Prolific Angel Investor Gokul Rajaram – SPADE for Decision Making

Yeah, it's a crazy story. Sixteen years ago, I was working in product at Google and we were doing a review with Eric Schmidt, the CEO. Back then I was on the ads team. It was something around display advertising. But what I remember very clearly is Eric asked. There was a particularly contentious topic we were discussing and we were arguing different sides of it. There were some other product managers in the room also. And Eric asked, who owns this decision? And literally, I kid you not, three of us simultaneously raised our hands at the same time. And so when he looked around and he saw three of us raising our hands owning the decision, he said, well, three people owning something means nobody owns it. So I'm ending this. He was very good at ending meetings. I'm ending this meeting. Now go back and then don't come back until you figure out who owns this decision. And so it was a pretty sobering thing where we had gone in, you know, essentially, you know, trying to make this point, and then here the meeting was shut down. And because of a lack of a clear owner of the decision, and really what it brought to me and countless other episodes confirmed later is that consensus doesn't work. Consensus doesn't work as a decision making tool, especially for very important decisions and actually for most decisions, because there's no owner, there's no clear some ownership. There's a very famous metaphor or a story actually of this Sadhu who's a holy man on a mountain. I think this climber wrote the story where they come across this holy man. He's shivering, they're trying to reach the summit, but he's shivering, he's almost dead. And so basically there's a group of them and none of them takes ownership. So at the end they end up leaving him behind because they all have different other things and all of them takes owner, each of them takes ownership of some part of it. And I think it's a very powerful metaphor for decision making, I think, because most decisions without an owner, without someone whose goal is to make that decision, they languish and they don't get done effectively. There's no driver. I always believe that it's true. For any project, you can't have 50% ownership. You've got to have someone 100% on it. Otherwise it's 0%. Anything you want to get done, you've got to put someone 100% on it. And then at square, a few years later, we basically, when we did a survey of people, survey of employees, one of the top, I think maybe the top thing in 2014 I think it was 13 or 14. The top thing that people were dissatisfied with was the decision making that the transparent. They didn't feel that decision making was transparent and they didn't understand why decisions were made. So at one of the town squares, which is the all handed square, as you remember, Dan, someone asked this question because I think we were reviewing the employee result survey and Jack suddenly said, well, Gokul's going to come back in two weeks or three weeks with a solution.

Had you talked with him about that before he said that?

No, I hadn't. And so he suddenly said that. And so literally we had three weeks to figure out what to do. So I basically got, you know, some people together and all of us brainstormed and our own experience with high quality decisions. We looked at literature, we looked at what, what had worked for us and then we talked to a bunch of people across the company and came up with this framework which, which we refined over the next few months. But it was a good start. Where it really started out with the notion that the decision should be owned by someone. We call it the responsible person. And then it actually was going to be called PSADE or something. It started with a P, but then we said acronyms mean a lot. So we just moved the setting up front and we called it spade. Spade, which is easier to remember than psad.

Yeah, yeah. And it's a very thorough framework. So for anyone listening, you know, check the show notes. I'm going to make sure to link to Goku. You have many amazing interviews we'll link to. You have many amazing pieces that you have writing and just kind of ideas that we'll link to. So for anyone interested, I mean this is something we could spend 30 minutes chatting about. I just want to ask one more question here which is can you just at a high level talk about what each of those letters stands for and just kind of string together, I think. Yeah, yeah, string together. I guess what you're focusing on when you're going through a decision in the spade way, kind of spade process.

So spade S stands for setting, P stands for people, A stands for alternatives, D stands for decide, and E stands for explain. So setting is essentially the context for the decision. The setting helps figure out what the decision actually is. The precision of that is important because in many cases it's not clear what the decision is. For example, when we say, well, we want to launch internationally, the decision is how to launch internationally. That's a imprecise decision. Your decision is figuring out when we want to say okay, the actual more precise definition is figuring out what the next country is to launch in. But even that is not precise enough because if you have multiple products then it's not just what decision country to launch it, but what product to launch and what country to launch it in. So there's more decisions that more dimensions to any decision that with the S you can articulate. The S also includes things like timeline for the decision when you need to make the decision by as well as. Probably the most important part of the essay is the why till we understand why, which is the objective. Why are we making this decision? What are we optimizing for? And I'll give you an example. I think it was from Square where one of our teams there was a big discussion around pricing for a certain hardware product in a country. And I think the reason we basically they came to our management team and we essentially realized after discussing that the marketing and the product teams were on different pages. The marketing team was trying to optimize for profit while the product team was trying to optimize for market share. So of course if you optimize your two completely different things, the price you come up with, the decision was actually what how to price a certain product would be completely different. So the first thing we did was to send them back and say come back to us with a very clear why objective as part of the S. And so we hadn't yet implemented Spade and it really forced us in that case to get them to implement Spade. But it was one of the early implementations that we saw the impact of it clearly articulating the setting. The next thing is the people which like I said should have been the first thing. It's the number one thing. It's really the horsepower behind executing a decision and it's really three pieces. One, the folks who are consulted and give input towards the decision. The next is people who approve the decision and most importantly the person who's responsible for ultimately making the call. So you have responsible approver and consultant. And I think the big question that comes up is who should be responsible? You go with various reasons. Think about it. In my, my opinion, and I think it works well, is that the person who's accountable for the consequence of the decision should also be the person responsible for making the decision. Why? Because it creates ownership, it creates empowerment, it creates fulfillment. Because imagine the last time you were given that decision handed down decision to implement which you had no role in making. That's the one of the least empowering things.

Yeah, you need skin in the game. And that alignment of incentives, like if you're going to deal with the consequences, then yeah, you get. You should get to own it.

Absolutely. Exactly. You own the decision. And the third one is, we talked about SP and then a, which is the alternatives. Once you define the setting and you assemble the participants, your next step is to outline the alternatives. An alternative is a view of the world. So it's essentially a different way. You could argue that when we're talking about product development, a decision or an outcome you want to get to is customer behavior change. Each alternative here is a different feature or a different way of doing things that could result in the same customer behavior change. So alternatives should be feasible. They obviously, you can't have impractical alternatives. They should be realistic, they should be diverse. In other words, one of the big mistakes I see folks making is people have alternatives, but they're all exactly very similar to each other. They're not very different. And so, for example, if you think about pricing, you know, the alternatives people come up with could be, well, charge $5, charge $6, charge $8. They're all kind of very similar. That's not really what the goal is. The goal is, is $5 better than charging 2% than charging $5 plus 2%? Those are three completely different ways of thinking about it. Is a fixed price better, percentage better, or some blend better? And then once you figure out that, then you can actually micro optimize it as 5, 5, 56, etc. And so you want to have a diverse set of alternatives. And then finally, the D is the decision phase. Once you have these alternatives, the thing you have to do is really do structured brainstorming. There's many ways to do structured brainstorming, but really structured brainstorming to outline how each of these alternatives impacts the decision or impacts the outcome. So really, ideally, quantitatively model it out or come up with a list of pros and cons with some with some data behind it to understand if you go with this outcome, with this objective, you're trying to get to which of these alternatives, what are the pro? Every alternative has pros and cons. And what do you care about the most? I think M and A is where companies do this the best, because every acquisition decision has alternatives. You want to accomplish certain acquisitions done to accomplish a certain business strategy. You can have buy, you can have partner, or you can have build. So there's clear alternatives to acquisition. And so one of the basic tenets of any M and A deal memo is you have to model out if we didn't buy, but we built or we partnered. What are those three things and what is the impact, financial impact, quantitative impact of those three things? And so M and A professionals are very, very good at this modeling. And I think the other kinds of decisions are a little bit more squishy, but no less important to figure out as much as possible through data what the impact of the decision is, what happened, what we saw with this spa. Before we get to D, let's talk about D's decide, which is, and I'll go back to what happened at Square once we started rolling this out. Once the alternatives are evaluated by people and pros and cons anchored to the setting, it's time to decide. And essentially you've got to essentially have a discussion, but ultimately you've got to have people. I like taking input from people privately. So essentially people, based on looking at all the data, you basically ask folks to tell you privately, each of them, the consultant folks, what it can be by email by Slack, sms, whatever the case may be, what alternative they choose amongst all the alternatives and why they choose it. And then after you get all that back, you ruminate on it and you essentially, you basically decide, make the decision thoughtfully, consider the feedback, and then you got to choose. That involves choosing one of these alternatives and then writing out in as much detail as possible why you chose it. And then finally explaining and explanation is, I think important because this is how you essentially explain to the broader or communicate to the broader group of stakeholders, even beyond the folks that are involved, why that decision was made and, and what the decision is and what it's optimizing for. You want to run the decision and the process by the approver to make sure there's no veto. Typically approvers don't really veto things unless vehemently disagree with the process or the way it was done. And approver's goal is really the monitored decision process, not the result. And then you want to also make sure that folks who are involved in that decision are committed. We have this phrase, disagree but commit. You want to make sure even if people disagree, because you need them to execute. You need a group of people to execute on the decision, help you execute on the decision. And one of the failure modes is where people say, oh yeah, decision has been made, but then they kind of undermine the decision through actions, even if they don't say it otherwise. So you want them to explicitly, in a public setting, say that I disagree, but commit. It's called a commitment meeting. And then you circulate, you basically send an email out with a with the spade summary and you ideally even record the decision in a spreadsheet or some other place. So a person who's joining the team new can see all the decisions that were made and look at the spade document behind it. What we started seeing at Square after about two or three years of doing this was the people were basically making a decision and using spade to justify it and so retroactively going back and coming at the framework. So we basically said, actually then we should not make a decision, we should just focus on spa, which is a spa, and then hold off on the decision. So there's no decision going to be made. You just have to spend a lot of time outlining the alternatives, outlining the setting, getting people together, getting their inputs, and then we make a decision separately. So this very quickly eliminated that decision. There was no decision going to be made. It was just doing the work around the alternatives and doing high quality work there. And so we saw this in, I think it was first done quite a company called Weebly. And so there was a ton of decisions going to be made around Weebly integration and they used SPA instead of spade, which I thought was really powerful. And the D was made a couple of months after the SPA was written, which is great. It gave time for that to settle in, people to understand the alternatives and not quickly come to a decision and back justify it based on some other stuff.