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- Choose a bias to action with reversible decisions.
Ask ‘what are the consequences of this de ...
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Even reversible decisions have an Opportunity Cost. The time and effort invested in that choice and then possibly backtracking have a cost in relation to the option forgone.
At the same time, the examples provided by Bezos ‘using his gut’ and intuition are problematic when we consider behavioural economics, Fast and Slow Thinking, and unconscious bias.
It's true that experts have deep, often unconscious pattern recognition within their field of expertise so can often make reliable, fast, gut-based decisions. But it's also true that such gut reactions lack a rational consideration and are prone to be impacted on by countless heuristics, particularly in new and unfamiliar situations.
Greenlighting Amazon Prime.
Bezos has said that the decision to greenlight Amazon Prime was ultimately based on intuition because the data did not provide a clear way forward. He explains that this is a common challenge with a new, untested initiative.
Bezos said: “There wasn’t a single financially savvy person who supported the decision to launch Amazon Prime. Zero. Every spreadsheet showed that it was going to be a disaster. So that had to just be made with gut.”
“You collect as much data as you can. You immerse yourself in that data,” said Bezos, “but then make the decision with your heart.”
The high velocity decision model is a useful decision making framework for any individual or team wanting to increase their agility and work in a competitive environment.
Use the following examples of connected and complementary models to weave high velocity decisions into your broader latticework of mental models. Alternatively, discover your own connections by exploring the category list above.
Connected models:
- Agile methodology: sharing the ideas of having a bias to action and testing ideas.
- Lean startup and minimum viable product: again, embracing the idea of quickly testing assumptions rather than discussing them forever.
Complementary models:
- Second order thinking: even if it is reversible, will the decision have second order and beyond implications that are irreversible?
- Circle of competence: making fast decisions from your circle of competence.
- Pareto principle: when making a decision based on 70 to 90% of the information, consider whether it includes the critical information.
- Inversion: considering what will be the cost of making the wrong decision in assessing whether it is reversible and what’s at stake.
- Redundancy/ margin of safety: to better make decisions with minimal risk.
- Fast and slow thinking: and the traps of relying on fast thinking.
- Availability heuristic: one of many cognitive biases that might arise from fast decision making.
- Prototypes: supporting a low risk approach to a bias for action.
This approach was described by Jeff Bezos in his 2016 letter to stakeholders. Here's how it starts:
“'Jeff, what does Day 2 look like?'
"That’s a question I just got at our most recent all-hands meeting. I’ve been reminding people that it’s Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic.
"'Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.'
"To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come.
"I’m interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization?
"Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps. I don’t know the whole answer, but I may know bits of it. Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making."
The essence of the following 'starter pack' has been summarised into the High-Velocity Decisions model that you've been exploring.
My Notes
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1546 days ago arun , CoFounder ModelThinkers & keynote speakerI was very proud that we managed to dig up this model. It's not widely talked about elsewhere, though there are many references about Bezos considering irreversible / reversible decisions, there aren't many sources that capture the 4 elements from the original shareholder letter. We really found the four elements in combination very powerful for any agile organistion.
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