🔑 How Jeff Bezos Makes Decisions
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Jeff Bezos is arguably the most successful entrepreneur of our time.
He grew a book website from zero into a $1.8 TRILLION dollar empire over 30 years before stepping back from his role as CEO in 2021. But you already know that.
What he did is rare. There are few people in the world who started a Trillion dollar company.
There are a few takeaways from Bezos that you can apply immediately to your own business.
He has a well-thought-out framework for making decisions, which he instilled in executives and managers at Amazon.
Today, I'm going to show you exactly how Bezos went about making those decisions.
One-Way Doors vs. Two-Way Doors
Bezos is famous for his fast decision-making. While other companies could take months to make decisions as dozens of middle managers debated the minute details of any change, Bezos insisted on fast decisions for certain types of choices.
Those choices are called "Two-Way Doors".
Two-way doors are doors that you can go in and out of multiple times.
Make a decision by 'walking through the door', see how it plays out, then walk back through to pick a different door if you don't like the outcome.
These types of decisions are easy to reverse.
For example: Changing some copy on your website, trying out a new marketing campaign, or experimenting with a different vendor.
If your initial decision doesn't work out, you can easily undo it.
The key is making these decisions quickly and implementing them fast.
You absolutely need quick feedback loops to build a successful business.
If your company takes 6 months to approve new copy for the website, then a few months to gather data on the change, then a few more months to make adjustments, you just spent a year on something that could have taken a month.
One-way doors, on the other hand, are decisions that can't be easily reversed.
As Bezos puts it:
"Some decisions are so consequential and so important and so hard to reverse that they really are one way door decisions.
You go in that door, you're not coming back. And those decisions have to be made very deliberately, very carefully."
Examples: Taking on a new investor, purchasing a competitor, or taking on debt for a new venture.
By default, many companies treat all two-way doors like one-way doors. They deliberate on every single decision and delay the feedback loops unnecessarily.
Never Compromise
Bezos says that compromise is a lazy form of decision-making.
It's a cop-out.
Instead of having a hard conversation to evaluate the merits of two conflicting ideas, managers will often merge the decisions to form a "win/win".
But it's usually not a win/win.
"The advantage of compromise as a resolution mechanism is that it's low energy, but it doesn't lead to truth."
The 6 Page Memo
One of Amazon's famous management techniques is the 6-page memo.
Bezos famously banned PowerPoint at Amazon. Here's why:
PowerPoint makes for dumbed-down information and decisions.
Instead of prompting the audience to think deeply about a specific topic, presenters often cherry-pick facts to simplify their arguments. After all, PowerPoints are supposed to have as few words as possible. The medium lends itself to simplicity, which isn't great for decision-making.
In 2004, Bezos introduced the 4-page memo concept (which later evolved to 6 pages) in this email:
The memo should be written in narrative style, meaning bullet points aren't allowed.
Here's the most interesting aspect of the memo concept, in my opinion: Every memo meeting starts with a 20 minute silent reading session!
Bezos found that typical meetings were unproductive because most attendees came completely unprepared.
But the PowerPoint presentation given during the meeting did little to deepen the understanding of the topic being discussed, so most of the meeting is spent just asking and answering basic questions. Then, there would need to be a second meeting to actually discuss the topic in depth.
Bezos' method skips that first unproductive meeting by making sure everyone develops a real understanding of the topic by reading the 6-page memo.
Here's how an Amazon employee put it:
"It's so easy to fool both yourself and your audience with an oral presentation or powerpoint slides. With narrative text that has to stand on its own, there is no place for poor reasoning to hide. Amazon's leadership makes better decisions than their competitors in part because they are routinely supplied with better arguments than their competitors."
Avoid Demoralizing Your Employees
I read through several other decision-making frameworks used by Amazon that I could highlight here, but most of them have a common them:
Don't demoralize your top performers.
A lot of bad decision-making at companies boils down to managers creating unnecessary roadblocks to making the right decision. A few examples;
- Letting stubborn people make decisions simply because they wear down others and refuse to concede.
- Hierarchy ruling all decisions. Sometimes, the best decision will come from the person who's closest to the action and has "boots on the ground". This is rarely the CEO or most senior manager, yet they usually have the final say.
- Waiting for perfect information (which never actually arrives).
All of these examples are examples of poor decision-making environments. Top performers get frustrated with having to navigate politics to get good decisions pushed through. They end up leaving the company or becoming complacent after being hindered by these poor management structures.
Summary of Jeff's tools for your business
- make fast decisions - Two-way door framework
- never compromise - get to the best answer
- use 6-page memos - make people read them
- don't demoralize your best employees - remove obstacles for them
I'm curious to hear from you...which of these do you think you'll apply to your business this year?
Buying a business is hard.
Which is why I've started working on a longer comprehensive email course on How to Buy a Business. It's going to be a paid service. If you're interested in learning about it when it launches, click here and drop your email to be the first to find out.
🔑 One interesting read
Speaking of humble beginnings, you'll want to ready the story of two friends who started a company in their basement with $100 as seed capital.
Today, you might know of their business, called UPS.
They started in 1907 as messengers and couriers in Seattle. The founder, Jim Casey, was actually just 19 at the time. Casey actually reminds me of the young tech entrepreneurs of the early 2000s: He embraced a new business model that the "grown ups" thought was a passing fad.
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Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.
