It may seem ironic that the CEO of America’s least profitable big company has insight to offer on investing in profitable businesses, but he does.
Yes, Jeff Bezos ran Amazon.com for years without turning a meaningful profit—decades even, but there is no denying the guy is brilliant.
In the span of about 20 years, Bezos managed to turn Amazon.com into one of America’s largest companies. He continues to disrupt and decimate brick and mortar retail, and under his leadership Amazon has spawned an entire new industry in the form of Amazon Web Services.
How did Bezos do it?
A relentless focus on the long-term.
Here is what Bezos said in a 2011 interview with Wired (emphasis mine).
Our first shareholder letter, in 1997, was entitled, “It’s all about the long term.” If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow—and we’re very stubborn.
The very same strategy and almost the same timeline can be applied to investing in securities.
Your single greatest advantage as an individual investor is time. The more patient you can be with your investments or your asset manager, the greater your chances of achieving investment success.
Few institutional and retail investors have the willingness or ability to invest with a 5-7 year time horizon. Many institutions talk a big game when it comes to long-term investing, but most are put on a tight leash by their investors. They may get a pass for underperforming for a year or two, but three years of underperformance can be ruinous for business.
If you are willing to approach investing with the same relentless focus on the long-term that Jeff Bezos uses to manage Amazon.com, you open a whole new set of opportunities with a lot less competition.