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Jeff Bezos on Day 1 vs Day 2

I love this letter from Jeff Bezos and wanted to quote it at length. The full letter is at Recode.

 2016 Letter to Shareholders

April 12, 2017

“Jeff, what does Day 2 look like?”

That’s a question I just got at our most recent all-hands meeting. I’ve been reminding people that it’s Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic.

“Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”

To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come.

I’m interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization?

Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps. I don’t know the whole answer, but I may know bits of it. Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making.

True Customer Obsession

There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality.

Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples.

Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight. A customer-obsessed culture best creates the conditions where all of that can happen.

Resist Proxies

As companies get larger and more complex, there’s a tendency to manage to proxies. This comes in many shapes and sizes, and it’s dangerous, subtle, and very Day 2.

A common example is process as proxy. Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right. Gulp. It’s not that rare to hear a junior leader defend a bad outcome with something like, “Well, we followed the process.” A more experienced leader will use it as an opportunity to investigate and improve the process. The process is not the thing. It’s always worth asking, do we own the process or does the process own us? In a Day 2 company, you might find it’s the second.

…Good inventors and designers deeply understand their customer. They spend tremendous energy developing that intuition. They study and understand many anecdotes rather than only the averages you’ll find on surveys. They live with the design.

…Embrace External Trends

The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind.

These big trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organizations to embrace. We’re in the middle of an obvious one right now: machine learning and artificial intelligence.

…High-Velocity Decision Making

Day 2 companies make high-quality decisions, but they make high-quality decisions slowly. To keep the energy and dynamism of Day 1, you have to somehow make high-quality, high-velocity decisions. Easy for start-ups and very challenging for large organizations. The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business – plus a high-velocity decision making environment is more fun too. We don’t know all the answers, but here are some thoughts.

First, never use a one-size-fits-all decision-making process. Many decisions are reversible, two-way doors. Those decisions can use a light-weight process. For those, so what if you’re wrong?

Second, most decisions should probably be made with somewhere around 70% of the information you wish you had. If you wait for 90%, in most cases, you’re probably being slow. Plus, either way, you need to be good at quickly recognizing and correcting bad decisions. If you’re good at course correcting, being wrong may be less costly than you think, whereas being slow is going to be expensive for sure.

Third, use the phrase “disagree and commit.” This phrase will save a lot of time. If you have conviction on a particular direction even though there’s no consensus, it’s helpful to say, “Look, I know we disagree on this but will you gamble with me on it? Disagree and commit?” By the time you’re at this point, no one can know the answer for sure, and you’ll probably get a quick yes.

This isn’t one way. If you’re the boss, you should do this too. I disagree and commit all the time.

…Fourth, recognize true misalignment issues early and escalate them immediately. Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision.

…

“You’ve worn me down” is an awful decision-making process. It’s slow and de-energizing. Go for quick escalation instead – it’s better.

So, have you settled only for decision quality, or are you mindful of decision velocity too? Are the world’s trends tailwinds for you? Are you falling prey to proxies, or do they serve you? And most important of all, are you delighting customers? We can have the scope and capabilities of a large company and the spirit and heart of a small one. But we have to choose it.

Warnings: Return of The Long Emergency

warnings

James Kunstler’s 2005 book “The Long Emergency” made a huge impression on me when I read it in 2006. In fact, it was one of the reasons I found myself pursuing a career in cloud computing in 2007. Partly thanks to this book and a former boss from British Telekom, my business partner and I were convinced that peak oil and climate change would create a huge demand for energy efficient, carbon neutral compute resources, and cloud computing was the future.

The Long Emergency was primarily concerned with America’s oil addiction and ill-preparedness for what looked at the time to be the coming energy (oil) shock, but it also examined other threats to civilization:

  • Climate Change
  • Infectious diseases (microbial resistance)
  • Water scarcity
  • Habitat destruction
  • Economic instability
  • Political extremism
  • War

Every one of those is still an enormous threat.

A new book by national security veteran Richard Clarke and R.P Eddy called “Warnings: Finding Cassandras to Stop Catastrophes” updates The Long Emergency with some new features of the threat landscape.

The book starts off by asking how we can reliably spot Cassandras – people who correctly predict disasters but who were not heeded – so that we can prevent future disasters.

They examine recent disasters – like 9/11, the Challenger space shuttle disaster and Hurricane Katrina, then examine the people who predicted these events, looking or patterns. They come up with some stable characteristics that allow us to score people on their Cassandra Quotient.

The second part of the book looks at current threats, and their doomsayers, to see if any have a high Cassandra Quotient and thus should be heeded.

The threats are:

  • Artificial Intelligence
  • Pandemic Disease
  • Sea-Level Rise
  • Nuclear Ice Age
  • The Internet of Everything
  • Meteor Strike
  • Gene Editing (CRISPR)

The bad news is that they all have high Cassandra Quotients and the scenarios in the book are plausible, science-backed and terrifying.

Artificial Intelligence as a threat hs been on my radar for a year or so thanks to Elon Musk, Bill Gates, Stephen Hawkins and Sam Harris warning of the risks of intelligent machines that can design and build ever moire intelligent machines.

Pandemic Disease has worried me since reading The Long Emergency, but I thought there had been better global awareness, especially since the world took the 2011 flu scare seriously, and Ebola and Zika.  Unfortunately, we are – as a planet – woefully ill-prepared for a global pandemic. A high fatality airborne flu could kill billions.

Sea-Level Rise genuinely surprised me, especially since the Cassandra in question – James Hansen – predicted the current melting and ice shelf break-offs we see in the Arctic today…30 years ago. I even googled how high my home is above sea level after being convinced we could see 7m rises within my lifetime.

As a child of the 70’s and 80’s, nuclear horror is deeply embedded in my psyche. But I thought the risk of a Nuclear Ice Age was a pretty low risk. It turns out you do not need a large-scale nuclear exchange between the US and Russia to cause global climate chaos. A limited exchange between India and Pakistan could be sufficient to kill billions though global starvation. I was also surprised to learn that Pakistan moves its nuclear arsenal around to thwart attacks my Indian commandos in the event of a war. This raises the risk of terrorists intercepting on of these weapons on the move, and using it for nuclear terrorism.

The book does a good job of examining the incredible fragility of out interconnected IT systems in the chapter on The Internet of Everything. As an IT professional I know the reality of how fragile these systems are and we are right to be scared of dire consequences of a serious cyber war.

I do not really think about Meteor Strikes, as there is little we can do about them and they are now part of popular culture.

The final worry in the book is about Gene Editing, especially CRISPR. CRISP has absolutely marvelous potential, but it also has many people worried. Daniel Saurez even has a new book on the topic called “Change Agent“. CRISPR is could be the mother of all second order effects. Take “off target events” for example:

Another serious concern arises from what are known as off-target events. After its discovery, researchers found that the CRISPR/Cas9 complex sometimes bonds to and cuts the target DNA at unintended locations. Particularly when dealing with human cells, they found that sometimes as many as five nucleotides were mismatched between the guide and target DNA. What might the consequences be if a DNA segment is improperly cut and put back together? What sorts of effects could this cause, both immediately and further down the road for heritable traits? Experimenting with plants or mouse bacteria in a controlled laboratory environment is one thing, but what is the acceptable level of error if and when researchers begin experimenting with a tool that cuts up a person’s DNA? If an error is in fact made, is there any potential way to fix the mistake?

So we have planet-scale problems, ingenious solutions. Instead of feeling paralysis or resignation we should accept Peter Thiel’s challenge to find the big breakthroughs, 0 to 1 intensive progress:

Progress comes in two flavors: horizontal/extensive and vertical/intensive. Horizontal or extensive progress basically means copying things that work. In one word, it means simply “globalization.” Consider what China will be like in 50 years. The safe bet is it will be a lot like the United States is now. Cities will be copied, cars will be copied, and rail systems will be copied. Maybe some steps will be skipped. But it’s copying all the same.

Vertical or intensive progress, by contrast, means doing new things. The single word for this is “technology.” Intensive progress involves going from 0 to 1 (not simply the 1 to n of globalization). We see much of our vertical progress come from places like California, and specifically Silicon Valley. But there is every reason to question whether we have enough of it. Indeed, most people seem to focus almost entirely on globalization instead of technology; speaking of “developed” versus “developing nations” is implicitly bearish about technology because it implies some convergence to the “developed” status quo. As a society, we seem to believe in a sort of technological end of history, almost by default.

It’s worth noting that globalization and technology do have some interplay; we shouldn’t falsely dichotomize them. Consider resource constraints as a 1 to n subproblem. Maybe not everyone can have a car because that would be environmentally catastrophic. If 1 to n is so blocked, only 0 to 1 solutions can help. Technological development is thus crucially important, even if all we really care about is globalization.

…Maybe we focus so much on going from 1 to n because that’s easier to do. There’s little doubt that going from 0 to 1 is qualitatively different, and almost always harder, than copying something n times. And even trying to achieve vertical, 0 to 1 progress presents the challenge of exceptionalism; any founder or inventor doing something new must wonder: am I sane? Or am I crazy?

From Blake Masters notes

Hail the Maintainers

I am finally clearing out some old Instapaper articles. One that I really enjoyed was Andrew Russell’s examination of our civilizational obsession with “innovation” at the expense of maintenance and sustainable operability.

This is something we in cloud services learned fairly recently. Features are increasingly table stakes, fundamentals (e.g. availability, supportability, security, privacy, operability, maintainability, etc.) are the crucial differentiators.

Hail the Maintainers