Strategery

AI turns one-way door decisions into two-way door decisions.

Jeff Bezos is brilliant at explaining things in plain English. He has a brilliant way of explaining decision-making. After all, this is the job of the CEO: to choose.

He distinguishes between two types of choice: one-way doors and two-way doors.

A two-way door is one that is reversible. I can go through the two-way door into the kitchen. If I don’t find what I’m looking for or what I need, then I can use the two-way door to leave and look somewhere else.

A one-way door is irreversible. Once I go through, I cannot go back. There is a point-of-no-return as in navigation. You are committed to a course of action. Or possibly, reversal is possible, but at tremendous, unaffordable cost, rendering the new condition all but permanent once you determine to follow a specific path.

Perhaps, it would be more accurate to say that there is a spectrum of decisions. At one end, it’s costless to switch and the other end, it is infinitely costly. Dating is a two-way door, marriage is a one-way door (until it isn’t with the attendant financial expense, loss of status, and psychic pain).

Even when you try to reverse out of a two-way door decision, you don’t end up back at your original starting point. Conditions on the ground have changed.

One of the key aspects of wisdom is knowing how to distinguish between the two types.

Bezos is articulate:

‘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.’

The description of “slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention” sounds familiar doesn’t it?

It’s bureaucracy.

Administrative sclerosis rewires the organizational brain to distort its perception of the world and the way it makes decisions about how to react to the information the world sends it.

The bureaucratic organization, in interpreting every choice as a one-way door, moves too slowly. It may generate insufficient options to understand that there are alternatives that can be reversed at much lower cost.

It is far less likely to innovate. Successful organizations that manage to develop rapidly a cash-generative or value-additive product attract administrators. In some ways, it’s a race to milk the innovative culture for as much as possible, as quickly as possible, before the arteries thicken with the buildup of clerical plaque.

Google was a miracle in this regard. They grew remarkably quickly and profitably before the bureaucracy set in. Of course, the sheer scale they were able to obtain attracted the bureaucracy in proportion to their success, but this cultural breakdown came after their big breakthrough which took care of itself, in a sense.

Imagine a company with a lower initial growth profile, but with the potential to accelerate very quickly at a later stage. The more time there is for the world to understand and anticipate their potential, the easier it is for bureaucracy to penetrate the enterprise, artificially capping that back-end upside.

A one-way door is an experiment. Let’s try something out to see if it improves things, at least on the margin. Let’s launch a prototype product to see if people want it or if they give us information that will lead us to develop a better product or improve some other aspect of our operations.

Organizations thrive on experimentation. The world is changing. If anything, the pace of technological change is accelerating these days. The need for one-way doors to test out different ways to adapt has never been more urgent.

Strategic planning is the ultimate one-way door mentality. The deep thinker sits in committees and writes long white papers mulling the optimal way to allocate resources. This person believes that the best approach is to gather information and to apply known models to design a path through the tree. They apply what Daniel Kahneman labeled System Two thinking.

There is a contrived nobility associated with System Two thinking. It’s like the rational Homo Economicus of classical economics. His approach is presumably superior to the intuition of the knee-jerk, reactive Systems One thinker.

This is a criticism of Kahneman’s model. It itself (ironically) is an oversimplification, a caricature of what people do in practice. Why only two types of thinking? Why isn’t there a continuum of an infinite combinations of the two approaches? Is it really possible for people to avoid all the biases when engaged in System Two thinking? Have you met a real-life human being?

There is a kind of organizational entropy at play here in which the pointy-headed big thinkers rise to positions of responsibility because, as Bezos points out, the scale of the decisions becomes so large and significant, in an absolute sense, that more decisions are deemed to be one-way doors.

Ironically, the strategic planning would be far more informed by the information from a series of small-scale experiments. There would be a better understanding of the shifting conditions on the ground. There would be a clearer sense of how technology impacts the factors at play. Even though this is true, the planner prefers the loneliness of command, punctuated only by the conferences they attend and the inexhaustible flow of meetings in which they find themselves submerged.

In the worst possible organizations, the everything-is-a-one-way-door people crowd out the doers, the people who make things happen, the ones with their ears to the ground. The ones who conduct experiments without even realizing it. The operators.

You see this from time to time. A great organization that is clicking on all cylinders gets hijacked by a strategic thinking Big Head. Perhaps the Board thinks replacing the team that got them to scale with Homo Economicus is what they’re supposed to do.

Does that ever work out?

In an age of artificial intelligence when anyone can develop a prototype and the cost of development has plummeted, shouldn’t we revisit the way in which we allocate resources? Doesn’t technology convert choices that used to be one-way doors in a prior age into two-way doors now?

Shouldn’t we judge organizations by the speed with which they can experiment and the efficiency with which they internalize the feedback they receive, all of which contributes to the speed and quality of the outcome they produce? It sounds a hell of a lot better than saying that, hey Janet, you wrote a great memorandum, I completely think that your plan should have worked. It’s crazy that it didn’t.

Perhaps that is the promise of AI. It will show us who can adapt and who cannot.