Making decisions is one of the core competencies of entrepreneurship. When you’re in the thick of things, you may be making multiple decisions per hour. And even when they don’t seem like big decisions, the impact of each decision – however small – compounds rapidly. Let’s say that improving your decision making allows you to increase the utility function of each decision by 0.5%. But after 1,000 such good decisions, that same function will have increased 147X.
Despite this large impact, the techniques of decision-making are often overlooked.
I sat down with my Blitzscaling co-author Chris Yeh to discuss this in depth on the most recent Greymatter podcast, which you can listen to here:
What is Good Decision-Making?
Entrepreneurs and executives will do all sorts of things to improve themselves, from taking a class on a particular technology, to reading a book about venture deals, to practicing intermittent fasting. Yet very few of them stop to ask the simple yet powerful question, “How can I make my decision-making better?”
And by the way, “better” doesn’t just mean “more accurate.” It also means “faster.” Many of the decisions facing entrepreneurs seem to have high stakes; they can literally mean the difference between the life or death of the company. When faced with such weighty decisions, the normal human instinct is to slow down, collect all the available information, and get emotionally comfortable with the possibilities before making a decision. That instinct is almost 100% wrong for entrepreneurial decision-making.
I describe entrepreneurial-decision making as confronting a rocky minefield (at night, inside a dense fog bank…) and deciding to sprint across. The central skill is learning how to be quick and decisive, and to adjust your course to avoid the worst of the mines.
When I evaluate entrepreneurs, one of the key factors I analyze is their decision-making calculus. This is especially true for repeat entrepreneurs. If they’re the kind of infinite learner who uses their past experiences to make their decision-making better, they have a huge advantage when it comes to everything from hiring to strategy to sales, making them an even better bet the second time around. But if they don’t have the drive and self-awareness to improve their decision-making, it’s probably not worth paying the experience premium to invest in them.
Making Decisions While Blitzscaling
If entrepreneurship requires a lot of decision-making, blitzscaling increases the pace and the stakes of that decision-making, which means an even greater premium on learning to make good decisions quickly under challenging circumstances.
I learned this from my own entrepreneurial experiences. Before becoming an entrepreneur, I thought I was really good at decision-making, in part because I considered myself intelligent, and in part because I thought about decision-making as a sport to master.
Then when I started my first company, SocialNet, I made bad decisions.
Sometimes I made decisions too slowly, sometimes I made decisions badly, and sometimes I did both. Those experiences led me to refine my decision-making framework.
It might have been tempting to blame those failures on others and say, “I trusted so-and-so, and he was wrong.” But I knew that I needed to take responsibility for every decision I made. When you find yourself in that situation, you need to ask yourself, “What should I do differently going forward to improve the way I play the game?” This self-reflection was a key reason that I was a much better decision maker during my time at PayPal.
Blitzscaling compresses this learning process, making it more challenging, but also more potentially productive. When you’re racing your competitors to achieve scale, you don’t have a lot of extra time to consult every stakeholder and reach a consensus. You have to make decisions, take responsibility for them, and learn from them.
This is one area where I recommend leveraging existing decision-making tools like the RACI (Responsible, Accountable, Consulted, Informed) and DACI responsibility assignment matrices. These proven tools can help structure and accelerate your decision-making.