Jeff Bezos Emphasizes The Core Of Investment Wisdom: 'The Stock Is Not The Company, And The Company Is Not The Stock' — Insights From The Amazon Founder On Navigating Market Perceptions

In a 2018 episode of “The David Rubenstein Show: Peer-to-Peer Conversations,” Amazon.com Inc. Founder Jeff Bezos shared insights about the company’s journey and its relationship with stock prices. The interview delved into Amazon’s expansion beyond books, exploring its venture into music, videos, electronics, toys and a wide array of products.

Bezos shared an anecdote about the company’s early days, explaining how he solicited customer feedback to guide Amazon’s diversification. He described sending emails to 1,000 random customers asking what else they wanted Amazon to sell. He received an assortment of responses, including a memorable request for windshield wiper blades, showcasing the potential for Amazon to expand its product offerings significantly.

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Addressing the stock’s performance, Bezos recalled a significant fluctuation: Amazon’s stock reached around $113 during the internet bubble then dropped to $6 in less than a year. Despite this, he noted that internal business metrics, such as customer numbers and profit per unit, were consistently improving.

Bezos emphasized the distinction between a company and its stock. stating, “The stock is not the company, and the company is not the stock.”  While Amazon’s stock price fell, the company’s internal metrics indicated robust growth and progress. He pointed out that during the financial bust following the internet bubble, Amazon had the necessary capital and did not require additional funding. This financial stability allowed the company to continue its growth trajectory despite the turbulent stock market.

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Understanding that a company’s stock price doesn’t always accurately reflect its actual performance is essential. For investors, especially those interested in investing in startups, this means that the real value lies in the company’s fundamentals — its business model, growth potential, leadership and market position. Picking good companies to invest in should be based on these tangible aspects rather than short-term stock performance.

Bezos also addressed criticisms about Amazon’s profitability, explaining that detractors accused Amazon of “selling dollar bills for 90 cents,” but he clarified that Amazon always had positive gross margins. It was a fixed-cost business, and he could see from internal metrics that once a certain volume was achieved, the company would cover its fixed costs and become profitable.

Throughout the conversation, Bezos highlighted the importance of focusing on the company’s core metrics and growth strategies, rather than being overly concerned with stock price fluctuations. This approach, he suggested, was key to navigating the challenges of the dot-com era and contributed to Amazon’s enduring success.

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