Lessons From Startup World – Type 1 & Type 2 Decisions

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Today I'm sharing one of the best strategies for decision-making that I learned during my time at startups.

You might have noticed a theme this month around decision-making. It's one of the most powerful skill sets you can improve.

We are unconsciously making thousands of decisions every day. What shirt do I wear today? What task do I need to work on first? What time should I go to the grocery store? What brand of wine won't give me a headache?

These decisions are taxing on our brain power – depleting our energy when it's time to make important decisions. The pressure to make the right decision can be daunting!

During my time in the startup world, a mentor told me to look at every decision as a Type 1 or Type 2 decision. This can 3x your decision-making speed and also ease the pressure of needing to always be “right.”

What is a Type 1 decision?

Think of a Type 1 decision as easily reversible. This is different than an "easy" decision. Type 1 decisions can feel like a big decision, but backtracked or recovered within a short timeframe.

For example, spending $500 on a new advertising channel would be a Type 1 decision. While the money isn't reversible, the potential to earn that back quickly makes it a Type 1 decision. It's a one-time expense that could produce returns quickly and it's not putting you out of business.

Now, it gets a little tricky because Type 1 decisions can depend on your current state. If spending $500 on advertising means you don't have money for rent, it could be a wise gamble, or it could get you kicked out of your apartment.

However, words to the wise: we often put more weight on decisions than is necessary because of emotional attachment. Ask yourself – can this be fixed quickly? Then it’s Type 1 even if the decision feels heavy.

What is a Type 2 decision?

Think of a Type 2 decision as not easily reversible. Type 2 decisions are meaty decisions that have high impact, but potentially big consequences. For example, choosing to go into business with a partner is Type 2. This one decision could have an outsized impact on your success or failure.

Another example, agreeing to a 12-month contract with a client is Type 2. You are committing to this client for a long time – a lot could happen in a year. Now take that same scenario, but say you only have a 3-month contract. That decision would fall into a Type 1 decision.

The beauty is that you can turn Type 2 decisions into Type 1 by figuring out ways to reduce the commitment or pressure.

How to Use Type 1 and Type 2

When faced with a Type 1 decision, ask yourself:

"If things go wrong, can this be remedied within a few days/weeks/[insert your comfortable time frame]?"

If the answer is yes, stop agonizing over it. Look at the data or go with your gut – make that decision already! Keep things moving.

Remember, you have SO many other decisions coming at you.

If the answer is no, take time to gather information and analyze the situation. Make a pros and cons list, consult with trusted peers, and weigh the potential outcomes.

You will never 100% know if you're making the right choice. If you feel 70% confident in a solution, do it. (Someone famous said the 70% number once. Pardon my lack of citation, Google failed me.)

Practical Action Steps

When my mentor explained it to me like this, it took the pressure off Type 1 decisions. I was 1) moving way too slow, and 2) taking them way too seriously. It essentially freed up my brain power (and time!) for the important things.

Use the framework this week:

• Spend one week labeling decisions that pop up as Type 1 or Type 2.

• When you come across a Type 1 decision, make a decision within 24 hours. Then practice getting comfortable shortening that timeframe.

• When you come across a Type 2 decision, take time with this decision. (You should have opened up more time in your schedule by quickly deciding on Type 1s!) Weigh the pros & cons…Just not so long that you don't take any action ;)

The good news is that most of our decisions are Type 1 – even if they don't feel like it. There are very few things in this amazing, crazy world that can't be corrected or redeemed. Get comfortable taking these Type 1 risks and you will expand and grow faster than you even realize.

Time to go forth and conquer those decisions!

Always in your corner,

Alex

If you implement any of these tips or learn something interesting, I'd love to hear from you! Just reply to this email or connect with me on social.

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