What is Amazon’s flywheel and why does Bezos so often ignore it?

I just finished reading The Everything Store by Brad Stone. It is an amazing book and I learned a ton. I highly recommend it.

But here is the question I kept coming back to: why does Bezos appear to so often get strategically distracted?

My presumption here is that I’m missing something and am wrong in thinking he gets distracted. He is the one running one of the most successful companies in the world.

But here’s my wondering:

Amazon seems most successful when it stays focused on building out world’s biggest online retail store and spinning out services that it had to create in order to scale (AWS, distribution, allowing 3rd party sellers on its platform).

This appears to be an amazing flywheel:

  • Capture the largest economies of scale retail has ever seen by being a global online everything store.
  • Anytime you create a technological or operational breakthrough, turn it into a platform available to third parties.
  • Repeat.

From afar, this seems like an amazing formula that Bezos has perfected with brilliant vision and aggressive execution.

So why doesn’t Bezos just stick to the formula?

Time and time again Bezos has deviated it from it and suffered major losses: including his dot.com spree of buying stakes in other companies, many of which eventually went bankrupt (investing distraction); the failure of Amazon Fire (hardware distraction); the failure of Amazon Wallet (veering into payments); the failure of Askville (search distraction). I’m sure there are more that I’m missing.

Note that in the above I’m not naming retail mistakes: experiments with online travel, fashion, auctions, and so forth were within in strategy and didn’t work out, but they weren’t really distractions. They were retail bets.

Kindle and Alexa are the most interesting counterpoints. With these devices, Amazon built hardware products that ended up being market leaders when the flywheel strategy dictates that they should have stayed out of the hardware game.

Amazon video another big bet that has not yet failed, but seems like it would have just been better for them to be the platform rather than be their own content channel.

Yet even if Kindle, Alexa, and Amazon video are long-term profitable, they (and all the distractions that failed) have to be weighed against the opportunity cost of time and resources that could have been plowed into the flywheel.

Amazon has so much retail growth ahead of them, why not just devote 100% of Amazon energy into being the everything store?

 

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