This presentation from Social Capital is a thing of beauty. Amazon analyzed where they were spending money, then found a better way to handle it. They vertically integrated those expenses into their business, then flipped that into a source of revenue. It may appear like sorcery at first, but as you pull things back, it’s just a byproduct of Amazon’s customer obsession.
Amazon has an obsession with its customers, while most other companies don’t. External vendors can’t meet Amazon’s high demands, they can’t meet Amazon’s scale. Amazon internalizes these needs, so they can meet their customers demands. If these businesses meet Amazon’s demands, they meet anyone’s demands. Obsession over the customer leads to innovation.
I love optionality, but what Amazon has done is on a whole new level. Amazon is turning costs into revenue. This is the ultimate form of optionality. It is hard to put into words, because it is so amazing. I can’t think of another business that even comes close to this level of sorcery. Jesus may be able to turn water into wine, but Bezos can turn costs into revenue.