Making decisions is the toughest thing leaders do. Here’s some advice on when to move fast and when to slow down.

Making decisions, even in areas you know relatively well, usually involves an element of uncertainty. Sometimes decisions can be made quickly, and uncertainty is acceptable or desirable. Other times, decisions are made slowly and deliberately to remove as much uncertainty as possible.

Once you are faced with a decision, the question becomes whether you should make it fast or slow.

Do you gather as much information as possible, knowing the process of gathering information slows you down and carries a cost? Or do you make it quickly with imperfect information?

Jeff Bezos, the founder of Amazon.com, considers decisions like doors. He asks himself if the decision is a one-way door or a two-way door. What’s the difference?

Once you walk through a one-way door, you can’t come back. It’s irreversible. With a two-way door, on the other hand, you can walk through, look around, and easily come back to where you started.

In a shareholder letter, Bezos wrote^[1]:

Some decisions are consequential and irreversible or nearly irreversible – one-way doors – and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that – they are changeable, reversible – they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups.

As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We’ll have to figure out how to fight that tendency.

Reversible to Irreversible

Decisions fall somewhere on the continuum from reversible to irreversible. You can tell where a decision lies on this spectrum by asking how much it would cost to undo. The higher the cost to undo, the more irreversible it is. The lower the cost, the more reversible it is.

Perhaps an example will help illustrate the point. After brushing your teeth this morning, you run to the store to grab some toothpaste. However, they are out of your usual brand. Since the decision is easily reversible, you quickly grab a package that looks decent and take it home. If the toothpaste is terrible, you can easily get another type tomorrow. Now consider an irreversible decision. Imagine you are the manager of an NBA team. You’re thinking about trading one of your star players away. Once made, that decision can’t (easily) be undone.

Once you learn to see decisions through the lens of reversible and irreversible, everything changes. It also changes how you make decisions.

Make reversible decisions as soon as possible and make irreversible decisions as late as possible.

When decisions are reversible, make them fast. Your biggest risk is dragging your feet and not making a decision. The cost to acquire additional information isn’t worth the effort.

When decisions are irreversible, slow them down. The biggest risk is making the wrong decision. The cost to get the information we need to reduce uncertainty is worth the time and effort.

I used this heuristic to quit my job and start my first company. While some people saw this as a huge risk, I didn’t. I realized that if the company failed, I would have learned a lot and could pretty easily return to my old job. It was a risk, but it wasn’t as big as some thought.

The future is unpredictable.

Sometimes you can handle the uncertainty or outcomes. Like trying a new restaurant after reading a review or hearing about it from someone at work. Other times, you want to remove as much uncertainty as possible. You wouldn’t decide to marry someone after one amazing date, buy a car without test driving it, or put all your money into a stock you overheard someone talking about in line at the grocery store.

Avoiding Analysis Paralysis

Make reversible decisions as soon as possible. Make irreversible decisions as late as possible.

When I mention this rule to people, they ask: how do I know it’s as late as possible?

Consider my rule of STOP, LOP, or KNOW. If you stop gathering useful information (STOP), you’re about to lose an opportunity (LOP), or you know what to do (KNOW).

If you stop gathering useful information and there is no prospect of any on the horizon, make the decision. When you’re in charge of operations at a three-letter agency, you make many hard decisions with imperfect information. Once you’ve talked to all the people with useful information, it’s time to act. The problem is a lot of people don’t act. They sit waiting for some magical piece of information that might or might not come that will make the decision clear. I call this unicorn information. We know it’s out there, but we can never find it. You can’t wait for the unicorn, you have to decide. The people that waited for the unicorn didn’t last.

If you’re about to lose a meaningful opportunity, make the decision. Recently a big real estate opportunity came across my desk. While not impossible to reverse, it would have been prohibitively costly. As with any decision that involves a lot of money — the biggest check I’ve ever written, I dove into the details wanting to understand everything. At first, there was no rush to make the decision. When interest rates started to rise, the deal got a lot more attractive. My partner called and asked if I was in because it was going forward with or without me. I had to decide, or I’d lose the opportunity.

If you know what to do, make the decision. When you’re the boss, sometimes you have to let people go. While you can offer feedback and coach and hope things will change, sometimes you wake up and know what to do. Once you know it’s best for both parties to move on, the biggest mistake is waiting.

Fast is not always Reckless.

Reversible decisions don’t need to be made the same way as irreversible decisions.

Reversible decisions are not an excuse to act recklessly or be ill-informed, but rather an acknowledgement that imperfect decisions are ok.

Fast decisions are a competitive advantage. Warren Buffett has famously given a yes/no decision on acquisitions in less than 48 hours. Fast decisions are one advantage that start-ups have over incumbents.

A good plan, violently executed now, is better than a perfect plan next week.

General George Patton

Bezos considers 70% certainty as the cut-off point where it is appropriate to make a decision. That means acting once we have 70% of the required information, instead of waiting longer. Making a decision at 70% certainty and then quickly course-correcting is much more effective than waiting for 90% certainty.

More Information does not mean Better Outcomes.

In Blink: The Power of Thinking Without Thinking, Malcolm Gladwell explains why decision-making under uncertainty can be so effective. We usually assume that more information leads to better decisions — if a doctor proposes additional tests, we tend to believe they will lead to a better outcome. Gladwell disagrees: “In fact, you need to know very little to find the underlying signature of a complex phenomenon. All you need is evidence of the ECG, blood pressure, fluid in the lungs, and an unstable angina. That’s a radical statement.”

In medicine, as in many areas, more information does not necessarily ensure improved outcomes. To illustrate this, Gladwell gives the example of a man arriving at a hospital with intermittent chest pains. His vital signs show no risk factors, yet his lifestyle does and he had heart surgery two years earlier. If a doctor looks at all the available information, it may seem that the man needs to be admitted to the hospital. But the additional factors, beyond the vital signs, are not important in the short term. In the long run, he is at serious risk of developing heart disease.

Gladwell writes:

… the role of those other factors is so small in determining what is happening to the man right now that an accurate diagnosis can be made without them. In fact, … that extra information is more than useless. It’s harmful. It confuses the issues. What screws up doctors when they are trying to predict heart attacks is that they take too much information into account.

Once you understand that reversible decisions are a great way to inject randomness, gather information, or even delegate to others, things change.

The biggest risk to irreversible decisions is deciding before you need to. The biggest risk to reversible ones is waiting until the last minute.

Make reversible decisions as soon as possible and make irreversible decisions as late as possible.