Jeff Bezos: There are two types of decisions to make and don't confuse them
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He first notes that Amazon is the best place in the world to fail because the company is willing to take big risks with the knowledge that 90% of them will fail.But then he goes on to carefully distinguish two kinds of decision-making that affect how he thinks about risks.Advertisement
Type 1 decisions are not reversible, and you have to be very careful making them.
Type 2 are like walking through a door - if you don't like the decision, you can always go back.The problem comes from confusing the two, Bezos writes:
As organizations get larger, there seems to be a tendency to use the heavy-weight 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.And one-size-fits-all thinking will turn out to be only one of the pitfalls. We'll work hard to avoid it… and any other large organization maladies we can identify.In a footnote, he acknowledges that taking Type 1 decisions lightly is an even a bigger mistake:Advertisement
The opposite situation is less interesting and there is undoubtedly some survivorship bias. Any companies that habitually use the light-weight Type 2 decision-making process to make Type 1 decisions go extinct before they get large.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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