New York (CNN Business)In his annual letter to shareholders, Jeff Bezos said Amazon's biggest successes have come from failures.
The sentiment is a popular trope from Big Tech companies and startups. Now Bezos is getting candid about what his company has learned from some of its biggest missteps.
"Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures," Bezos wrote in the letter. "Of course, we won't undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out."
As a company grows, everything will need to scale, including the size of failed experiments, he wrote. Bezos often shares thoughts, analysis and glimpses into future plans in his annual shareholders letter, which started in 1997.
In the letter, he pointed to examples of growing pains. After the 2014 launch of the Fire Phone -- the company's biggest financial failure -- Amazon found major success with its smart speaker Echo. The products were developed around the same time.
Bezos said the company was ultimately able to take what it learned from the Fire phone failure and accelerate its Echo efforts and development for its voice assistant Alexa.
"The good news for shareowners is that a single big winning bet can more than cover the cost of many losers," he said.
This year's letter began by highlighting the growth in Amazon's third-party sellers. Sales from small and medium-sized businesses have grown to $160 billion in 2018 from $0.1 billion in 1999.
"Third-party sellers are kicking our first party butt. Badly," Bezos said.
Bezos also detailed the struggle behind building its cashier-less Amazon Go stores. Customers check in with an app, grab products off the shelves and walk out when they're done shopping. Amazon Go now has 10 locations.
"Getting there was hard. Technically hard," Bezos said. "We had to design and build our own proprietary cameras and shelves and invent new computer vision algorithms, including the ability to stitch together imagery from hundreds of cooperating cameras. And we had to do it in a way where the technology worked so well that it simply receded into the background, invisible."
Bezos touched on the origins of Amazon's cloud computing service, AWS.
"No one asked for AWS. No one," Bezos said. "Turns out the world was in fact ready and hungry for an offering like AWS but didn't know it. We had a hunch, followed our curiosity, took the necessary financial risks, and began building -- reworking, experimenting, and iterating countless times as we proceeded."
AWS now has millions of customers, including startups, nonprofits, government entities and major companies.
Bezos also challenged its top retail competitors, without naming specific companies, to match Amazon's employee benefits and its $15 minimum wage.
"Do it! Better yet, go to $16 and throw the gauntlet back at us. It's a kind of competition that will benefit everyone," he said.
Dan Bartlett, Walmart's executive vice president of corporate affairs, shot back at Amazon on Twitter. He shared an article about Amazon paying $0 in federal taxes last year and wrote: "Hey retail competitors out there (you know who you are) how about paying your taxes?"
According to an SEC filing on Wednesday, Bezos made a salary of $81,840 last year -- a number that hasn't changed for two decades. Although he's never taken stock awards, he owns 16% of Amazon and is the richest person in the world.
