Increasing the quality of our decisions

Earlier this year, Brex transitioned to a written decision-making culture. I wrote this memo to our team on why this transition was important, and how the process of writing is crucial for coming up with good decisions.

From: pedro@
To: employees-all@
Subject: Increasing the quality of our decisions
Date: 2020–02–05 9am PT

Team,

Over the last few months, you may have noticed a shift in our culture towards more written decision-making processes. In particular, we’ve started to favor narratively structured memos instead of slides (or oral presentations) to set the context for most of our meetings and decisions.

This change, which is part of a broader set of improvements in how we make decisions, is something that I’m very excited about! I’d like to add some color as to why we’re making this transition, how it increases the quality of our decisions, and why this is important for our long-term success.

Long-term value and decision-making

All it takes to build a successful company is making a sequence of right decisions.

Think about the implications of this. It sounds hard to believe that the only thing in the way of Brex being as successful as Amazon, Apple, or Facebook comes down to something so basic. Success seems like a much harder phenomenon to explain.

When thinking about success, the big decisions seem to matter the most. Of course, some of them can dramatically change the trajectory of companies. Think about Amazon’s decision to build AWS, back when cloud computing was in its infancy. Or Apple’s decision to bring back Steve Jobs, at the brink of bankruptcy. Looking backwards, it’s hard to imagine what these companies would have been, had these decisions been different. But somehow, a sequence of right decisions made these companies successful.

At Brex, we’ve seen a few big, non-obvious decisions. For instance, our decision to start working on Brex Cash back in October 2018, just four months after we publicly launched the card! All of our advisors and investors thought it was a mistake to invest so much in a second product, given how early Brex was. But we decided to do it anyway. Nonetheless, making this call back then was hard, because we knew the company would turn out drastically different in either scenario.

The less obvious part, though, is that smaller decisions also matter. First, some big decisions look deceptively small until you analyze them closer. Think about our decision on how the onboarding flow will work for Cash + Card. A discussion that was initially intended as a UX decision turned out to have major strategic implications in our company positioning and how customers perceive our product bundle. We wouldn’t have known the impact of this decision if we hadn’t spent enough time going deep.

The less obvious part is that smaller decisions also matter.

Second, as the company grows it becomes generally harder to make any decisions. In the early days, everyone was involved in every decision, so we all had the context to make the right calls. However, as complexity increases, context becomes shared across more people, and fewer people understand all the implications of a specific decision. When we launched the Card, four engineers built the onboarding flow, including myself. We had all the context required, and could make decisions very casually. But now, we have more than 20 people working on the onboarding flow, across engineering, product, legal, operations, finance, etc. The previous way of making decisions (the same decisions!) just doesn’t work anymore. No single person knows all the details. If we hadn’t changed to a better process, we would likely make big, expensive mistakes today. So having a better decision-making process becomes crucial to continue getting decisions right as the company grows.

Third, and perhaps most importantly, a culture of strong decision-making can only be created over time, by the combination of small, thoughtful decisions. We can’t assume we will be ready to get the big decisions right, unless we constantly exercise the muscle of getting most decisions right. This is true even for the “big bets”. The same way that Jeff Bezos wasn’t behind the conception of AWS, I don’t expect Henrique or I to think of the next Brex Cash, especially as the company grows (Square Capital, for instance, was born at a hackathon). The entire company needs to operate with the same thoughtfulness around decision-making, because we simply don’t know where the next important decision will be. This is why we have Seek Truth as one of our values, and we expect everyone to practice it all the time.

A culture of strong decision-making can only be created over time, by the combination of small, thoughtful decisions … If you compound many thoughtful decisions made by hundreds of people over a long period of time, it’s easy to see why the long-term value of a company is based almost entirely on the quality of its decision-making.

Good ideas and decisions need to come from everyone in the company, regardless of who you are or what you do. This is, perhaps, the biggest advantage of a strong decision-making culture. It enables us to leverage the collective genius within Brex not only to get to the right outcomes, but also to achieve substantially better ones. Outcomes that would be unthinkable if only people at the top were making the calls, and they were expected to be right all the time. If you compound many thoughtful decisions made by hundreds of people over a long period of time, it’s easy to see why the long-term value of a company is based almost entirely on the quality of its decision-making.

Decision-making culture, memos and seeking truth

So how do we navigate the ambiguity of making great decisions? The only scalable answer is to create a culture that deeply appreciates the rituals that generate them.

Amazon is probably the best example of this, and a big source of inspiration for our decision-making culture. Jeff Bezos famously wrote about Amazon’s culture of “narratively structured six-page memos”, and how they set up meetings for high-quality discussions. What is often not known is the extent to which it permeates Amazon’s culture. I had a chance to interview leaders from Amazon, and I heard stories of teams working for weeks (!) on memos for some decisions, vendor selection processes being subject to memo timelines, and people being promoted (or demoted) based on how well prepared they were for decision-making meetings. By looking at how much value gets created at Amazon these days, these rituals clearly worked to generate good decisions.

Inspired by these rituals, we created our Weekly Decision Review meetings, where anyone in the company can bring a decision for discussion. Teams are expected to write a memo detailing the problem, the trade-offs of each solution, and their recommendation. Participants are expected to read the memos prior to the meetings, and add comments. The efficacy of the meeting and the quality of the discussions (and decisions) are substantially higher than anything we had at Brex before. There’s still a lot for us to improve in our Decision Reviews, but great memos have really helped set the stage for great discussions so far!

More important than the discussion, though, is the process behind writing a good memo. Different from a PowerPoint presentation, where one can get distracted by images, bullet points and animations, a narratively structured memo requires a coherent flow of ideas (a memo with a list of bullet points defeats its purpose). Slides are a good tool to report what you think people want to know, but because they’re always geared towards a specific audience, they can only tell the part of the story that you think is relevant to them. This can create a culture of upwards management, where teams spend time building materials for someone, instead of using that time to get to the bottom of issues that matter to them. Slides simply cannot be used by teams to make decisions and empower others to dive deep into their ideas.

Memos, instead, are not artifacts for others. In fact, the act of writing down a decision is the primary purpose of a memo itself. The writing process helps teams to be more thoughtful and make better decisions, exploring the nuance that usually gets lost between bullet points. Memos serve as a great tool to seek truth — it’s just harder to miss a logical step if you have to articulate each one of them in plain English. And in some ways, a memo is more similar to an essay than a PowerPoint. Paul Graham wrote a great piece on essays:

Essayer is the French verb meaning ‘to try’ and an essai is an attempt. An essay is something you write to try to figure something out.

Here’s something I recently noticed about great memos: Teams often use the very act of writing them to figure out what the right decision is. The discipline of writing doesn’t just communicate ideas — it generates them. By not knowing exactly what the right decision is in the first place, a team has to navigate through different options and often write down a conclusion that would be unlikely in the beginning. This doesn’t mean that good memos are overly verbose (brevity matters and we should stick to fewer pages), but instead they clarify the process used to get to a decision in the first place. Good memos add tremendous faith that a team’s decision, whatever it was, is the right one. And, as we know, making the right decisions is what we need to do to be a successful company.

The benefits of written decision-making don’t stop at just increasing the quality of our decisions. We’re discovering new ones all the time. Here’s another one that I find particularly relevant: As we add new team members, it’s hard to understand the context behind a decision without actually talking to people — which is not scalable, especially distributed. But memos provide discoverability, documentation, and shared context by design. All of a sudden, anyone can be brought onboard a decision and understand not only why we decided on a certain path, but also why we did not go with any other paths. Imagine this level of clarity and buy-in added to hundreds of decisions, impacting hundreds of people over many years to come. It’s hard to ignore the impact that a single person can have by writing a thoughtful memo.

Bad outcomes vs. bad decisions

Regardless of how much thought we put into decisions, sometimes things will go wrong, and that’s ok! But whenever it happens, we should ask ourselves: Was this a bad decision or just a bad outcome?

Bad outcomes are a natural part of the life of an inventive company. When we explore new ideas, there’s a reasonable chance that things may fail. However, we need to be critical about the process that generated these decisions. If a decision was made correctly but it led to a bad outcome, there’s still something to be celebrated there. We did the best we could with the data we had. We will eventually get it right next time! At the same time, there’s nothing good about ignoring the right processes and accidentally getting to the right outcome. That’s just luck, and we cannot count on it to be successful in the long-run.

Bad outcomes are fine, but bad decisions are not.

...

We’re starting to see how a written decision-making culture is increasing the quality of our decisions, which is exciting on its own! However, I’m even more excited about how this change will compound over many years to come, and directly contribute to more long-term value being created at Brex.

Of course, there’s a real cost in doing everything I just described. Writing takes time, and a great memo can take several days — or even a week! And when it comes to decisions, speed matters too (expect to hear more from me on this soon). But if we believe all it takes to build a successful company is making a sequence of right decisions, it feels almost irresponsible to not heavily invest in a culture that generates these decisions by default.

On this topic, there’s a quote from Robert Pirsig that I really like:

You want to know how to paint a perfect painting? It’s easy. Make yourself perfect and then just paint naturally.

In some ways, I feel this is true for decision-making. The only way to consistently come up with great decisions is to become the type of company that makes them naturally. A company where great ideas come from anywhere, and where the main driver of how we make decisions is how much we’re invested in getting as close to the truth as possible. There’s a long way to get there, and the journey will never be really over. But that’s the type of company we aspire to become.

In fact, before writing this memo I had no idea exactly why I appreciated our memo culture so much. The act of writing these paragraphs is how the exact benefits crystallized in my head. Which is exactly the point of writing memos. :)

Pedro

This memo was authored for internal purposes by Pedro Franceschi, Brex cofounder and co-CEO as part of a regular written cadence he has with the company. Pedro is a Brazilian entrepreneur and before Brex, he built Pagar.me — a Brazilian payments platform — along with his co-founder Henrique Dubugras.