The distinction between reversible and irreversible decisions goes back to Jeff Bezos, who called them Type-1 and Type-2 decisions. Type-1 decisions are irreversible: once made, they cannot be undone or only at extreme cost. Type-2 decisions are reversible: if they prove wrong, you can go back. This distinction is critical for determining appropriate decision speed.
Bezos’ core argument: most decisions in companies are Type-2 decisions but are treated as though they were Type-1. This leads to unnecessary slowness and analysis paralysis. Testing a new feature, trying a price change, or exploring a new channel are typical Type-2 decisions that can be made quickly and revised if needed. Selling a business unit, making a major acquisition, or entering a new market with high irreversible investments are Type-1 decisions that deserve careful analysis.
The practical implication: organizations should let Type-2 decisions be made decentrally and quickly, while Type-1 decisions are made at the appropriate leadership level with due diligence. The ability to distinguish between both types is a core competence of fast organizations.
