Jeff Bezos published his annual letter to shareowners this week. You can find it here. And as is his usual practice, he has attached his 1997 letter to shareholders at the bottom of it. This is his "Day 1" and he clearly likes the reminder.

I was somewhat surprised to learn that 58% of physical gross merchandise sales on Amazon are now by independent third-party sellers. This number has been steadily increasing almost every year since 1999.

And this is despite the fact that first party sales -- products sold by Amazon -- have grown at a compound annual growth rate (CAGR) of 25% during this same time period. Amazon excels at the fulfillment component and you can have them do that for you as a third-party seller.

There are a number of other interesting facts sprinkled throughout the letter, but I particularly liked the bits on "intuition, curiosity, and the power of wandering." Here is an excerpt on how Amazon is working to scale the size of its failures:

As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures. Of course, we won’t undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out. This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society. The good news for shareowners is that a single big winning bet can more than cover the cost of many losers.

A lot has already been said and written about accepting failure in life and business. Nobody wants to fail, but it can happen when you're trying to "imagine the impossible."

The two nuances here are that failures should scale along with the company. And that "large-scale risk taking" can actually be construed as a service. It might mean that the impossible becomes possible.

“Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.” -Warren Buffet

Warren Buffet published his annual letter to Berkshire Hathaway shareholders this past Saturday. I always enjoy reading his letters and I have been doing it for years. If only he wrote a daily blog.

One of the things he talks about in this year’s letter is why Berkshire wasn’t very acquisitive in 2017:

In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price.

That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high. Indeed, price seemed almost irrelevant to an army of optimistic purchasers.

Some of you in the real estate game might be feeling similarly. But he ends the section with these words of advice: 

In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.

Buffet has a way of simplifying things. He also, clearly, has a way of remaining disciplined.

Jeff Bezos published his annual letter to shareowners this week. You can find it here. And as is his usual practice, he has attached his 1997 letter to shareholders at the bottom of it. This is his "Day 1" and he clearly likes the reminder.

I was somewhat surprised to learn that 58% of physical gross merchandise sales on Amazon are now by independent third-party sellers. This number has been steadily increasing almost every year since 1999.

And this is despite the fact that first party sales -- products sold by Amazon -- have grown at a compound annual growth rate (CAGR) of 25% during this same time period. Amazon excels at the fulfillment component and you can have them do that for you as a third-party seller.

There are a number of other interesting facts sprinkled throughout the letter, but I particularly liked the bits on "intuition, curiosity, and the power of wandering." Here is an excerpt on how Amazon is working to scale the size of its failures:

As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures. Of course, we won’t undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out. This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society. The good news for shareowners is that a single big winning bet can more than cover the cost of many losers.

A lot has already been said and written about accepting failure in life and business. Nobody wants to fail, but it can happen when you're trying to "imagine the impossible."

The two nuances here are that failures should scale along with the company. And that "large-scale risk taking" can actually be construed as a service. It might mean that the impossible becomes possible.

“Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.” -Warren Buffet

Warren Buffet published his annual letter to Berkshire Hathaway shareholders this past Saturday. I always enjoy reading his letters and I have been doing it for years. If only he wrote a daily blog.

One of the things he talks about in this year’s letter is why Berkshire wasn’t very acquisitive in 2017:

In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price.

That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high. Indeed, price seemed almost irrelevant to an army of optimistic purchasers.

Some of you in the real estate game might be feeling similarly. But he ends the section with these words of advice: 

In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.

Buffet has a way of simplifying things. He also, clearly, has a way of remaining disciplined.