Amazon, the incredible company that is upending traditional retail and driving consumers from malls to laptops, first sold shares to the public 20 years ago this week. And its stock price just hit yet another all-time high, giving me a new low in my ability to win on Wall Street. To help drive my fragile ego even lower, some analysts are predicting another 20% upside this engine of growth.
I’ve missed my fair share of winners on Wall Street, but this one is especially painful. Had I invested $1.00 in Amazon right after its Initial Public Offering in 1997 it would be worth $500.00 today, a huge return on a modest investment. Sure, we all have our stories of opportunities lost. But this one is personal. Here’s why.
Shortly after Amazon went public, I had the opportunity to interview venture capitalist John Doerr, a partner in the enormously successful Silicon Valley firm of Kleiner Perkins Caufield & Byers. According to Forbes, Doerr was worth more than $4 billion by 2015. He hit a lot of home runs in high tech over the years, and Amazon was right up there helping add to his own net worth.
I was covering a charity event in San Francisco for my syndicated TV show, “On the Money with Brian Banmiller”, and John was there to help, along with San Francisco Mayor Willie Brown. After interviewing John about the charity, and with the camera turned off, he asked me if I knew much about a company called Amazon. I confessed I did not.
Doerr proceeded to tell me about its debut as a Seattle based company selling books online, and that its current stock price of $40 would hit $600 in a few short years. I challenged him by asking the obvious question, “Are you the banker on this deal, and so simply pushing your stock?” He smiled in response and said “I do not give stock tips, but this one is a sure winner.” I was not sure how to take that, since all venture capitalist in the Valley push their stocks to potential investors.
Back in the truck, I turned to my cameraman John MacKenzie, who heard the entire conversation, and said “I think I’ll dump a bunch of my pension plan money into Amazon stock”. MacKenzie, who also dabbled in stock, as did so many of us back then, said “You’d be crazy to do that”. So I did not. Neither did MacKenzie.
Years later, after Amazon stock did indeed hit $600 a share as Doerr had predicted, I happened to be interviewing Laura Tyson, former Chair of President Clinton’s Council of Economic Advisors. She had moved back to U.C. Berkeley as Dean of The Haas School of Business. Tyson cut the interview short, saying she had a luncheon meeting in Silicon Valley with, you guessed it, John Doerr.
Knowing Laura so well, I just had to tell her of the time years before when Doerr had recommended I buy Amazon stock at $40 a share. She smiled and said, “He told me too.” Did she buy? Nope. I laughed and said to Dean Tyson, here we have you as head of the Haas Business School, and me as a well-known business reporter and anchor of the syndicated show, “Silicon Valley Business”, neither of us pulled the trigger. I took some comfort in that. Hitting a home run is hard.
Fast forward to today. Finding another Amazon is not easy. According to Jason Zweig at The Wall Street Journal, “from 1926 through 2015, only 30 stocks accounted for one-third of the cumulative wealth generated by the entire U.S. stock market and Amazon was one. That’s 30 out of a grand total of 25,782 companies publicly traded over that period.” Here is the bottom line. Buying Amazon and holding it for 20 years would have made me a very smart or just very lucky investor. But it takes discipline to hold on when your stock tanks or shoots up.
Amazon itself lost 95% between 1999 and 2001 when the internet bubble burst. Hundreds of high tech stocks did not survive the bloodbath and investors lost billions. But Amazon turned itself around in spectacular fashion. According to Zweig, “super stocks are so rare that building your investment strategy around the search for them is all but sure to end in heartbreak. But the rewards are so great that even the tiniest gamble could pay off for those who can withstand the pain.”
Just know that for every Amazon success story there are spectacular failures. Enron, the energy trading company, went from boom to bust? Webvan was the online grocery business that went bankrupt in 2001 after 3 years of operation, and was later folded into (drumroll please!) Amazon. As one Venture capitalist told me off the record, the biggest open secret in Silicon Valley is that more than 90% of start-ups fail. Silicon Valley and Las Vegas have a lot in common.
Brian Banmiller is a national business reporter for CBS News Radio and Managing Editor of www.banmilleronbusiness.com
This article originally published on May 20, 2017.
CBS News Radio national business journalist Brian Banmiller has spent more than 40 years in the news industry, covering business, politics and the economy on television, radio and in print. Currently, his “Banmiller on Business” reports are delivered to an audience of millions nationwide.