This is the second part of my mental models series. In this post I look at 7 more models I use regularly. You can read the first part here.
Right, let’s get to it then.
The Pareto principle states that for many outcomes, roughly 80% of consequences come from 20% of causes. Once internalised, one is constantly on the lookout for the vital few that will move the needle by 80%. In other words we know that most of what we do will likely fail or have little impact and that provides a healthy detachment with actions and also forces us to consider many more views before converging. The detachment also makes it easier to double down on what works and drop the items that aren’t working out.
This is probably the most abused term in the startup world. First principles is going back to the core of any idea or logic and reasoning one’s way out. Ozan Varol writes in some detail about “path dependence” in his book How to Think Like a Rocket Scientist and explains why it’s so difficult. PD is when we keep going down a rabbit hole based on a direction we took sometime back. I wrote about how width of the engine that powers the space shuttle, one of the most complicated pieces of high tech machinery developed by mankind, was determined over 2000 years ago by Roman road engineers in a Linkedin post a little while back. A famous example of first principles thinking was how Elon Musk refused to accept the cap on the cost of battery power. He argued the costs seemed made up as the cost of all the metallic components of a battery bought at the London metal exchange, threw up a much lower cost. It is this sort of “challenge the core assumptions” based thinking that first principles is all about.
Every consequence cannot be anticipated but by being aware of some common ones like tragedy of the commons (where a common resource used individually, gets depleted), moral hazard (where the risk taker is immune to the effects of his actions) and odd effects of perverse incentives (the famous cobra effect in pre-independent India), etc, helps one prepare for what can come next.
This one is as much about organisational culture as it is a mental model. Kim Scott, in her book, Radical Candor, calls for a culture of truth seeking and “getting it right”, as opposed to “being right”. The goal remains to keep the eye on the prize and not seek validation of one’s own ideas. One way to do this is to set up “red teams” and have your colleagues play devil’s advocates and get them to poke hole in your own ideas. An idea evolves into something more resilient and useful as it is challenged from different angles.
I learned about this in the book Superthinking and it seems like a neat way to think about decisions. Dividing decisions into reversible and irreversible ones helps us avoid over analyzing and move with caution appropriately. Reversible decisions are cheaper to make and can always be corrected as new information comes in. Irreversible decisions like investing key resources in a project, once executed, are hard or impossible to rollback and they must involve a lot of thinking, excel-sheeting and if possible, simulation before being kick started. Treating the two kinds of decisions differently allows one to move with more speed and caution.
Short term optimisations (like 15% improvements i sign up rates, 20% better free trial to paid conversions) are always fun and keep up morale. One needs to, however, be wary of how some of these short term positive movements can have adverse effect on the long term goals. This is related to the unintended consequences thing but with a catch. Even if something goes not have a directly visible negative consequence, it can make one feel satisfied in having achieved a local maxima. The key is to constantly question if a positive short term effect is in line with a long term objective. The most common way this plays out is if an organisation finds itself constantly retain people by matching competing offers. This creates a culture that prompts people to constantly explore opportunities outside to make themselves grow.
DRI is a simple but important idea that comes from Apple. It means there’s only one person with whom the buck stops on any given project. The idea is that every project is assigned a DRI who is ultimately held accountable for the success (or failure) of that project. This can be thought of as a simple management principle as well but it has deeper implications. By making things unambiguous, DRI makes organisations somewhat immune to internal politics as people generally don’t have conflicting personal goals.
I run a startup called Harmonize. We are hiring and if you’re looking for an exciting startup journey, please write to jobs@harmonizehq.com. Apart from this blog, I tweet about startup life and practical wisdom in books.