Failure as a Strategy: What Portfolio Theory Teaches Us
How 80% failure still created a trillion-dollar company
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Introduction
Most people think Amazon’s rise to power was one smooth journey. But the truth? It was built on a mountain of failures. And that was the strategy all along.
Jeff Bezos understood something most founders don’t: portfolio theory.
What Is Portfolio Theory in Business?
Portfolio theory comes from investing. Smart investors don’t put all their money into one stock. They spread it across multiple bets. Some fail, some do average, and a few become massive winners that cover every loss, and then some.
Bezos applied this exact logic to building Amazon.
Amazon’s Graveyard of Failures
You’ve probably heard of:
- Fire Phone
- Amazon Destinations
- Dash Buttons
- Amazon Wallet
All flops. But Bezos never saw them as disasters. He shrugged them off because failure was baked into the strategy.
His approach:
01 - Run as many experiments as possible.
02 - Expect 80% to fail.
03 - Ensure no single failure can sink the company.
04 - When something works, double down hard.
Why This Strategy Works
Because in business, just like in investing, it only takes one big win to change everything.
- The Kindle changed digital reading forever.
- AWS turned into a multi-billion-dollar business.
- Prime locked in millions of loyal customers.
Each of these wins came from the same portfolio of experiments that produced all the failures.
From Books to the Everything Store
This is how Amazon went from selling books to becoming the everything store. The failures weren’t setbacks—they were stepping stones.
Food for thought
If you’re building a business:
- Don’t fear failed experiments.
- Don’t bet everything on one idea.
- Run multiple small bets.
- When you find your winner, go all in.
That’s portfolio theory in action. And it’s one of the most underrated secrets of long-term success.
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Prompt used to create the image for the note
P.S.: Image made on Meta AI using the prompt, “Create an image of an entrepreneur standing in front of a whiteboard with a list of experiments that they wish to do in their business”