• Amazon CEO Jeff Bezos believes that Amazon should be making big bets that will occasionally result in “multibillion-dollar failures.”
  • His annual letter to shareholders spells out why: “Amazon will be experimenting at the right scale for a company of our size,” he says, “if we occasionally have multibillion-dollar failures.”
  • This view lines up with Bezos’ previously stated approach to life: Failure is better than never having tried in the first place.
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What’s the point in making billions if you can’t make a multibillion-dollar mistake every now and again?

According to Amazon CEO Jeff Bezos, those types of failures are actually critical to Amazon’s success.

“Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures,” Bezos wrote in the company’s annual letter to shareholders, which was published on Thursday morning.

“If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle,” he said.

Amazon Fire Phone

Foto: The Amazon Fire phone.sourceFlickr/TechStage

He cited Amazon's infamous Fire phone as an example of a failure - but pointed out that work on the Fire phone assisted in the development of Amazon's Echo smart speakers and the Alexa digital assistant.

"While the Fire phone was a failure, we were able to take our learnings (as well as the developers) and accelerate our efforts building Echo and Alexa," Bezos said.

This philosophy - that it's better to have failed than to never have tried in the first place - is core to how Bezos looks at his own life.

"I knew that when I was 80, I was not going to regret having tried this," Bezos said in a 2001 interview with the Academy of Achievement. "I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. I knew that if I failed, I wouldn't regret that. But I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day."

amazon prime day amazon dash buttons 2x1_smaller

Foto: Amazon Dash buttons are no longer sold by Amazon.sourceAmazon; Samantha Lee/Business Insider

In the case of Amazon, Bezos applies that same philosophy on a much larger scale.

"This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society," he said. "We will work hard to make them good bets, but not all good bets will ultimately pay out."

Of course, this being a letter from the CEO of a publicly-traded company to its shareholders, Bezos has reassurance and tempering to offer as well.

As Bezos put it: "The good news for shareowners is that a single big winning bet can more than cover the cost of many losers."