS is difficult to estimate as a result of every buyer’s workload is so completely different, however we’ll do it anyway, acknowledging up entrance that the error bars are excessive. Direct price enhancements from working in the cloud versus on premises differ, however a affordable estimate is 30%. Across AWS’s total 2020 income of $45 billion, that 30% would indicate buyer worth creation of $19 billion (what would have price them $64 billion on their very own price $45 billion from AWS). The troublesome a part of this estimation train is that the direct price discount is the smallest portion of the client advantage of transferring to the cloud. The larger profit is the elevated velocity of software program growth – one thing that may considerably enhance the client’s competitiveness and high line. We don’t have any affordable approach of estimating that portion of buyer worth besides to say that it is nearly definitely bigger than the direct price financial savings. To be conservative right here (and remembering we’re actually solely attempting to get ballpark estimates), I’ll say it is the identical and name AWS buyer worth creation $38 billion in 2020.
Adding AWS and shopper collectively provides us complete buyer worth creation in 2020 of $164 billion.
Summarizing:
Shareholders $21B
Employees $91B
3P Sellers $25B
Customers $164B
Total $301B
If every group had an revenue assertion representing their interactions with Amazon, the numbers above could be the “backside traces” from these revenue statements. These numbers are a part of the explanation why individuals work for us, why sellers promote by way of us, and why prospects purchase from us. We create worth for them. And this worth creation is just not a zero-sum sport. It is not only transferring cash from one pocket to one other. Draw the field large round all of society, and you will find that invention is the basis of all actual worth creation. And worth created is greatest regarded as a metric for innovation.
Of course, our relationship with these constituencies and the worth we create is not solely {dollars} and cents. Money does not inform the entire story. Our relationship with shareholders, for instance, is comparatively easy. They make investments and maintain shares for a length of their selecting. We present course to shareowners sometimes on issues similar to annual conferences and the appropriate course of to vote their shares. And even then they will ignore these instructions and simply skip voting.
Our relationship with employees is a very completely different instance. We have processes they observe and requirements they meet. We require coaching and varied certifications. Employees have to present up at appointed instances. Our interactions with employees are many, they usually’re fine-grained. It’s not simply concerning the pay and the advantages. It’s about all the opposite detailed features of the connection too.
Does your Chair take consolation in the result of the latest union vote in Bessemer? No, he does not. I feel we’d like to do a better job for our employees. While the voting outcomes had been lopsided and our direct relationship with employees is robust, it is clear to me that we’d like a better imaginative and prescient for how we create worth for employees – a imaginative and prescient for their success.
If you learn a number of the information reviews, you would possibly suppose we now have no care for employees. In these reviews, our employees are typically accused of being determined souls and handled as robots. That’s not correct. They’re refined and considerate individuals who have choices for the place to work. When we survey success middle employees, 94% say they might suggest Amazon to a good friend as a place to work.
Employees are ready to take casual breaks all through their shifts to stretch, get water, use the remainder room, or discuss to a supervisor, all with out impacting their efficiency. These casual work breaks are in addition to the 30-minute lunch and 30-minute break constructed into their regular schedule.
We do not set unreasonable efficiency targets. We set achievable efficiency targets that consider tenure and precise worker efficiency knowledge. Performance is evaluated over a lengthy time frame as we all know that a number of issues can affect efficiency in any given week, day, or hour. If employees are on monitor to miss a efficiency goal over a time frame, their supervisor talks with them and offers teaching.
Coaching can also be prolonged to employees who’re excelling and in line for elevated obligations. In truth, 82% of teaching is optimistic, supplied to employees who’re assembly or exceeding expectations. We terminate the employment of lower than 2.6% of employees due to their incapability to carry out their jobs (and that quantity was even decrease in 2020 due to operational impacts of COVID-19).
Earth’s Best Employer and Earth’s Safest Place to Work
The truth is, the massive workforce of 1000’s of people that lead operations at Amazon have at all times cared deeply for our hourly employees, and we’re happy with the work surroundings we have created. We’re additionally happy with the truth that Amazon is a firm that does extra than simply create jobs for pc scientists and other people with superior levels. We create jobs for individuals who by no means received that benefit.
Despite what we have completed, it is clear to me that we’d like a better imaginative and prescient for our employees’ success. We have at all times needed to be Earth’s Most Customer-Centric Company. We will not change that. It’s what received us right here. But I’m committing us to an addition. We are going to be Earth’s Best Employer and Earth’s Safest Place to Work.
In my upcoming position as Executive Chair, I’m going to deal with new initiatives. I’m an inventor. It’s what I get pleasure from probably the most and what I do greatest. It’s the place I create probably the most worth. I’m excited to work alongside the massive workforce of passionate individuals we now have in Ops and assist invent in this enviornment of Earth’s Best Employer and Earth’s Safest Place to Work. On the small print, we at Amazon are at all times versatile, however on issues of imaginative and prescient we’re cussed and relentless. We have by no means failed after we set our minds to one thing, and we’re not going to fail at this both.
We dive deep into issues of safety. For instance, about 40% of work-related accidents at Amazon are associated to musculoskeletal issues (MSDs), issues like sprains or strains that may be attributable to repetitive motions. MSDs are widespread in the kind of work that we do and are extra possible to happen throughout an worker’s first six months. We want to invent options to cut back MSDs for new employees, lots of whom is likely to be working in a bodily position for the primary time.
One such program is WorkingWell – which we launched to 859,000 employees at 350 websites throughout North America and Europe in 2020 – the place we coach small teams of employees on physique mechanics, proactive wellness, and security. In addition to lowering office accidents, these ideas have a optimistic affect on common day-to-day actions outdoors work.
We’re growing new automated staffing schedules that use refined algorithms to rotate employees amongst jobs that use completely different muscle-tendon teams to lower repetitive movement and assist shield employees from MSD dangers. This new expertise is central to a job rotation program that we’re rolling out all through 2021.
Our elevated consideration to early MSD prevention is already reaching outcomes. From 2019 to 2020, general MSDs decreased by 32%, and MSDs ensuing in time away from work decreased by greater than half.
We make use of 6,200 security professionals at Amazon. They use the science of security to remedy advanced issues and set up new business greatest practices. In 2021, we’ll make investments greater than $300 million into security initiatives, together with an preliminary $66 million to create expertise that may assist stop collisions of forklifts and different varieties of industrial autos.
When we lead, others observe. Two and a half years in the past, after we set a $15 minimal wage for our hourly employees, we did so as a result of we needed to lead on wages – not simply run with the pack – and since we believed it was the appropriate factor to do. A latest paper by economists on the University of California-Berkeley and Brandeis University analyzed the affect of our determination to elevate our minimal beginning pay to $15 per hour. Their evaluation displays what we have heard from employees, their households, and the communities they stay in.
Our enhance in beginning wage boosted native economies throughout the nation by benefiting not solely our personal employees but in addition different staff in the identical neighborhood. The research confirmed that our pay elevate resulted in a 4.7% enhance in the typical hourly wage amongst different employers in the identical labor market.
And we’re not accomplished main. If we would like to be Earth’s Best Employer, we should not settle for 94% of employees saying they might suggest Amazon to a good friend as a place to work. We have to goal for 100%. And we’ll do that by persevering with to lead on wages, on advantages, on upskilling alternatives, and in different methods that we are going to work out over time.
If any shareowners are involved that Earth’s Best Employer and Earth’s Safest Place to Work would possibly dilute our deal with Earth’s Most Customer-Centric Company, let me set your thoughts relaxed. Think of it this fashion. If we will function two companies as completely different as shopper ecommerce and AWS, and do each on the highest degree, we will definitely do the identical with these two imaginative and prescient statements. In truth, I’m assured they are going to reinforce one another.
The Climate Pledge
In an earlier draft of this letter, I began this part with arguments and examples designed to show that human-induced local weather change is actual. But, bluntly, I feel we will cease saying that now. You do not have to say that photosynthesis is actual, or make the case that gravity is actual, or that water boils at 100 levels Celsius at sea degree. These issues are merely true, as is the truth of local weather change.
Not way back, most individuals believed that it will be good to handle local weather change, however in addition they thought it will price a lot and would threaten jobs, competitiveness, and financial development. We now know better. Smart motion on local weather change is not going to solely cease dangerous issues from occurring, it would additionally make our economic system extra environment friendly, assist drive technological change, and cut back dangers. Combined, these can lead to extra and better jobs, more healthy and happier kids, extra productive staff, and a extra affluent future. This does not imply it will likely be simple. It will not be. The coming decade can be decisive. The economic system in 2030 will want to be vastly completely different from what it’s right this moment, and Amazon plans to be on the coronary heart of the change. We launched The Climate Pledge along with Global Optimism in September 2019 as a result of we needed to assist drive this optimistic revolution. We want to be a part of a rising workforce of firms that perceive the imperatives and the alternatives of the 21st century.
Now, lower than two years later, 53 corporations representing nearly each sector of the economic system have signed The Climate Pledge. Signatories similar to Best Buy, IBM, Infosys, Mercedes-Benz, Microsoft, Siemens, and Verizon have dedicated to obtain net-zero carbon in their worldwide companies by 2040, 10 years forward of the Paris Agreement. The Pledge additionally requires them to measure and report greenhouse gasoline emissions on a common foundation; implement decarbonization methods by way of actual enterprise adjustments and improvements; and neutralize any remaining emissions with extra, quantifiable, actual, everlasting, and socially useful offsets. Credible, high quality offsets are valuable, and we must always reserve them to compensate for financial actions the place low-carbon options do not exist.
The Climate Pledge signatories are making significant, tangible, and impressive commitments. Uber has a aim of working as a zero-emission platform in Canada, Europe, and the U.S. by 2030, and Henkel plans to supply 100% of the electrical energy it makes use of for manufacturing from renewable sources. Amazon is making progress towards our personal aim of 100% renewable power by 2025, 5 years forward of our preliminary 2030 goal. Amazon is the most important company purchaser of renewable power in the world. We have 62 utility-scale wind and photo voltaic initiatives and 125 photo voltaic rooftops on success and type facilities across the globe. These initiatives have the capability to generate over 6.9 gigawatts and ship greater than 20 million megawatt-hours of power yearly.
Transportation is a main element of Amazon’s enterprise operations and the hardest a part of our plan to meet net-zero carbon by 2040. To assist quickly speed up the market for electrical car expertise, and to assist all corporations transition to greener applied sciences, we invested greater than $1 billion in Rivian – and ordered 100,000 electrical supply vans from the corporate. We’ve additionally partnered with Mahindra in India and Mercedes-Benz in Europe. These customized electrical supply autos from Rivian are already operational, they usually first hit the highway in Los Angeles this previous February. Ten thousand new autos can be on the highway as early as subsequent yr, and all 100,000 autos can be on the highway by 2030 – saving hundreds of thousands of metric tons of carbon. A giant cause we would like corporations to be part of The Climate Pledge is to sign to {the marketplace} that companies ought to begin inventing and growing new applied sciences that signatories want to make good on the Pledge. Our buy of 100,000 Rivian electrical vans is a good instance.
To additional speed up funding in new applied sciences wanted to construct a zero-carbon economic system, we launched the Climate Pledge Fund final June. The funding program began with $2 billion to make investments in visionary corporations that goal to facilitate the transition to a low-carbon economic system. Amazon has already introduced investments in CarbonCure Technologies, Pachama, Redwood Materials, Rivian, Turntide Technologies, ZeroAvia, and Infinium – and these are simply a number of the revolutionary corporations we hope will construct the zero-carbon economic system of the longer term.
I’ve additionally personally allotted $10 billion to present grants to assist catalyze the systemic change we’ll want in the approaching decade. We’ll be supporting main scientists, activists, NGOs, environmental justice organizations, and others working to combat local weather change and shield the pure world. Late final yr, I made my first spherical of grants to 16 organizations engaged on revolutionary and needle-moving options. It’s going to take collective motion from large corporations, small corporations, nation states, international organizations, and people, and I’m excited to be a part of this journey and optimistic that humanity can come collectively to remedy this problem.
Differentiation is Survival and the Universe Wants You to be Typical
This is my final annual shareholder letter because the CEO of Amazon, and I’ve one final thing of utmost significance I really feel compelled to educate. I hope all Amazonians take it to coronary heart.
Here is a passage from Richard Dawkins’ (extraordinary) guide The Blind Watchmaker. It’s about a primary truth of biology.
“Staving off demise is a factor that you’ve to work at. Left to itself – and that’s what it’s when it dies – the physique tends to revert to a state of equilibrium with its surroundings. If you measure some amount such because the temperature, the acidity, the water content material or {the electrical} potential in a dwelling physique, you’ll sometimes discover that it’s markedly completely different from the corresponding measure in the environment. Our our bodies, for occasion, are normally hotter than our environment, and in chilly climates they’ve to work arduous to keep the differential. When we die the work stops, the temperature differential begins to disappear, and we find yourself the identical temperature as our environment. Not all animals work so arduous to keep away from coming into equilibrium with their surrounding temperature, however all animals do some comparable work. For occasion, in a dry nation, animals and vegetation work to keep the fluid content material of their cells, work in opposition to a pure tendency for water to circulate from them into the dry outdoors world. If they fail they die. More typically, if dwelling issues did not work actively to stop it, they might ultimately merge into their environment, and stop to exist as autonomous beings. That is what occurs once they die.”
While the passage is just not supposed as a metaphor, it is however a implausible one, and really related to Amazon. I’d argue that it is related to all corporations and all establishments and to every of our particular person lives too. In what methods does the world pull at you in an try to make you standard? How a lot work does it take to keep your distinctiveness? To maintain alive the factor or issues that make you particular?
I do know a fortunately married couple who’ve a operating joke in their relationship. Not sometimes, the husband seems on the spouse with fake misery and says to her, “Can’t you simply be regular?” They each smile and snicker, and naturally the deep reality is that her distinctiveness is one thing he loves about her. But, on the similar time, it is also true that issues would typically be simpler – take much less power – if we had been a little extra regular.
This phenomenon occurs in any respect scale ranges. Democracies are usually not regular. Tyranny is the historic norm. If we stopped doing the entire steady arduous work that’s wanted to keep our distinctiveness in that regard, we might rapidly come into equilibrium with tyranny.
We all know that distinctiveness – originality – is efficacious. We are all taught to “be your self.” What I’m actually asking you to do is to embrace and be practical about how a lot power it takes to keep that distinctiveness. The world desires you to be typical – in a thousand methods, it pulls at you. Don’t let it occur.
You have to pay a worth for your distinctiveness, and it is price it. The fairy story model of “be your self” is that every one the ache stops as quickly as you permit your distinctiveness to shine. That model is deceptive. Being your self is price it, however do not anticipate it to be simple or free. You’ll have to put power into it repeatedly.
The world will at all times strive to make Amazon extra typical – to deliver us into equilibrium with our surroundings. It will take steady effort, however we will and have to be better than that.
* * *
As at all times, I connect our 1997 shareholder letter. It concluded with this: “We at Amazon.com are grateful to our prospects for their enterprise and belief, to one another for our arduous work, and to our shareholders for their assist and encouragement.” That hasn’t modified a bit. I need to particularly thank Andy Jassy for agreeing to tackle the CEO position. It’s a arduous job with a lot of duty. Andy is sensible and has the best of excessive requirements. I assure you that Andy will not let the universe make us typical. He will muster the power wanted to maintain alive in us what makes us particular. That will not be simple, however it’s vital. I additionally predict it will likely be satisfying and oftentimes enjoyable. Thank you, Andy.
To all of you: be sort, be unique, create greater than you devour, and by no means, by no means, by no means let the universe clean you into your environment. It stays Day 1.
Sincerely,
Jeffrey P. Bezos
Founder and Chief Executive Officer
Amazon.com, Inc.
