Decision Making for 2024
Decision Making for 2024
10 CEOs' insights on how to make better decisions
TL;DR
Key lesson from various CEO insights on decision-making: the choice is just as important as the complex context that influences it.
As we are wrapping up 2023, I've been thinking about the year ahead and some important decisions I need to make. To be adequately prepared (as if), I decided to tap the collective wisdom of some prominent CEOs. In the process I used Google, ChatGPT, various interviews and quotes to come up with a list of different things that each CEO said. To make this knowledge easier to digest I took my findings and categorised them. In the following, some insights I gained from this exercise. I dedicated two sections at the end of this post to Jeff Bezos and Andy Grove, who I felt had some particularly unique views.
CEO Selection
Who to add to the selection? Unsurprisingly most of my searches for "legendary CEO" lists were very Y chromosome heavy. So I went for a more manually curated approach to make things more diverse. Of course, this is a completely subjective process and I'm sure many "legendary" figures are missing.
Warren Buffet
Jeff Bezos
Meg Whitman
Ursula Burns
Indra Nooyi
Andy Grove
Steve Jobs
Carly Fiorina
Zhang Yin
Bill Gates
Bonus - Charlie Munger - while he's known as Buffet's sidekick at Berkshire Hathaway (where he wasn't CEO), he was still a legend! RIP.
(I didn't include Elon as he gets far too much air time already.)
General Insights
Here the often recurring themes grouped in general categories ranked by number of occurrence:
Long term thinking - in a trade off between short and long-term goals, the latter should always take precedent. Aligning decisions with the long-term vision of an organisation should be the goal. I wonder if CEO stock bonuses don't sometimes skew this…but let's not distracted.
Ethical considerations- this is embarrassing but none of the men prominently mentioned this point but all the women did. It's not a bad idea to make decisions that are in line with common sense ethics, especially if profit maximisation would suggest doing the wrong thing (sup Sacklers).
Learning - the notion that failure is part of the creative process of company building is well accepted. As such, good organisations embrace it and make learning the more important goal than failure avoidance in decision making.
Courage - all women brought up courage as an important factor when having to take bold or unpopular decisions. None of the men did. This may be selection bias on my part or may be an indicator of how much more women are scrutinised (by men and women) when making decisions in the corporate world.
Adaptability - decisions and decision making processes need to adapt to ever changing internal and external business circumstances. This is especially true when a decision is made based on very little information.
Data - using data to make decisions is obvious. The only CEO disagreeing and arguing for intuition was, you guessed it, Steve Jobs. He believed that creativity and innovation often come from following one's intuition rather than from a purely analytical process.
Collaboration - Fiorina put it nicely: recognise that good ideas and sound decisions come from different levels within the organisation.
Speed - Bezos suggests that decisions should be made with about 70% of the information you wish you had, thereby recognising that in a fast-paced business environment, being too slow can be as harmful as being rash.
Simplification - simplicity in decision making should be preferred to situations that are too complex to understand. This can be achieved by focussing intensely on what is essential. Deciding what not to do is as important as deciding what to do.
Stakeholder - Whitman highlights the importance of considering how decisions will impact employees, customers, shareholders, etc. Understanding different viewpoints and the impact of decisions on various stakeholders is crucial for making well-rounded decisions.
Diversity - Nooyi stressed the need for inclusivity and diversity in the decision-making process. She believes that diverse teams bring varied perspectives that can lead to more innovative and effective solutions. Diverse here can also be interpreted as having differing perspectives.
A few other topics that came up more than once, which are straight forward enough just to be mentioned rather than expanded upon are Rationality, Transparency, Customer Focus, Quality Focus, Personal Commitment, Resource Utilisation.
Notable Contributions
Some contributions stood out:
Opportunity Cost: Munger places a high value on the concept of opportunity cost in decision-making. He suggests considering what else could be done with the resources or time that one is planning to invest in a particular decision.
Circle of Competence: Buffet suggests staying within your "circle of competence," meaning making decisions based on what you truly understand. This approach minimises risks associated with venturing into unknown territories or industries.
Avoid Repeating Decisions: Gates advises not to make the same decision twice, highlighting the value of making a solid decision the first time to prevent revisiting the issue unnecessarily.
The 'No' for a Thousand 'Yeses': Jobs famously talked about saying no to a thousand things to make sure they didn't get on the wrong track or try to do too much. He was a strong advocate of simplicity and would often make decisions to eliminate clutter and focus on a few key objectives.
“Invert, Always Invert”: Munger often emphasises the concept of inversion in decision-making. This involves approaching a problem backward, looking at what you want to avoid before considering what you want to achieve. It's a way of thinking that helps to identify and avoid potential pitfalls.
Independent Thinking: Buffett encourages thinking independently rather than following the crowd. He believes that popular opinion isn't always right and often leads to suboptimal decisions.
Holistic Thinking: Jobs had a unique ability to think holistically, considering the various facets of a problem – technology, design, user experience, and business strategy – to arrive at decisions that aligned all these elements harmoniously.
Jeff Bezos
Bezos needs no introduction. While one can question the moral foundation on which his business empire was founded, it is very hard to deny how impressive his execution has been. Taking a predominantly B2C focussed Amazon into B2B web services before Microsoft or Google was visionary. His attempts at hardware, despite public failures of the Fire Phone, were ahead of its time. When it comes to decision making some of Bezos ideas are worthy to be adopted widely.
Importance of Being Right, a Lot: Bezos acknowledges that leaders must often make decisions with incomplete information. However, he also stresses the importance of a leader being right a lot. This comes from honing judgment, being open to new viewpoints, and continuously learning.
Leaders Are Obligated to Express Divergent Opinions: He expects leaders to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. This approach is aimed at ensuring robust discussions and the best possible outcomes.
Two Types of Decisions: Bezos categorises decisions into two types. Type 1 decisions are high-stakes and irreversible, or at least very difficult to reverse. Type 2 decisions are like walking through a door that swings both ways; they are reversible and less consequential. He emphasises that these two types should be approached differently.
Bias for Action: Bezos champions a "bias for action" in decision-making. This means preferring action and experimentation over unnecessary delay and indecision. For reversible decisions (Type 2), he advises making swift decisions to maintain momentum.
Escalate When Necessary: Bezos encourages his team members to escalate decisions when they cannot reach an agreement. This prevents decision-making from becoming a function of stamina (who can argue the longest) and ensures that decisions are made effectively and efficiently.
Disagree and Commit: He promotes the concept of "disagree and commit." This principle is particularly useful in a team setting where consensus cannot be reached. It means that even if a team member disagrees with a decision, they commit to its execution to support the team and the project. This approach helps prevent stalemates and ensures progress.
Regret Minimisation Framework: Early in his career, Bezos used what he calls the "Regret Minimisation Framework" to make significant life decisions. He projects himself into the future and considers which option he would regret less. This framework led him to leave his job and start Amazon.
Decision Making and Proxies: Bezos highlights the danger of making decisions based on outdated or inappropriate proxies instead of seeking the underlying truth they are meant to represent. Say an organisation tracks a metric for 5 years. A kind of inertia can set in where the truth behind why this metric was watched is forgotten. Say this number was returns per thousand orders and it was meant to measure customer happiness. Well if an organisation becomes more complex and doesn't only sell things that can be returned this metric is obviously no longer a good proxy for customer happiness.
Bezos discussed the point above on Lex Fridman's recent podcast, which is worth listening to as it's really good.
Andy Grove
Andy Grove was a legendary CEO primarily due to his transformative impact on Intel and the broader technology industry. He was known for his exceptional vision and strategic thinking, which enabled Intel to evolve from a memory chip manufacturer to a dominant player in microprocessors. Grove's pragmatic approach to business, exemplified in his philosophy of "Only the Paranoid Survive," fostered a culture of relentless innovation and adaptability within the company. His focus on results-driven management and his ability to foresee industry shifts made him a pivotal figure in the rise of the personal computer era.
Moreover, Grove's leadership extended beyond corporate success; he was instrumental in shaping Silicon Valley's entrepreneurial ethos and was highly respected for his contributions to management practices. His legacy is not just Intel's technological and financial achievements under his leadership, but also the generation of leaders and innovators he mentored and inspired.
Strategic Inflection Points: Grove introduced the concept of "strategic inflection points," moments when significant changes in the business environment require fundamental adjustments in business strategy. He stressed the importance of recognising these points and making bold decisions to adapt to them.
The Five Whys: Grove often used a method known as the "Five Whys," a technique for getting to the root cause of a problem by asking "Why?" five times in succession. This approach helps in understanding the fundamental nature of problems and thus leads to more informed decision-making.
Constructive Confrontation: Grove was famous for his belief in "constructive confrontation." He encouraged open, direct, and often intense debate among his team to ensure that all viewpoints were considered and that decisions were rigorously challenged before being made.
The "Groveian" Approach to Uncertainty: Grove stressed that in the face of uncertainty, it's important to build a strategy that is robust across a range of scenarios. He encouraged leaders to prepare for various potential futures rather than trying to predict one specific outcome.
Feedback Loops: He was a strong advocate for establishing rapid feedback loops in the decision-making process. This approach allows for quick adjustments and course corrections, which is vital in a dynamic business environment.
Empowering Lower Levels for Operational Decisions: For operational decisions, Grove believed in empowering lower levels of management and the frontline employees. He felt that people closest to the issues often had the best understanding and should be entrusted with decision-making responsibilities.
Theory of Constraints: Influenced by Eliyahu Goldratt's theory, Grove focused on identifying and managing bottlenecks in any process, believing that decision-making should target these constraints to improve overall system performance.
Managerial Leverage: In his book High Output Management, Grove discusses the concept of managerial leverage - the idea that a manager's impact is maximised by making decisions that influence other people's productivity and output, rather than focusing on personal productivity alone.
The book High Output Management actually was the inspiration for Startup Pragmatism. It is a rare example of a business book that gives very matter of fact advice to business leaders. It is widely regarded in Silicon Valley as one of the best business books of the 20th century.
Conclusion
What stands out across all these diverse insights is a common thread: the importance of balancing various elements—rational analysis, ethical considerations, long-term vision, and a deep understanding of one's business and its environment. The wisdom of these leaders shows that great decision-making is not just about choosing the right path but also about understanding the myriad factors that shape that path.
I hope that as we step into another year, these insights allow me and maybe you to approach decision-making with a more nuanced, informed, and strategic mindset. Whether you're leading a startup, managing a team, or just navigating your personal career, the wisdom shared here offers valuable guidance for making decisions that are hopefully not only successful but also sustainable and ethical in the long run.
Happy New Year and see you in 2024!