• UCD Student Managed Fund

The King is Dead, Long Live the King

Updated: Feb 21

By Fiachra Barry, Equity Analyst at University College Dublin Student Managed Fund

Just before the release of Amazon’s Q4 earnings for 2020 it was announced that Jeff Bezos would be stepping down as CEO. As well as his abdication of the throne of e-commerce, Bezos was also recently replaced as the richest person in the world. Everyone’s favourite billionaire Elon Musk snatched top spot from him thanks to a surge in Tesla’s stock price. Is this the end for Bezos? In this article I will take a look at the life and legacy of Jeff Bezos and try and predict what his next move will be.

A high achiever from a young age, Bezos graduated in 1986 from Princeton University with a Bachelor of Science in Engineering and a 4.2 GPA. He went on to work in a variety of industries. Perhaps most interesting was his stint at D.E. Shaw & Co, a quantitative hedge fund. D.E. Shaw was a pioneering firm in the quantitative space. They employed carefully guarded trading algorithms crafted by computer scientists and mathematicians not economists or financial analysts. It’s no wonder he was attracted by this innovative and exciting sector. Eventually though, Bezos grew weary of Wall Street and quit his job at D.E. Shaw to start a bookstore.

However, just like Jeff Bezos is no ordinary man, this bookstore would be no ordinary bookstore. Founded in late 1993 that little bookstore would go on to become the monstrous company we know today as Amazon. Recognising the potential that the internet held, Bezos established an online bookstore in his garage with a $300,000 investment from his parents. It’s estimated that if they hadn’t sold any of their shares, they would own just over 3% of the company today. That would make them the second-biggest individual owners after Bezos himself and possibly the greatest venture capitalists of all time. Their initial investment would be valued at approximately $50 billion today.

Though the initial focus was on selling books online, it was inevitable that Amazon would expand into other areas. By the end of 1998 there was a wide array of consumer goods available through their website and in 2002, Amazon Web Services (AWS) was launched. When it launched, AWS provided web traffic information and compiled weather reports from various websites. However, much like Amazon’s main e-commerce business, AWS soon became something far greater.

Recognising the need for cloud computing all the way back in 2003 gave AWS a head start on the competition and it has not stopped growing since. Despite making up only 10% of total sales, AWS accounts for over 50% of Amazon’s profits. This is to be expected though. Low margins are par for the course in commerce businesses, especially when compared to the sky-high margins found in the cloud computing industry.

Amazon made its commitment to AWS clear by appointing Andy Jassy, the CEO and founder of AWS, as Jeff Bezos’s replacement. This is a statement of intent by Amazon. Jeff Bezos fostered a culture of innovation in the company and that is what has helped them to grow at lightning-fast speeds. Jassy, who has led AWS since its inception, will be a good candidate to continue to promote that mindset that sets Amazon apart.

Of course, Bezos is not completely retiring. He is merely stepping down as CEO and will take on the role of Executive Chairman. He has said he will take more time out to focus on passion projects such as his space exploration company Blue Origin or the Washington Post.

However, Amazon and Jeff Bezos’s unstoppable rise has not been without controversy. Amazon have come under fire for their anti-competitive practices and US and EU antitrust watchdogs have highlighted Amazon’s treatment of third-party sellers as particularly problematic. They have also been accused of mistreatment of workers on multiple occasions and have received criticism for the way they manipulate and take advantage of loopholes to avoid paying tax.

Whether you think Jeff Bezos is a genius entrepreneur or just another exploitative billionaire, it is undeniable that the impact he has had on Amazon and the markets in general are unmistakable. Twenty or thirty years ago it would have been unheard of for an unprofitable company to be worth over $200 billion, which was the case with Amazon in 2015. As for his next move? Whatever Bezos’s long-term goal is, be it world domination or terraforming Mars, I wouldn’t bet against him achieving it.

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