Jeff Bezos: “Focus on the Controllable Inputs to Your Business Instead of the Outputs”

Jeff Bezos explains how many companies mistakenly focus on trying to directly influence their stock price, such as by selling their stock:

“[A higher stock price] is the final output… That’s not going to be sustainable. It’s a silly approach.”

Instead, Jeff advises working backward from the desired output, focusing on controllable inputs:

“What are the inputs to a higher stock price? Okay, well, free cash flow and return on invested capital are inputs to a higher stock price. Let’s keep working backwards. What are the inputs to free cash flow? And you keep working backwards until you get to something that’s controllable.”

One such controllable input is reducing costs, such as improving the efficiency of operations:

“If we can improve our picking efficiency in our fulfillment centers and reduce defects – reducing defects at the root is one of the best ways to lower cost structure – that starts to be a job you would accept. If you’re a reasonable person, you would say, I have no idea how to drive up the stock price – I can’t manage that directly. It’s not a controllable input. But I can make your picking algorithms more efficient, and that will reduce cost structure. And then you follow that chain all along the way. That’s what you do in all of these businesses.”