This Is Jeff Bezos's Most Important Investing Lesson

Amazon (NASDAQ:AMZN) founder and CEO Jeff Bezos is one of the most admired leaders in business. Over the last generation, Bezos has steered Amazon from a tiny online bookseller to a tech behemoth with a leading position in retail, cloud-computing, voice-activated technology, and logistics, among other arenas. Amazon is now worth $1.5 trillion, and Bezos is the wealthiest person in the world.

While there is little doubting his business acumen, however, attention is rarely devoted to his thinking as an investor. The recently released Invent & Wander: The Collected Writings of Jeff Bezos represents the most comprehensive collection of Bezos’s thinking on a wide variety of subjects, and the title itself sums up a core philosophy of Amazon-innovating and experimenting. And there’s one theme the Amazon chief keeps coming back to about his approach as an investor and acquirer of businesses.

Image source: Jeff Bezos.

Missionary vs. mercenary

In the introduction to the book, Walter Isaacson describes a conversation with Bezos about leadership and his thinking when he meets with a CEO about a potential acquisition. Bezos says:

I’m always trying to figure one thing first and foremost: Is that person a missionary or mercenary? The mercenaries are trying to flip their stock. The missionaries love their product or their service and love their customers and are trying to build a great service. By the way, the great paradox here is that it’s usually the missionaries who make more money.

Amazon’s biggest acquisition was its $13.7 billion takeover of Whole Foods in 2017. Anybody familiar with Whole Foods and its founder John Mackey likely knows that Mackey is an evangelist for clean eating. He founded Whole Foods in Texas back in 1980 when healthy eating was little more than a niche category.

Even today, Whole Foods doesn’t sell products like Coca-Cola or Cheerios, and has a long list of ingredients that are banned from its stores, which aligns with its mission of serving only the highest-quality foods and setting standards of excellence among food retailers. For much of its time as an independent supermarket chain, Whole Foods regularly bested the competition in growth and profitability.

The implication for everyday investors

There are a number of lessons that investors can take away from Bezos’s focus on missionaries over mercenaries — and it should be noted that Bezos himself is a missionary, obsessed with pleasing the customer, advancing new technology, and inventing and experimenting. 

The biggest takeaway is that investors should start by focusing on founder-led companies, which have been shown to outperform other stocks. Entrepreneurs are likely to be the most passionate about their own businesses, as they are selling their own ideas and creations. While Bezos himself is a great example of why you should invest in founder-led companies, below are two more inspiring missionary-led companies that have delivered blockbuster results.

  • Tesla (NASDAQ:TSLA) CEO Elon Musk wasn’t technically a founder of Tesla, though he was retroactively named co-founder and has led the company since its early days. More than anyone else, Musk seems to be responsible for the electric vehicle revolution — and we’ve now reached a tipping point in the eventual conversion from combustion vehicles to electric cars. Musk’s persona is a big part of the cult feeling surrounding Tesla — the stock, the brand, and the vehicles — and under his guidance the company achieved what few once thought possible, building a high-performance electric car at scale. Musk is now one of the world’s richest people, but he’s still motivated by stretching the bounds of engineering at both Tesla and his space exploration company SpaceX. He also sees the climate crisis as a call to arms, and he’s even told Detroit automakers to accelerate their transition to electric vehicles.
  • Zoom Video Communications (NASDAQ:ZM) founder and CEO Eric Yuan has one of the most compelling biographies around. Born and raised in China, his visa to come work in the U.S. was denied eight times before he got through. Yuan barely spoke English at the time, but was a strong coder and worked his way up at WebEx and then Cisco. He had an idea for a better video communications platform than what was on the market, but Cisco wasn’t interested — and thus Zoom was born. When he started the company, Yuan took 40 Cisco engineers with him, a sign of his leadership capabilities. Zoom, of course, has become both a utility and a verb during the pandemic, and Yuan has beaten the tech giants and led his company to become the dominant videoconferencing platform. In an interview at the University of Miami, Yuan explained how he came to his top goal after an epiphany about employee happiness: “That’s why when I started the company that was my priority. As a CEO, my number-one job is not about the customer, product or service, it’s about our employees’ happiness. If I can make our employees happy, together we can make our customers happy.” It shouldn’t come as a surprise, then, that Yuan was named #1 CEO by Glassdoor in 2018, and that the company was on its Top 5 list of best places to work in 2018 and 2019.

In addition to screening for founder-led companies and using Glassdoor ratings for insights into company culture, it’s also worth considering the mission of the company itself. Mission-driven companies tend to outperform others, as the mission anchors the corporate culture and helps management screen for employees who are truly committed to those goals.

Amazon’s mission, to be Earth’s most customer-centric company, is one major reason for its success, as it’s guided the company into entirely new business lines where it sees opportunities to make life better for customers. And that mission focus has paid off: According to a number of polls, Amazon ranks among the top companies in customer satisfaction, and that customer trust has doubtless been one of the biggest drivers of the company’ success. Bezos himself said in an early shareholder letter, “The customer franchise is our most valuable asset.”