How to build candor and fast decision-making

1 The bottom line

Build candor by making it safe and routine to tell the boss the truth, and decide fast by treating most choices as reversible. Companies that hid bad news or waited for certainty lost years, while those that corrected quickly moved ahead.

2 Key takeaways

• Reward the people who push back, and never punish bad news. Leaders hear the truth only when telling it is safe.
  • At NeXT, co-founder Daniel Lewin wrote that the product was over a year late and twice as expensive, and Jobs stripped him of his marketing role Steve Jobs, NeXT30:07.
  • Gates would not pull rank to end an argument and wanted people to win him over Bill Gates, Microsoft56:51.
• Put honest feedback into routines instead of hoping people volunteer it. Powerful people rarely hear criticism unless a mechanism delivers it.
  • Pixar's Brain Trust gives a director candid notes from five to thirty people, with no power to order changes Ed Catmull, Pixar41:58.
  • Morita's weekly company newspaper let employees apply confidentially for other jobs, which exposed bad managers Akio Morita, Sony59:00.
• Treat most decisions as reversible and make them at about 70% of the information. Being wrong costs less than being slow, if you correct quickly.
  • Bezos said waiting for 90% means being slow in most cases, and the safeguard is spotting and fixing bad decisions fast Jeff Bezos, Amazon12:45.
  • Southwest negotiated and signed a $20 million deal for Midway's Chicago gates in under six hours Herb Kelleher, Southwest Airlines35:24.
• Replace long-range plans with scenarios and readiness. Outside events cannot be predicted, and a fixed plan slows the response.
  • Singleton moved Teledyne from acquisitions in the 1960s to consolidation and buybacks in the 1970s Henry Singleton, Teledyne14:30.
  • Southwest ran what-if sessions that produced multiple plans instead of one Herb Kelleher, Southwest Airlines36:21.
• Flatten the structure and set short clocks so information and decisions move together. Extra layers and loose deadlines quietly eat time.
  • Hock gave an engineer nine months to build Visa's whole authorization system, because computer people consume any time you give them Dee Hock, Visa1:56:30.
  • Jensen Huang designed a company he could manage directly, with about 60 direct reports Jensen Huang, Nvidia9:45.

We are not optimizing for not embarrassing somebody. We're optimizing for the company learning from our mistakes.

Jensen Huang, Nvidia

2.1 Make the truth safe to say

Candor starts with how the leader reacts to bad news and to disagreement.

• Do not punish the person who brings bad news. See what it cost Steve Jobs at NeXT30:07.
  • Executives who griped about Jobs went silent the moment he walked in, and engineers kept promising "one more month" Steve Jobs, NeXT30:07.
  • Jobs fired manufacturing VP Linda Wilin for preparing for both possible circuit boards Steve Jobs, NeXT17:50.
  • Sales were hidden behind channel stuffing, and when distributors could not sell the machines NeXT was owed over $10 million Steve Jobs, NeXT30:07.
  • The honest answer was a year of seven day weeks. The chip finally delivered did not work and cost another full year Steve Jobs, NeXT17:50.
• Hire and keep people who argue back.
  • Jobs wanted talented people whose ideas survived only if they could convince the smart people around them Steve Jobs, NeXT6:36.
  • Gates drilled into every position and would not pull rank to end an argument Bill Gates, Microsoft56:51.
  • Jobs told Ed Catmull he had fired two Apple board members because they never disagreed with him Steve Jobs, NeXT6:36.
  • At MITS, Ed Roberts ran a culture of fear where no one told him the truth, and Gates was the exception who got in his face Bill Gates, Microsoft56:51.
  • Noyce expected anyone in a meeting to challenge him Bob Noyce, Intel41:01.
• Ask for criticism directly, even from admirers.
  • When the author started praising Zara, Ortega interrupted and asked her to explain what she did not like Amancio Ortega, Inditex39:30.
  • Morita invited Norio Ohga, a student who had severely criticized Sony's first tape recorder, to be a paid critic Akio Morita, Sony55:50.
  • Ortega knew that as one of the world's wealthiest people, most would say only nice things Amancio Ortega, Inditex39:30.
  • Ohga later became Sony's president, and likened the critic's role to a mirror for a ballet dancer Akio Morita, Sony55:50.

2.2 Build routines that deliver honest feedback

Do not wait for people to speak up. Build a mechanism that makes them.

• Separate blunt critique from decision authority.
  • Pixar's Brain Trust has no authority, so the director does not have to follow any suggestion, and the fix comes from the filmmaker Ed Catmull, Pixar41:58.
  • Tell the team that early work is supposed to be bad, so people attack the idea and not the person Ed Catmull, Pixar40:30.
  • Catmull says all the films now seen as brilliant were once terrible, and the job is to make them suck less Ed Catmull, Pixar40:30.
• Give employees a confidential way to signal a bad manager.
  • Morita started a weekly company newspaper listing openings elsewhere in the firm, and employees could apply confidentially Akio Morita, Sony59:00.
  • A manager that many people tried to leave stood out as inadequate. It started when a young employee said a "stupid" section chief had come to represent Sony to him Akio Morita, Sony59:00.
• Give the board an off the record place to question you.
  • Chang emailed the agenda two weeks ahead and hosted independent directors to dinner the night before each meeting, off the record Morris Chang, TSMC48:12.
  • Directors raised the capex plan even before that dinner Morris Chang, TSMC48:12.
• Tell people honestly how they are doing.
  • Noyce loved Andy Grove's five-level rating system, from Superior to does not meet requirements Bob Noyce, Intel45:01.
  • He believed the hotshots arriving in the late 1960s and early 1970s had never had honest grades, because colleges inflated marks to keep students out of Vietnam Bob Noyce, Intel45:01.

2.3 Test ideas hard and share the lessons widely

Challenge the content, not the person, and let the whole company learn from each failure.

• Criticize in the open so one mistake teaches everyone.
  • After the NV30 chip failed, Jensen Huang called out the engineers at an all-company meeting Jensen Huang, Nvidia16:40.
  • He invited a Best Buy executive to describe customer complaints Jensen Huang, Nvidia16:40.
  • He rejects praise in public and criticism in private Jensen Huang, Nvidia16:40.
• Be the first to say your own strategy has failed.
  • Nvidia had recruited over 100 engineers on a vision of setting industry standards. Jensen told his co-founders the vision was dead and the company had to out-engineer rivals inside Microsoft's standard Jensen Huang, Nvidia41:22.
  • Admitting the failure let the company act in time, and led directly to the Riva 128 and the company's survival Jensen Huang, Nvidia41:22.
• Make every claim face a test, in writing.
  • After a bad presentation in 2004, Bezos banned PowerPoint and required short narratives, because a memo's structure exposes what matters more than what Jeff Bezos, Amazon17:20.
  • Bezos assumes each sentence is wrong until he can prove otherwise, and he challenges the content, not the writer's motive Jeff Bezos, Amazon20:10.
  • Meetings open with about 20 minutes of silent reading Jeff Bezos, Amazon17:20.
• Give every requirement a named owner who can defend it.
  • At SpaceX, a requirement with no owner who can defend it is deleted Elon Musk, SpaceX35:02.
  • When engineers said the military or legal required a spec, Musk made them name the actual person Elon Musk, SpaceX and Tesla20:50.
  • Falcon 9's folding grid fins were deleted after simulation showed fixed fins were acceptable Elon Musk, SpaceX35:02.
  • Plastic caps on Tesla battery pins had no owner and were deleted, and the pins never bent Elon Musk, SpaceX and Tesla20:50.

2.4 Flatten the structure so information and decisions move together

Fewer layers and shared codebases mean truth travels fast and people can act without permission.

• Design an organization you can manage directly.
  • Jensen Huang has about 60 direct reports and no one-on-ones, so information travels fast and employees act independently Jensen Huang, Nvidia9:45.
  • He refused board advice to hire a COO Jensen Huang, Nvidia9:45.
• Tell everyone at the same moment, and organize around the mission.
  • In a robotics meeting, new grads, three vice presidents and two executive staff heard a decision at exactly the same time Jensen Huang, Nvidia29:09.
  • Teams are wired around a specific mission, with the best skills pulled from across the company Jensen Huang, Nvidia30:08.
  • The cost is high pressure on leaders, since no one has privileged information to lean on Jensen Huang, Nvidia30:08.
• Remove the structures that make people wait.
  • Noyce put executives in one big room and sent cross-department problems to councils of the people on the line Bob Noyce, Intel41:01.
  • Facebook hired engineers into the company, not onto a team, and kept one codebase, so people could be reassigned quickly against Google+ Mark Zuckerberg, Meta3:32:50.
  • Bezos and Jassy mandated that all Amazon teams talk only through service interfaces, with no back doors and no shared data stores Jeff Bezos, Amazon Web Services46:35.
  • By 2002 Amazon's single 1995 codebase meant any new code risked breaking everything, and the company ground to a halt Jeff Bezos, Amazon Web Services46:35.
• Meet on a fixed rhythm to spread what works.
  • Walton held mandatory Saturday morning meetings where store managers shared P&L numbers and what was working Sam Walton, Walmart1:27:20.
  • The aim was to roll good ideas into other stores quickly, and Kmart did nothing like it Sam Walton, Walmart1:27:20.

2.5 Decide on partial information and make mistakes cheap

Speed comes from sorting decisions by reversibility and then accepting some errors.

• Give two-way doors light process and decide at about 70% of the information.
  • Bezos said day two companies make good decisions slowly, and slow decisions drive builders away Jeff Bezos, Amazon1:07:50.
  • Reversible decisions should not get the heavy process of one-way doors Jeff Bezos, Amazon1:07:50.
  • The safeguard is being good at quickly spotting and correcting bad decisions. Being wrong then costs less than being slow, which is expensive for sure Jeff Bezos, Amazon12:45.
• Disagree and commit instead of running a long persuasion cycle.
  • When a team wanted to green-light an Amazon Studios show he doubted, Bezos wrote back "I disagree and commit" Jeff Bezos, Amazon1:07:50.
  • That saved a long cycle of persuasion Jeff Bezos, Amazon1:07:50.
• Choose a hill fast, and if it is wrong, turn and attack the other.
  • Andrew Stanton told Pixar the only unacceptable course is running between the hills Ed Catmull, Pixar42:41.
• Treat mistakes as the price of being active.
  • Kamprad said fear of mistakes is the root of bureaucracy, and that mediocre people spend their time proving they were not wrong Ingvar Kamprad, IKEA18:57.
  • He admitted losing hundreds of millions of dollars on projects such as a TV factory stake, a Russian sawmill, and ventures in Romania and Thailand Ingvar Kamprad, IKEA18:57.

2.6 Plan by readiness and set hard clocks

Skip the forecast, rehearse the options, and give work a deadline that does not let it expand.

• Steer day by day instead of writing a long plan.
  • Singleton distrusted long-range plans because most outside influences cannot be predicted, and said his only plan was to keep coming to work Henry Singleton, Teledyne14:30.
  • Jensen Huang runs no five-year plan and says strategy is actions, not words Jensen Huang, Nvidia35:05.
  • Kelleher said reality is chaotic and planning is orderly. A fixed plan would have meant three months of debate over six more airplanes Herb Kelleher, Southwest Airlines0:12.
• Rehearse what-ifs, then move within hours when the chance arrives.
  • Southwest asked what if it opened New England cities or Chicago built a new airport, and how many planes it would need, producing multiple plans Herb Kelleher, Southwest Airlines36:21.
  • When Midway Airlines closed, the team was negotiating with city officials by 9 a.m. and had a $20 million gate deal by 2:30 p.m. Herb Kelleher, Southwest Airlines35:24.
  • When US Air pulled out of California cities, Southwest bought the planes, took the gates and dominated California Herb Kelleher, Southwest Airlines0:12.
• Set deadlines shorter than feels comfortable.
  • Kelleher told a new marketing vice president that a nine month commercial plan meant next Wednesday, because a smaller airline had to be faster Herb Kelleher, Southwest Airlines38:07.
  • Hock gave Aram Tulan nine months to build Visa's whole authorization system after IBM and integrators bid too high and too slow Dee Hock, Visa1:56:30.
  • Jensen Huang times each task as if there were no delays, queues or downtime, and judges teams against that speed of light Jensen Huang, Nvidia20:45.
  • The Visa system worked in nine months. Visa then built clearing and settlement, cutting average settlement from about a week to overnight and saving banks about $15 million in year one Dee Hock, Visa1:56:30.
  • Arnault phoned an employee two hours after a file reached the desk to ask how much had sold Bernard Arnault, LVMH13:53.

2.7 Where they differ

The goals match, but founders disagree on how hard to push and how public to be.

• Combat or patience.
  • Jobs built a combative culture where veterans were told to dial it back at later jobs Steve Jobs, NeXT6:36.
  • Catmull never had a yelling argument with Jobs. He presented the facts and waited until Jobs said "you're right" Steve Jobs, NeXT46:00.
• Public or confidential criticism.
  • Jensen Huang criticizes in front of the whole company so everyone learns Jensen Huang, Nvidia16:40.
  • Morita and Chang built private channels, a confidential transfer list and an off the record dinner Akio Morita, Sony59:00, Morris Chang, TSMC48:12.
  • Private routines suit upward feedback to a powerful leader. Public critique suits lessons that the whole company needs.
• Pressure works only with honest reporting.
  • Arnault pushed staff relentlessly and built the leading French private house developer in 5 years Bernard Arnault, LVMH13:53.
  • At NeXT, pressure with no safe way to say "it will be late" produced "one more month" and hidden sales Steve Jobs, NeXT30:07.
• Preparing for both outcomes.
  • Jobs fired a VP for preparing for two possible circuit boards Steve Jobs, NeXT17:50.
  • Southwest deliberately built multiple plans for different scenarios Herb Kelleher, Southwest Airlines36:21.