The Art of Decision-Making: Type 1 vs. Type 2 Decisions

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👋 Hey, I’m Ben! I write deep dives on tactical strategies for building and growing early-stage tech companies. I go deep on growth strategies, how to build products users love, and what actionable lessons can be learned from what best-in-class founders are doing.

As a product builder, you are constantly faced with the challenge of making choices that can impact the future of your product, team, or business. Understanding the types of decisions you make and employing the right decision-making approach can mean the difference between success and failure. In this week’s post, I will explore Type 1 and Type 2 decisions, their differences, and how to effectively navigate them in the world of product management and entrepreneurship.

Type 1 Decisions: High-Stakes and Irreversible

Type 1 decisions are those with significant consequences, often irreversible or challenging to undo. In the realm of product management and entrepreneurship, these decisions can involve launching a new product line, pivoting the business model, or investing substantial resources into a particular project. The outcomes of Type 1 decisions can make or break the future of your business, so they demand careful consideration and extensive research.

Type 1 decisions require a lot more thought and due diligence before you commit to them. If you’re faced with a Type 1 decision, it’s helpful to:

  • Validate your hypotheses as much as possible prior to committing. Things like A/B tests, user surveys, user interviews, and more can help you here.

  • Dive deep into the data and gather insights from multiple sources to form a well-rounded perspective on the potential consequences and benefits of the decision.

  • Get input from team members, industry experts, and other stakeholders who can provide valuable insights and perspectives.

  • Weigh the potential risks and rewards associated with the decision. Make sure to map them all out. A framework like a SWOT analysis could be helpful here.

  • Take the time needed to make an informed decision, but be prepared to act once you have gathered the necessary information.

Type 2 Decisions: Low-Stakes and Reversible

Type 2 decisions are those with fewer consequences and can be easily reversed or adjusted if needed. Examples of Type 2 decisions for builders include selecting a marketing channel, choosing a project management tool, or making minor adjustments to a product's UI.

When it comes to Type 2 decisions, it's important to strike a balance between making informed decisions and making fast decisions. It can be helpful to approach these decisions with an experimental mindset, leveraging A/B testing and iterating as needed to deliver something valuable. However, unlike Type 1 decisions, Type 2 decisions don't require extensive research and analysis, so it's important to be decisive. By being prepared to make decisions promptly and adapt as needed, teams can move forward with confidence and agility.

Importantly, this framework is completely useless if you don’t identify when a decision is Type 1 or Type 2, so start bringing that into your thinking as you face decisions in your day to day. Ultimately, I have found the above framework helpful for shaping my decision-making process and I hope that you will too.

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