Bezos Decision Making Framework
If you can make a decision with analysis, you should do so. But it turns out in life that your most important decisions are always made with instinct and intuition, taste, heart. - Jeff Bezos
Hey PMs, 🎆 Happy new year 2022!
What is Decision making?
Decision-making is regarded as the cognitive process resulting in the selection of a belief or a course of action among several possible alternative options. It could be either rational or irrational. The Decision-making process is a reasoning process based on assumptions of values, preferences, and beliefs of the decision-maker. Every decision-making process produces a final choice, which may or may not prompt action.
General Thinking Concepts
Combining intelligent preparation — learning about the big time-tested ideas from multiple disciplines — with general thinking frameworks will dramatically improve your decision-making skills.
These thinking frameworks help you look at problems through different lenses.
Inversion — Otherwise known as thinking something through in reverse or thinking “backward,” inversion is a problem-solving technique.
Second-Order Thinking — Ask yourself, “And then what?”
The Map Is Not the Territory —The map of reality is not reality itself. If any map were to represent its actual territory with perfect fidelity, it would be the size of the territory itself.
How Jeff Bezos Makes Decisions
According to Bezos, there are two basic kinds of decisions you can make:
Type 1: Almost impossible to reverse. Bezos calls them "one-way doors." Think selling your company. Or quitting a job. In short, figuratively jumping off a cliff. Once you make a Type 1 decision, there's no going back.
Type 2: Easy to reverse. Bezos calls these decisions "two-way doors." Like starting a side hustle. Or offering a new service. Or introducing new pricing schemes. While Type 2 decisions might feel momentous, with a little time and effort (often a lot less than you think) they can be reversed.
Unfortunately, it's easy to mistake a Type 2 decision for a Type 1 decision or to let caution creep in and assume that every Type 2 decision is a Type 1 decision.
Do that and you become paralyzed -- and make no decision at all.
As Bezos wrote in a shareholder letter,
Some decisions are consequential and irreversible or nearly irreversible -- one-way doors -- and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don't like what you see on the other side, you can't get back to where you were before. We can call these Type 1 decisions.
But most decisions aren't like that -- they are changeable, reversible -- they're two-way doors. If you've made a sub-optimal Type 2 decision, you don't have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups.
As organizations get larger, there seems to be a tendency to use the heavyweight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We'll have to figure out how to fight that tendency.
Characteristics of Type 1 and Type 2 Decisions:
You cannot always classify a decision as Type 1 or Type 2. But, the overall characteristics of these decisions are as follows.
Five rules can guide you toward high-velocity decision-making:
1. Never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a lightweight process.
The distinction between two different types of decisions and, thus, two different types of decision-making mechanisms must be crystal clear. It beats bureaucracy, analysis paralysis, and improves, over time, people’s judgment in decision-making.
2. Don’t make all decisions by yourself. No matter how hard-working you and your top team are, there are only 24 hours in a day. As your business continues to grow, if decision-making remains concentrated at the top, sooner or later, you and your top executives will become the biggest impediment to rapid growth.
3. Don’t wait for all the information. As Bezos wrote in his 2016 shareholder letter, “most decisions should probably be made with somewhere around 70 percent of the information you wish you had. If you wait for 90 percent, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course-correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.”
4. Don’t require approvals that are lengthy and must go through large numbers of hierarchical layers. When multiple functions actually need to be involved in approving a Type 2 decision, you can transform the traditional sequential process into a simultaneous dialogue for high-velocity, high-quality decision-making.
5. Don’t wait for everyone to agree. Everyone has experienced postponed decision-making due to one or a few people’s objections or absence. In some cases, in a drive to have consensus, one person can exercise veto power. Sometimes a decision is made and then reopened in the third meeting, which is very frustrating, energy-draining, and time-consuming—and the quality of decision, by definition, is poor.
To solve this deadlock, “disagree and commit.” Bezos did that when his team wanted to greenlight an Amazon Original show that he felt should be dropped, responding, “I disagree and commit and hope it becomes the most watched thing we’ve ever made.” Just imagine how long that call would have taken if the team had to educate, persuade and finally earn a commitment from him.
After all the facts are considered and all thoughts are expressed, as Bezos wrote in a shareholder letter, “if you have a conviction on a particular direction even though there’s no consensus, it’s helpful to say, ‘Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?’ By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes.”
This is a two-way, rather than a one-way, approach. Leaders can use it for high-velocity decision-making, and leaders should also be prepared to practice this principle themselves, as Bezos did in greenlighting that Amazon Studios original program.