When Jeff Bezos told his boss, D.B. Shaw, about his decision to leave his firm to start an online book store. His boss said that it’s a great idea but for someone who already doesn’t have a job already.
It must have been a difficult decision for him to leave a prestigious firm to do something that had not been tested before. Jeff Bezos said that the mental model he uses to make decisions in such situation is regret minimization technique. He wants to reduce the number of regrets he will have when he is 80 years old.
His ideas sound so simple but profound and powerful at the same time. He calls Amazon the most customer centric company. Such a simple idea but why did no one come up with this before?
I have collected some of his best ideas in this post.
On Stress
“Stress primarily comes from not taking action over something that you can have some control over.
So if I find that some particular thing is causing me to have stress, that’s a warning flag for me; what it means is, there’s something that I haven’t completely identified, perhaps in my conscious mind, that is bothering me, and I haven’t yet taken any action on it. I find, as soon as I identify it and make the first phone call, send up the first email message or whatever it is that we’re going to do to start to address the situation, Even if it’s not solved, the mere fact that we’re addressing it dramatically reduces any stress that might come from it. So stress comes from ignoring things that you shouldn’t be ignoring, I think in large part.”
On decision-making
Jeff gives a very interesting mental models on decision making. He says that most of the decisions are two way doors where even if you made a mistake, you can come back and change the door. It’s important to not drag your feet when dealing with two way door decisions.
Two way door decisions:
“If it’s a two way door decision, you pick a door, you walk out, you spend a little time there, it turns out to be the wrong decision. You can come back in and pick another door.”
Make these decisions quickly, because it’s reversible.
One way door decisions:
“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.”
On Failure
“If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle”.
On Taking Bold Bets
“Given a ten percent chance of a one hundred times payoff, you should take that bet every time”.
“We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs.
The difference between baseball and business, however, is that baseball has a truncated outcome distribution.
When you swing, no matter how well you connect with the ball, the most runs you can get is four.
In business, every once in a while, when you step up to the plate, you can score one thousand runs.
This long-tailed distribution of returns is why it’s important to be bold.
Big winners pay for so many experiments.”
On Long Term Thinking
When he was asked if he was aware of his revenue growth, he replied, saying:
“I’m thinking a few years out. I’ve already forgotten those numbers.”
In the 1997 shareholders’ letter, he pointed this out again:
“We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.”
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