Why is Jeff Bezos, the Founder-CEO of Amazon, Stepping Down?

Feb 04, 2021 News

Jeff Bezos, the founder-CEO of Amazon, announced this week that he was stepping down.

This immediately caught our attention, as TradeSmith Decoder has held a stake in AMZN since April 2020. We’ve traded around the position multiple times, sometimes adding, sometimes booking partial profits. As of the Feb. 3 close, the core position is up more than 50%.

For Bezos to step down is shocking on the surface. He is only 57 years old, and Amazon is his baby.

What’s more, Bezos has long been known as someone who likes control.

One of the most famous things ever written about Amazon was a 2011 “platforms rant” memo from Steve Yegge, a software engineer who had spent six-and-a-half years at Amazon before transferring to Google.

In the memo — which brilliantly captures the core of Amazon’s success — Yegge said that Bezos “makes ordinary control freaks look like stoned hippies.”

That characterization fits with other well-informed descriptions, like the one in The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone.

Why, then, would one of the most rich and powerful tech CEOs in the history of mankind — if not No. 1 — decide to voluntarily step back from the company he built?

We were shocked to hear the news. We reached out to two friends who work at Amazon — one in artificial intelligence, the other in book publishing — and neither had any idea the Bezos announcement was coming.

Wall Street took the news in stride, though, because the announcement was timed alongside a blockbuster earnings report, demonstrating that Amazon is firing on all cylinders.

Meanwhile Andy Jassy, the chosen successor to Bezos, is the head of Amazon’s cloud business and has been with the company since 1997. Last but not least, Bezos will still retain ample power behind the scenes as executive chairman. He isn’t really leaving.

It’s possible that a nasty shoe will drop — some piece of news that explains why Bezos chose to step back. But it seems more likely that, as with Seinfeld choosing to end its run on top, Bezos wanted to go out on a high note.

Strategically, the move makes sense, for reasons both positive and negative.

For instance, Bezos has long wanted to spend more time on Blue Origin, the space exploration company he founded in 2000.

Many do not realize that Blue Origin is two years older than SpaceX, which was founded in 2002; this is probably because Blue Origin has long avoided press coverage, seemingly wanting to draw as little attention to itself as possible.

As the privately funded space race heats up, Blue Origin will be moving into a “show and tell” phase, sharing more information with the world in terms of what it is doing, which contracts it has secured, and how it is stepping up to SpaceX.

By relinquishing the Amazon reins, Bezos will have more time for Blue Origin, and greater elbow room to rebrand himself as a pioneer of private space exploration, alongside the more well-known Elon Musk and Richard Branson.

Amazon, a cloud services and e-commerce juggernaut, is also entering a season of brutal scrutiny.

Over the next decade or so, the CEO of Amazon will likely spend a hefty chunk of time dealing with congressional inquiries, antitrust actions, labor unionization movements, and increasingly hostile press coverage as the company’s power grows.

Bezos is likely happy to sidestep that spotlight. In his role as executive chairman, he’ll be able to retain a strong influence on Amazon’s future direction, while letting the new CEO, Andy Jassy, deal with the headaches on Capitol Hill.

Amazon’s latest earnings report was a tour de force, highlighting the dominance that is both a major success for Amazon and a growing source of regulatory headaches.

Consider, for example, that Amazon’s revenue grew 44% in the fourth quarter of 2020, topping $100 billion in a single quarter for the first time.

Or consider that Amazon’s full-year revenue for 2020, across all four quarters, was an amazing $386 billion — more than a billion dollars per day on average.

“The growth Amazon is seeing is just amazing, and it reflects a structural shift toward e-commerce that isn’t stopping or slowing,” a portfolio manager at Aptus Capital Advisors told Bloomberg.

“As this tailwind continues, Amazon will become even more of a behemoth than it already is,” the portfolio manager added, “and not just in e-commerce, but retail overall.”

That is probably correct — and it doesn’t even account for the cloud side of the business, which is likely to eventually spin off as a trillion-dollar enterprise unto itself, or Amazon’s growing advertising business, which could also be worth hundreds of billions as a standalone unit.

All told, it looks like Amazon is doing fine, and Bezos rationally wants to spend more time and energy on fun stuff — the acceleration phase of Blue Origin and private space exploration — while leaving the headaches of running an e-commerce empire to a hand-picked successor.

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