Jeff Bezos on innovation: Amazon ‘willing to be misunderstood for long periods of time’
One question at Amazon.com's shareholder meeting this morning in Seattle clearly made an impression on Jeff Bezos, sparking an extraordinary response from the Amazon CEO and founder on the qualities …
Context & Ripple Effects
Bezos's 'willing to be misunderstood' answer at the Seattle shareholder meeting lands after an unusually aggressive May 2011 for Amazon: confirmed Kindle e-reader price cuts as the line expands, a Mac Download Store launch of 250 titles positioned squarely against Apple's Mac App Store, and the two-day 99-cent sale of Lady Gaga's 'Born This Way' — which industry sources told Billboard cost Amazon millions (a rumored figure Amazon has not confirmed).
The remark also follows Bezos's late-May appearance alongside Eric Schmidt and Jimmy Wales at the e-G8 summit in Paris. Read together, the shareholder meeting gives investors the doctrine behind the spending: the price cuts and below-cost promotions are framed not as margin erosion but as deliberate long-horizon bets.
First-order effects
- Amazon shareholders get an explicit rationale for continued thin or negative margins on devices and downloads, with the Kindle price cuts and the Gaga promotion as the live examples in front of them.
- Apple, whose Mac App Store the new download store targets directly, now faces a distribution rival that has publicly disclaimed short-term earnings discipline.
Second-order effects
- Rivals in digital media and software distribution must choose between matching potentially below-cost pricing — the pattern Billboard's sources described in the album sale — or conceding volume in nascent categories.
- Publishers, labels, and software vendors gain leverage from Amazon's willingness to subsidize demand, but risk training the market to expect promotional pricing that erodes everyone's margins.
Third-order effects
- If the pattern holds, tolerance for sustained investor misunderstanding becomes a structural moat: companies that can hold public-market patience for years can price competitors out of emerging categories before profitability matters.
- The shareholder meeting itself hardens into a governance instrument — annual rhetorical reinforcement letting management defer profit expectations indefinitely while still retaining retail investors.
The trend: Consumer-tech competition circa 2011 is tilting toward firms that can sustain years of unprofitable category-building, and Bezos is turning shareholder meetings into the venue where that patience gets explicitly negotiated.