Warren Buffett’s famous warning during the internet bubble was a wake-up call for Jeff Bezos that Amazon’s long-term survival was the furthest thing from guaranteed.
The famed investor and Berkshire Hathaway CEO presented to an elite group of business leaders at Sun Valley in July 1999, about nine months before the dot-com crash.
Buffett laid out how the vast majority of US automakers and aircraft manufacturers had gone bankrupt. He predicted that would be the case for internet startups too, with all the hype and speculation fading over time and leaving only a handful of companies surviving.
Bezos, then Amazon’s CEO, was “so intrigued” by the talk that he asked the investor for his lists of failed car and plane companies, Buffett confidant Carol Loomis wrote in Fortune in November 1999.
The online shopping pioneer noticed that many of the defunct carmakers had “Motors” in their names, similar to how droves of internet companies had inserted “.com” into theirs. “Wow, the parallel is interesting,” Bezos told Loomis.
Buffett had compared the highest-flying tech stocks to members of a species destined for extinction. As a former hedge fund employee and history buff, Bezos told Loomis that the analogies “resonate deeply.”
“Now Bezos is spreading the gospel according to Buffett and urging Amazon employees to run scared every day,” Loomis wrote.
“We still have the opportunity to be a footnote in the e-commerce industry,” Bezos told her.
Bezos pivot
Milton Berg, a former advisor to George Soros and Stanley Druckenmiller, recently underscored the huge impact that Buffett’s warning had on Bezos and how he ran Amazon from that point on.
“He changed his method of managing the company,” Berg said. “He didn’t want Buffett to be right.”
Bezos has avoided the fate he dreads. Amazon has increased its net sales from $1.6 billion in 1999 to $575 billion last year, and has gone from losing money to generating $30 billion in annual net income. Its market capitalization has mushroomed to nearly $2 trillion, ranking it among America’s most valuable companies.
Even so, Bezos is probably still paying heed to Buffett’s words. He famously treats every day like it’s “Day One” to stop complacency from setting in, as that could allow Amazon to be disrupted and rendered obsolete by hungrier rivals.
