hello my friends and welcome to the redefining high performance Podcast. My name is ty Bennett. I’m excited to be with you today because today i’m going to give you a framework for decision making that i think is going to reshape how you look at decisions.
I think this is framework is going to be revolutionary for you. I’m going to give you a couple examples of where this has helped to shape and grow incredible companies. This is a framework I’m trying to implement into my life and into the organizations that I run, the companies that I own.
I’ll tell you where it came from. If you’ve gone into our research, Redefining High Performance, if you haven’t, go back and listen to some of these previous episodes or you can go to my website tybennett.com and download the white paper. But if you’ve paid attention to any of our research or you’ve heard me on stage, sharing some of this research, you know that according to the research, the number one barrier to high performance is the fear of failure. Now that comes up in lots of different areas. I think fear affects us in lots of different ways, but one of those ways in which it affects us is in decision-making or often the lack of decision-making because think we are afraid of making the wrong decision. I think we’re afraid of making a choice that is irreversible. I think we’re afraid of choosing something and going down the road where we fail, we look dumb. I mean, there’s lots of things that come into play. And when you look at organizations, especially like bigger organizations, typically the decision-making process slows down immensely.
And because of that, these companies move extremely slow. In 2015, Jeff Bezos, who is the founder of Amazon, in a shareholder letter, he outlined a framework for decision-making that he was implementing into Amazon. And this has become a popular framework because he shared it openly, but also built what Amazon is today. The framework is simply this. There are two types of decisions, type one decisions and type two decisions. Now type one decisions according to Bezos are one way doors. The definition meaning they’re high impact, they’re irreversible decisions. I’ll give you an example. For a company like Amazon, that would be acquiring another company or launching a major new product line or changing your core business model. When you think about the characteristics, they’re costly, they’re impossible to reverse. They require deep analysis and careful deliberation. They’re usually made slowly and often by the senior leadership or you want a lot of voices, eyes, ears, experience looking in on that decision. And the mistakes if made in that decision making process can have long-term consequences. So the approach with type one decisions is typically we move cautiously We gather data, we seek multiple perspectives, and we make them infrequently. These are big decisions. The problem is that we treat most decisions that way. And most decisions aren’t type 1 decisions. Those are more rare. Those happen infrequently. We’re not constantly making life-altering decisions.
Most decisions are what Bezos calls type 2 decisions. These are two-way doors. The definition meaning is they’re low impact, they’re reversible decisions that you can change or undo if it doesn’t work. So an example, testing a new feature on a small set of customers that you can try that out and no harm done. Changing some marketing copy, you can test it, maybe A, B test it and kind of see what sticks. Adjusting an internal process, this can be readjusted if needed. So the characteristics are they’re easy to roll back, They’re lower cost or lower risk. They can be made quickly, often by individuals or small teams, and they encourage experimentation and innovation, right? Most decisions actually fall in the type two category. So the approach is that you move fast, you try things, you learn and you adjust, and you don’t get stuck in analysis paralysis. Or in other words, we don’t let the fear of failure come into those decisions. So if we start to change our focus thought process and create a framework, then we’re starting to look at decisions and going, are these type one decisions or type two decisions?
Because if they’re type two decisions, which most are, then we can change it and speed of decision making actually gives you an advantage. It allows you to experiment, innovate, iterate faster, to fail forward, to learn through the process. What Amazon warns is that many organizations treat type two decisions like type one, and that slows everything down. It adds unnecessary layers of approval and you lose speed and effectiveness and growth in that process. And so if we can identify if it’s a type one decision, yeah, then we go slow, we’re deliberate, we involve top level, everybody involved in the decision.
Type two is fast, it’s iterative, and it’s decentralized, meaning anybody can make that decision. This is a framework that helped to build Amazon. Let me give you another example. There’s a guy named Patrick Collison who is the founder of Stripe. Now, if you don’t know Stripe, Patrick Collison started Stripe at 22 years old and his goal was to revolutionize online payments, right? There were other platforms that existed, probably the most notable being like PayPal at the time. But as a 22-year-old, Collison started to study this idea and he came up across this framework from Jeff Bezos. And as he looked at it, he said that could give us an advantage because if we can clearly identify what things are type two decisions and move faster to market, that’s gonna give us an advantage to adjust, move, continue to adapt as we grow our business moving forward.
Type one decisions, obviously those need to be more deliberate. We need to handle those a little bit differently. The question that Collison started to ask is, is it reversible? Are these decisions reversible? What’s the long-term consequence? So things like new features, they were reversible. You could put them out immediately. Or like an API update, yeah, push it out because you can go roll it back and change it up with an additional API update. But other things like payment encryption or database updates database architecture, those were big decisions. And so Collison himself was in on those decisions. They required his personal approval. They took their time to make sure they did it right. But what he did with type two decisions is he worked to empower individual engineers saying, you have full autonomy here. You have decision, right? Decision-making operational decision-making power. So go ahead and move forward quickly. And they shocked Silicon Valley with this. They moved forward so fast. They thought that that could give them an advantage over their competitors, and it did. In fact, that framework helped to contribute in a huge way to the growth of Stripe by 2021, Stripe becoming a $95 billion company. Their pace of growth was unprecedented because of this framework. I hope this is making you think a little bit, but it’s making me think, and it’s making me think about how the organizations that I run, how we work, right?
What kind of decision-making power am I passing on? That framework of type one decisions, slow, deliberate, these are important, we can’t reverse these, let’s spend some time. But the majority being type two, failure’s okay. Failure teaches us, we can reverse it, we can learn through it, we can iterate, we can adapt. Let’s move forward quickly because the speed of decisions gives you an advantage and separates you. So the fear of failure is a huge barrier to high performance. One of the biggest reasons being is it stops the decision-making process. And so hopefully this framework of type one and type two decisions can give you an idea of how to move forward and move past that fear of failure when it comes to decision-making.
I hope this has been helpful for you. I love these quick, fast episodes where we can dive into just one piece of the research, one takeaway, and I hope that it’s something that’s truly serving you.
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Share this with other people. I truly appreciate it. If you haven’t gone, and read the white paper on our research, Redefining High Performance.
You can find that at my website, tybennett.com. And I look forward to being with you again next week.