Scottish Mortgage is Baillie Gifford's flagship investment trust (founded 1909, LSE ticker SMT), known for its maximalist growth style — long-term stakes in Tesla, Amazon and ASML plus bold allocations to private companies like SpaceX and ByteDance. It is the UK retail investor's flagship vehicle for global disruptive growth.
This piece reflects on Scottish Mortgage's 20-year investment in Amazon. The fund's manager says Amazon's real edge isn't what it sells but its culture of experimentation and long-term thinking, institutionalized by founder Jeff Bezos. For example, when Prime launched in 2005, models predicted huge losses, but Bezos used his authority to push it through, betting that free shipping would change customer behavior—and it did. After Bezos stepped down in 2021, Scottish Mortgage trimmed its Amazon stake, unsure if new CEO Andy Jassy can make another big bet like AWS. They see AI and cloud as the next growth driver, but admit it's a gamble.
At a Glance The Scottish Mortgage research article reviews its two-decade investment journey in Amazon, emphasizing the value of long-term holding while tolerating high capital expenditure and uncertainty. The report argues that Amazon’s core strength is not limited to book sales but lies in the cul
Tom Slater (Investment Manager at Scottish Mortgage) reflects on the fund's two-decade-long investment journey in Amazon. The central theme of this issue: Amazon's competitive advantage does not stem from any single business, but from the culture of experimentation, long-term thinking, and scaled innovation capability institutionalized by founder Jeff Bezos. The most weighty judgment in the entire episode: Bezos believes that the innovation function must grow faster than the organization itself—"You need more ideas to sustain a hundred-billion-dollar revenue business than a ten-billion-dollar one"—and it is this exponential mindset that lies at the root of Amazon's continuous self-reinvention.
Tom Slater argues that Amazon's true competitive advantage lies not in what it sells, but in how it makes decisions.
In his 1997 shareholder letter, Bezos established a culture of "bold rather than timid investing" and "pursuing long-term market leadership over short-term profitability." Slater notes that when Scottish Mortgage initially invested in Amazon, it did not see a bookstore—"We couldn't see anything it was doing that was limited to books."
The core mechanism of this culture is the "working backwards" method: starting from customer pain points, drafting a future press release first, then reverse-engineering the capabilities needed. Project leaders do not require layer-by-layer approval and "can make decisions directly." Slater recalls a conversation with Bezos at Amazon's Seattle headquarters—when asked how to maintain innovation in a large company, Bezos corrected the premise of the question: it is not about "maintaining" innovation, but about making the innovation function grow faster than the organization.
> "You need many more ideas to grow a business with $100bn of sales than one with $10bn." — meaning innovation density must scale exponentially with size.
Tom Slater uses the launch of Amazon Prime to illustrate that founder authority is irreplaceable in critical decisions.
When Prime was launched in 2005, the short-term economic model looked terrible—the customers who spent the most were the most likely to subscribe to "unlimited free shipping," and the loss projections were "absurdly high." The model said don't do it, and most people inside the company agreed. But Bezos used the founder's "moral authority" to push it through.
His bet was on second-order effects: customer behavior would change. When shipping became frictionless, people would buy more and more frequently. This cycle—build scale → use scale to improve service → build even larger scale—is the core of Amazon's flywheel. Slater implies that without Bezos's authority, this positive feedback loop might never have been set in motion.
Slater introduces Bezos' decision-making classification framework: One-way doors are irreversible major decisions requiring extensive consultation; two-way doors are reversible and should be attempted quickly.
AWS was originally a "two-way door". It began as internal infrastructure and was only offered as a cloud service externally in 2006, sitting in the "Other" segment of Amazon's financial reports for a full decade. It was not until 2015-2016 that this line began to grow rapidly, prompting questions about "how big can cloud services actually become."
Interestingly, Bezos himself was uncertain at the time—he told investors that AWS was a capital-intensive business with low expected returns. Slater notes that this judgment "later proved inaccurate" [AWS currently contributes nearly 60% of Amazon's operating profit], but adds that "he may have just been trying to scare off competitors."
The advertising business is another example—it was not part of the original investment thesis, but with so much traffic intent on purchasing, a massive business naturally emerged.
Slater admits that when Bezos stepped back from his operational role in 2021, Scottish Mortgage indeed felt uneasy and reduced its position accordingly.
The issue is not the founder’s departure per se—provided he has built mechanisms for the organization to succeed in his absence. The real uncertainty lies in the ability to continue making bold, game-changing decisions. Today, Amazon is a $717 billion revenue enterprise, and any new experiment must be large enough to move the needle.
Current CEO Andy Jassy is a "continuity candidate"—he has been with the company since its inception, worked alongside Bezos for years, and performed well on the execution front. However, Slater notes: "He has yet to produce a clear big bet or new business pillar on the scale of AWS, and that remains an open question."
That said, he offers another perspective: Tim Cook created hundreds of billions of dollars in value at Apple without Steve Jobs-level product innovation. Perhaps in the AI era, the ability to execute and maximize existing potential matters more than disruptive innovation.
Slater argues that Amazon’s next growth driver most likely comes from AWS and AI.
Cloud migration has already reshaped enterprise spending patterns, and AI could accelerate this trend. "If more valuable activities run on the cloud, Amazon will become an even more critical part of the global economic infrastructure."
However, he acknowledges this is a bet—"the capital deployed is enormous, and demand must materialize." Yet Amazon has consistently excelled at layering new businesses on top of existing capabilities. Slater concludes: trying to predict the next act may be a mistake; the real question is whether the culture and ambition that spawned Kindle, AWS, and Prime can continue to create opportunities.
| Position | Guest Sentiment | Key Data |
|---|---|---|
| Amazon | Long-term bullish, but reduced holdings after founder's departure | Revenue $717bn; AWS contributes nearly 60% of operating profit; Prime's loss forecast at launch in 2005 was "absurdly high" |
1. Tom Slater on the Scale of Innovation: Bezos believes that innovation capabilities must outpace organizational growth—"You need more ideas to sustain a hundred-billion-dollar revenue company than a ten-billion-dollar one." This is exponential thinking, not linear thinking.
2. Tom Slater on Founder Authority: When Prime was launched, every model said "no," but Bezos used moral authority to bet on second-order effects—customer behavior would change due to frictionless delivery. That judgment later proved correct.
3. Tom Slater on Decision-Making Frameworks: Bezos's "one-way door/two-way door" classification—only irreversible major decisions require extensive consultation; reversible decisions should be attempted quickly. AWS was originally a two-way door.
4. Tom Slater on the AWS Miscalculation: Bezos once told investors that AWS would not generate high returns—"Maybe just to scare off competitors." Today, AWS contributes nearly 60% of Amazon's operating profit.
5. Tom Slater on Founder Departure: Scottish Mortgage reduced its position after Bezos stepped back from operational roles, citing doubts about "the ability to make major, dramatic decisions." Andy Jassy has executed well, but no new bet on the scale of AWS has emerged.
6. Tom Slater on the Apple Analogy: Tim Cook created hundreds of billions of dollars in value at Apple without product innovation on the level of Steve Jobs—suggesting that execution capability may be more important than disruptive innovation.
7. Tom Slater on the AI Bet: AI could accelerate cloud migration, making Amazon an even more central part of the global economic infrastructure. But "the investment is enormous, and demand must deliver"—this is the biggest uncertainty at present.
Tom Slater (Manager of Scottish Mortgage) reflects on a two-decade investment journey with Amazon. The core insight: Bezos’s vision often takes four to five years to be understood by the market. The investment inspiration Scottish Mortgage gained from observing Bezos’s thinking and actions is no less valuable than the returns from Amazon itself.
Tom Slater argues that the market often takes four to five years to truly grasp the value of many of Bezos’s major decisions. He cites two examples:
Key signal: Scottish Mortgage not only reaps financial returns from Amazon but also, by observing the direction of Bezos’s thinking, has shaped its investment horizon—“Where he spends his time and the company’s money, we often only begin to truly understand four or five years later.”
Slater emphasizes that Scottish Mortgage gains not just a 20-year investment return from Amazon but also a valuable opportunity to observe how Bezos thinks and acts. Exchanges with Bezos and his senior colleagues have directly influenced the fund’s focus areas and the types of companies it wants to hold.
Readers should note: This is a self-defense from the perspective of a position holder—Slater uses Bezos’s foresight to justify long-term holding, but does not mention the psychological test that Amazon’s multiple significant share price pullbacks (e.g., a 46.1% decline in 2022) have posed to investors.
| Position | Guest Sentiment | Key Data |
|---|---|---|
| Amazon | Long-term hold, highly endorses founder's mindset | Held for 20 years; 2022 share price -46.1%, 2025 +42.7% (Scottish Mortgage annual performance) |
1. Bezos’ decisions often take four to five years to be understood by the market (Tom Slater) — The warehouse automation and humanoid robot case: Bezos discussed the "difficulty of replicating the human hand" before the pandemic, and seven years later it became an industry bottleneck.
2. The investment inspiration Scottish Mortgage gained from observing Bezos is as valuable as the financial returns from Amazon (Tom Slater) — Direct exchanges with Bezos influenced the fund’s investment direction.
3. Bezos’ way of thinking: simplifying complex concepts and cutting to the essence (Tom Slater) — A typical opening line: "I live in the future, and it’s a wonderful place," accompanied by his signature laugh.
4. Long-term holding requires tolerating high investment and uncertainty (implicit judgment) — Scottish Mortgage’s share price fell 46.1% in 2022 but rebounded 42.7% in 2025, reflecting the volatility of long-term investing.