Recently read “Invent and Wander” – Writings of Jeff Bezos” by Jeff Bezos and Walter Isaacson. The book aggregates Amazon’s shareholder letters (plus some additional material) into one simple layout, starting with the first shareholder letter in 1997 all the way through the most recent 2019 letter. As a reader, you get a historic perspective of the bets that paid off, the un-tested and relentless focus on the long-term, and the inherent “Day 1 mentality” which yields Amazon to be viewed not only as a success (~$1.6T market cap) but an enduring company that truly embraces external trends rather than fight against it – allowing it to diversify its businesses, experiment, innovate, fail multiple times, and stay relevant.

There are well-known principles that make Amazon, Amazon. Few common principles: customer obsession, maniacal focus on free cash flow, and always building and thinking about the long-term. What isn’t (in my opinion) as widely known and critical to their success is their decision-making framework used internally. Amazon senior executives and employees are taught to bucket decisions into two categories:

Type 1 Decisions

These decisions are consequential and often nearly irreversible – one-way doors if you will. As you can imagine, these types of decisions must be driven using empirical data, analyzed several times from different angles, and methodically played out knowing the slim (if any) chances of reversing the decision.

Type 2 Decisions

Type 2 Decisions are the opposite of Type 1 Decisions, these decisions are reversible, and you usually can back get back to where you were before you made the decision(s). These decisions should be made quickly by small groups or high judgment individuals.

One of the many variables that separate the high performing companies from the rest is the structure and culture around decision making. Lagging companies, organizations, and startups, in general, make a number of high-quality decisions daily, weekly, monthly, and they too often making them too slowly by using a one-size-fits-all method or pulling in internal resources, processes, and values that should be used to evaluate Type 1 Decisions. Separate each decision into Type 1 and Type 2 and simply ask yourself, is this decision reversible or not? And move quickly. Time is of the essence and knowing that your customers are always dissatisfied.