I watched the recent Jeff Bezos documentary on a flight back from Harare to London last week, and one of the areas which I thought interesting was his approach to making big life decisions.
Bezos was in a steady day job, earning a very good salary at DE Shaw, a New York hedge fund. He went to his boss one day and said:
I’m going to go do this crazy thing — I’m going to start this company selling books online.
Of course his boss tried to persuade him to stay in his job and advised him to think about the decision for 48 hours and then let him know. He then set about trying to find a framework to justify his decision, soon landing with the “regret minimization framework.”
It would be difficult to think of another decision-making framework that would corroborate his decision for leaving a job such as this. Any traditional investment decision making tool such as NPV, IRR or payback, would point to staying in his current job. The expected value from going on an entrepreneurial venture would be too difficult to estimate with any semblance of accuracy.
What Bezos did was to project his life forward to the age of 80 and think back on his life, and what he would regret. If he got to the age of 80, and had never quit his job to start Amazon, he might regret it. And so he handed in his notice, forfeited any bonus which he may have been due, and started Amazon. 30 years later, he is 60, and has built a $2 trillion company and lived a remarkably rich life.
Walking away from a high paying job at a reputable firm, doing a job that you enjoy, for a new venture which has a high probability of failure, is a difficult decision to make, and can be confusing, amplified by other people inevitably expressing their opinions.
However, taking a long-term approach such as this regret minimization framework can cut through much of the confusion, and bring greater clarity to the decision-making process.
In the Daily Telegraph this morning, I was reading a story about Michael Doolin leaving his £200k salary to start a new HR firm. Many people are caught in “golden handcuffs”, being well paid, lined up for big bonuses “down the road”, incurring lifestyle creep (new car, bigger house, private school fees, more holidays), which means they are unable to leave their jobs. In this case, Doolin was inspired by the Bob Geldof autobiography called Is that it?, which led him to think more about actually what he wanted out of life, and what will be your legacy 10 years on.
Doolin offers some advice before taking the plunge: “Make sure you know yourself, your strengths and weaknesses. Always have a plan B.” If you are well qualified and experienced, a natural plan B would be to go and find another job if the venture doesn’t work out.