creates a virtuous cycle that leads over the long term to a much larger dollar amount of free cash flow, and thereby to a much more valuable Amazon.com. We’ve made similar judgments around Free Super Saver Shipping and Amazon Prime, both of which are expensive in the short term and—we believe—important and valuable in the long term. Asanother example, in 2000 we invited third parties to compete directly against us on our “prime retail real estate”—our product detail pages. Launching a single detail page for both Amazon retail and third-party items seemed risky. Well-meaning people internally and externally worried it would cannibalize Amazon’s retail business, and—as is often the case with consumer-focused innovations—there was no way to prove in advance that it would work. Our buyers pointed out that inviting third parties onto Amazon.com would make inventory forecasting more difficult and that we could get “stuck” with excess inventory if we “lost the detail page” to one of our third-party sellers. However, our judgment was simple. If a third party could offer a better price or better availability on a particular item, then we wanted our customer to get easy access to that offer. Over time, third- party sales have become a successful and significant part of our business. Third-party units have grown from 6% of total units sold in 2000 to 28% in 2005, even as retail revenues have grown three-fold. Math-based decisions command wide agreement, whereas judgment-based decisions are rightly debated and often controversial, at least until put into practice and demonstrated. Any institution unwilling to endure controversy must limit itself to decisions of the first type. In our view, doing so would not only limit controversy —itwouldalsosignificantly limit innovation and long-term value creation. Thefoundation of our decision-making philosophy was laid out in our 1997 letter to shareholders, a copy of which is attached: •Wewillcontinuetofocusrelentlesslyonourcustomers. •Wewillcontinuetomakeinvestmentdecisionsinlightoflong-termmarketleadershipconsiderations rather than short-term profitability considerations or short-term Wall Street reactions. •Wewillcontinuetomeasureourprogramsandtheeffectivenessofourinvestmentsanalytically,to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures. •Wewillmakeboldratherthantimidinvestmentdecisionswhereweseeasufficientprobabilityof gaining market leadership advantages. Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case. Youcancountonustocombineastrongquantitative and analytical culture with a willingness to make bold decisions. As we do so, we’ll start with the customer and work backwards. In our judgment, that is the best way to create shareholder value. Jeffrey P. Bezos Founder and Chief Executive Officer