Type 1 and Type 2 Decisions (Jeff Bezos)

Type 1 and Type 2 Decisions (Jeff Bezos)

🔥NEW We are used to approach decision making from many different angles… strategic to operational, personal to professional, long-term to short-term and so forth. Back in 2015, Amazon's CEO Jeff Bezos shared that being able to distinguish between 2 types of decisions had proved to have great impacts on Amazon's success. It was in a letter to Amazon's shareholders where he started with saying how once a simple startup Amazon has since become matured and eventually built 3 profitable business lines – Prime, Marketplace and AWS. Unlike many he acknowledged the presence of luck in each of those endeavors as he wrote, "Luck plays an outsized role in every endeavor, and I can assure you we've had a bountiful supply." But he also thinks decision making had a unique role as well. Even though many of their decisions proved to be a failure, he described failure as a part of Amazon's distinctive culture and that Amazon is "the best place in the world to fail". In that letter he clarified why even those failure couldn't stop Amazon from wining.

One of the reasons was Amazon's ability to distinguish between two types of decisions as a matter of course. In Bezos' own words:

TYPE 1 DECISIONS
"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."

TYPE 2 DECISIONS
"But most decisions aren't like that – they are changeable, reversible – they're two-way doors. If you've made a suboptimal 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."

IMPLICATIONS FOR DECISION MAKERS
Bezos says, "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."
He also pointed out that the opposite is perhaps even worse: "Any companies that habitually use the light-weight Type 2 decision-making process to make Type 1 decisions go extinct before they get large."
In my opinion making this difference is a good example of contingency in decision-making.

⇨ What do you think of Bezos 2 types of decisions? Do you actively make the distinction between the 2?

		Comments Sort by date Sort by rating Rating
		2 Maurice Hogarth Consultant, United Kingdom
	A Decision Made is not the Same as a Decision Taken I am struggling with the precise wording of the concept / referents of type-1 decisions. - A decisi... Sign up

		3 Steve Player Director, United States
	Examples of Type 1 and Type 2 I want to thank the original submission for a useful summary of Jeff Bezos discussion of "Type 1 and... Sign up

		1 Maurice Hogarth Consultant, United Kingdom
	Decision Types 1 & 2 + 3? @Steve Player: Thanks Steve, clarification appreciated. (I suggest that there is more than a "sligh... Sign up

		3 Jaap de Jonge Editor, Netherlands
	An Interesting Further View to Reversability of Decisions Thanks Maurice for explaining the subtle difference between making a decision and taking a discussio... Sign up

		2 Steve Player Director, United States
	Focus on Type 2 Decisions can Lead to Greater Agility @Jaap de Jonge: Thanks to both you and Maurice for your kind words and further discussion. The time ... Sign up

		1 Jaap de Jonge Editor, Netherlands
	Agile Decision Making Thanks Steven for sharing that example about differences in how much time companies take for making ... Sign up

		1 Munadil Shafat Student (MBA), Bangladesh
	Decision Making or Taking! I'm really fascinated to see such a deep discussion is going on to this topic. Thanks all for taking... Sign up

		0 Maurice Hogarth Consultant, United Kingdom
	Decision Classifying or Scaling @Jaap de Jonge, Steve Player: Thanks Steve / Jaap. I like your points that Bezos' type-1 decisions, ... Sign up

		0 Libardo Daza Business Consultant, Colombia
	Libardo Alberto Daza, Consultor, Miembro, Colombia @Maurice Hogarth: A todos muchas gracias por compartir sus apreciaciones sobre un tema que sigue gen... Sign up

		1 Rick McPherson Teacher, United States
	Great Way to Think About Making More Timely Decisions As both a former executive and an educator, I find this idea of Type 1 and Type 2 decisions a great ... Sign up

		1 Graham Williams Management Consultant, South Africa
	Decision Types 1 + 2 + 3 + ... Quite a comprehensive discussion! I found @Jaap's insights around real options theory and agility to... Sign up

		0 Maurice Hogarth Consultant, United Kingdom
	The Choice of Consequences Graham Williams; as you say 'When faced with a choice, select the best of both'. Frequently decisio... Sign up

		2 Graham Williams Management Consultant, South Africa
	Decision Types 1 + 2 + 3 + $ + Rational decision making, whatever the nature of the decision consequences is sometimes trumped by a... Sign up

		0 Jaap de Jonge Editor, Netherlands
	Type 1 and Type 2 Decisions (Bezos of Amazon) Thanks all for sharing your views. Sometimes the beauty of a model is in its simplicity. That's what... Sign up