Tuesday , October 26 2021
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Why is Bezos such an extraordinary manager?

Summary:
Reading Amazon Unbound by Brad Stone, his second bio of Jeff Bezos and Amazon, which picks up where The Everything Store left off.  In the book, Bezos punishes managers for wasting time on small incremental--and successful--projects. It is as if Bezos recognizes the perverse incentives created by ordinary managers, who punish employees for making the more-visible Type I errors (doing something that they shouldn't), rather than the less-visible Type II errors (failing to do something they should).  Typically this kind of reward asymmetry leads to fewer Type I errors but more Type II ones. But in an innovative environment, Type II errors typically have bigger costs, so it is incumbent on managers to find a way to avoid them.  So Bezos rewards managers who fail spectacularly in pursuit of

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Reading Amazon Unbound by Brad Stone, his second bio of Jeff Bezos and Amazon, which picks up where The Everything Store left off.  In the book, Bezos punishes managers for wasting time on small incremental--and successful--projects. 

It is as if Bezos recognizes the perverse incentives created by ordinary managers, who punish employees for making the more-visible Type I errors (doing something that they shouldn't), rather than the less-visible Type II errors (failing to do something they should).  Typically this kind of reward asymmetry leads to fewer Type I errors but more Type II ones. 

But in an innovative environment, Type II errors typically have bigger costs, so it is incumbent on managers to find a way to avoid them.  So Bezos rewards managers who fail spectacularly in pursuit of something big and punishes those who succeed at timid, incremental change.   

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