One of my favourite business interviews by Dave Rubenstein is when he interviewed Warren Buffett, but the second favourite is with Jeff Bezos.
In the interview with Jeff Bezos, he starts the interview with this question:
David M. Rubenstein: Now, your stock is actually up 70 percent this year. Is there one thing that you think is responsible for that or several things, because 70 percent is pretty good?
Jeff Bezos: No, I – you know, I have been lecturing, we have all-hands meetings at Amazon. And for 20 years, ever since we’ve been, what, 21 years now, in 1997, at almost every all-hands meeting, I say, look, when the stock is up 30 percent in a month, don’t feel 30 percent smarter, because when the stock is down 30 percent in a month, it’s not going to feel so good to
feel 30 percent dumber. And that’s what happens.
You know, the great quote that Warren Buffett brings up all the time, that Benjamin Graham said, which is, in the short run the stock market is a voting machine, in the long run it’s a weighing machine. And what you need to do is operate your company in such a way knowing that it will be weighed one day and just let it be weighed, never spend any time thinking about the daily stock price. I don’t.
Warren Buffett used this Benjamin Graham quote in his interview with Dave Rubenstein. Now Jeff Bezos used it as well:
“In the short run, the stock market is a voting machine, in the long term, it’s a weighing machine.”
Basically when building a business don’t think about the daily stock price. Think about building a sustainable business.
There was a time when the Amazon shares were down 80% from the previous year, but Bezos wrote in one one of his letters to shareholders that “the company is in a stronger position now than at any time in its past.”
Despite this drop, Bezos never doubted Amazon’s business model.
“That understanding of the fixed nature of our expenses, relative to physical retail, is what led us to have the ‘get big fast’ strategy. We knew that our economics would be improved if we had sufficient scale,” he said.
This is what is meant by understanding your business fundamentals and numbers.
If you don’t know your numbers, you don’t know your business. You will easily confuse the voting numbers with the weighing numbers.
What matters more is your internal metrics, numbers and fundamentals of your business than your external popularity numbers.
Understand the fundamentals that are important in building your business.
Understand the key financial numbers that are important in building your business.
Ignore the noise and build a business for the long term.
Build a business that will be weighed in the future.
In the short run, the stock market is a voting machine, in the long term, it is a weighing machine.