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Jeff Bezos: Focus on the Controllable Inputs, Not the Outputs

By Jeff Bezos · Leadership · 1 min read

If somebody said 'Jeff, your job is to drive up the stock price' — that sounds ridiculous. But many companies actually try to do this. It's not sustainable.

Key Points

Focus on the controllable inputs to your business, not the outputs — you get better results long-term
Work backwards from the goal until you find something you can actually change
Reducing defects at the root is one of the best ways to lower cost structure

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.

Don't Manage the Output

Bezos: If you focus on the controllable inputs to your business instead of the outputs, in the long term you get better results.

If somebody came up to me and said — Jeff, I want your job to be to drive up the Amazon stock price and just manage that directly — this might sound ridiculous, but many companies actually do this. They actually go out and try to sell the stock. That's the final output. It's not going to be sustainable. It's a silly approach.

Many companies actually try to manage the stock price directly. It's not sustainable.

Work Backwards

Bezos: What are the inputs to a higher stock price? Free cash flow and return on invested capital. OK — keep working backwards. What are the inputs to free cash flow?

You keep working backwards until you get to something that's controllable. A controllable input for free cash flow would be something like lower cost structure.

Keep working backwards until you get to something that's controllable.

A Job You Would Accept

Bezos: You back up from there and say — if we can improve our picking efficiency in our fulfillment centers and reduce defects — defects are very, very costly — reducing defects at the root is one of the best ways to lower cost structure.

That starts to be a job you would accept. A reasonable person would say — I have no idea how to drive up the stock price. I can't manage that directly. But I can make your picking algorithms more efficient. And that will reduce cost structure. Then follow that chain all the way. That's what you do in all of these businesses.

I can't manage the stock price. But I can make picking algorithms more efficient. Follow the chain.