3 Tactics Amazon CEO Jeff Bezos Uses to Make High-Velocity Decisions – Even When He Disagrees With the Decision

Amazon recently released Jeff Bezos’ 20th annual letter to shareholders (https://www.sec.gov/Archives/edgar/data/1018724/000119312517120198/d373368dex991.htm).  His letters are always packed with practical information and this one had some excellent points.

Jeff writes:

“To keep the energy and dynamism of Day 1, you have to somehow make high-quality, high-velocity decisions. Easy for start-ups and very challenging for large organizations. The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business – plus a high-velocity decision making environment is more fun too. We don’t know all the answers, but here are some thoughts.

First, never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a light-weight process. For those, so what if you’re wrong? I wrote about this in more detail in last year’s letter.

Second, most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.

Third, use the phrase “disagree and commit.” This phrase will save a lot of time. If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, “Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?” By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes.

It’s a genuine disagreement of opinion, a candid expression of my view, a chance for the team to weigh my view, and a quick, sincere commitment to go their way.”

Jeff Bezos is passionate about remaining a Day 1 company because “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death” and “Day 2 companies make high-quality decisions, but they make high-quality decisions slowly.”

Your future self may not agree with every decision you make today so knowing that the best and brightest often make decisions with only 70% of the information they would like and many decisions are reversible (you can go back out the door you came in) form a sound safety net for just about any decision you will make and should give you the confidence to move forward toward your goals and dreams.  And in a business setting, having the option of saying “I disagree but will fully commit to your plan” empowers others to achieve what for you, with your individual experiences, talents and lenses through which you view the world, might be impossible.

Remember, “you need to be good at quickly recognizing and correcting bad decisions”.  Whether you agreed with the decision or not, your future self needs to be adept at spotting bad decisions, rapidly course correcting, and learning from them.  In our business we have done team post-mortems to dissect the causes of failures, ensuring that the entire team benefits from the learnings.  We all grow stronger and better at our roles when we share our successes and our failures.  We use a kaizen process that keeps the failures few and small and yields larger successes with increasing frequency.

 

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At Vertical Capital Advisors, we are most often engaged by industry leaders to be the bridge to the capital they need to fuel growth.  We start with great leaders at great companies that have compelling, profitable business plans where the only missing ingredient is capital.

ABOUT VERTICAL

Vertical Capital Advisors is an Atlanta-area business advisory firm built on creating tangible value for our clients, serving clients in just about every industry.  Our clients are both capital growers and capital allocators.  How can Vertical help your firm maximize value?

Joe Briner
Managing Director
Vertical Capital Advisors LLC
briner@verticalcapitaladvisors.com
866-912-9543 ext 108

Puerto Rico: Beautiful but bankrupt. Who’s next?

The US Territory of Puerto Rico, an island of striking beauty and history, filed for bankruptcy protection on May 3, the largest municipal bankruptcy in US history.  The filing involves $74 billion in bonds and another $49 billion in pension obligations, over $40 billion of which is unfunded.

We visited Puerto Rico last year while Congress was debating the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA).  Prior to President Obama signing the Act into law in 2016, Puerto Rico had no mechanism for filing for protection from creditors.

While visiting Puerto Rico, we struck up conversation with many locals who proudly showed the numerous government housing options, most of which included free electricity, water and cable TV (don’t know why cable TV was such a big deal but it is a source of great pride among locals).  They boasted of government unemployment benefits for nearly half of the working-age population and a normal retirement age in one’s early 50’s.  It was clear that this model is not sustainable but that did not seem to faze the locals – it is just the way their economy is set up and they like it that way.  They also had many stories of politicians going to jail for corruption.  Correlation between giving away the key to the treasury and going to prison?  We don’t know but seeing politicians of the opposite party being carted off to prison seemed to be a national pastime of sorts.

PR flag

The NY Times reports marches BEFORE Puerto Rico’s bankruptcy filing against austerity that is surely coming.
nytimes.com/2017/05/03/business/dealbook/puerto-rico-debt.html

Who’s Next?

George Mason University ranked all 50 states for solvency in a June 2016 study (https://www.mercatus.org/statefiscalrankings) and the weakest states are:

Connecticut #50Map of US
Massachusetts #49
New Jersey #48
Illinois #47
Kentucky #46
with Hawaii and California not far behind at #45 and #44, respectively.

Forbes, JPMorgan and Price WaterhouseCoopers rank them similarly (www.forbes.com/sites/johnmauldin/2016/07/28/dont-be-so-sure-that-states-cant-go-bankrupt/#40fc3fa72f2d).

What does this mean?

It means that even though markets have been topping off at new highs and world wealth has never been greater, fundamental structural economic fault lines are growing.  And with imminent insolvency of entitlement programs like Social Security and Medicare, the US government has got to figure out a way to avoid a fate similar to Puerto Rico.  It means we can’t keep giving everything away before creditors force us to give everything up.  It means a little discomfort now to avoid incredible pain and dislocation later.  Can the US Congress get it right during the Trump years?

 

* * *

At Vertical Capital Advisors, we are most often engaged by industry leaders to be the bridge to the capital they need to fuel growth.  We start with great leaders at great companies that have compelling, profitable business plans where the only missing ingredient is capital.

ABOUT VERTICAL

Vertical Capital Advisors is an Atlanta-area business advisory firm built on creating tangible value for our clients, serving clients in just about every industry.  Our clients are both capital growers and capital allocators.  How can Vertical help your firm maximize value?

Joe Briner
Managing Director
Vertical Capital Advisors LLC
briner@verticalcapitaladvisors.com
866-912-9543 ext 108