If The Joker in The Dark Knight was an agent of chaos, then entrepreneurs are the exact opposite of that, Chaos Managers. Entrepreneurs deal with chaos every single day and try to find the best possible outcomes for their businesses. And since every situation is so varied that it would be beneficial if there were an framework that would help an entrepreneur make better decisions.
These 5 mental models have helped us immensely in our journey of bootstrapping TFTH. They have guided us in making the right decisions and always stay the course, even when things got really challenging.
5 Mental Models that Helped Us in Better Decision Making
- Occam’s Razor –There are many interpretations to this model but the best one that we like is “The simplest solution tends to be right or put differently, pick the one that has the least number of assumptions”. We find this to be extremely useful whenever we don’t have enough data to make informed decision. And in such situations we always take that route that has minimum assumptions for every assumption introduces error into the decision model. This comes in handy whenever we designing a user flow for our product.
- Compounding – This is one mental model that is perhaps used by finance guys more than the entrepreneurs. It is so powerful that Einstein once said —
“Compound Interest is the Eighth Wonder of the World. He who understands it, earns it… He who doesn’t… pays it.”
One would wonder how compounding helps in better decision making. It helps by making us realize that if we keep on doing good habits (in business), then those will compound over time to take us closer to our goals. A lot of times when we are in deep execution, we lose sight of the fact that our daily small efforts will result into something monumental. Compounding helps us stay focussed. It also helps us take a long term view of business much like Jeff Bezos.
- Inertia – Inertia would perhaps be the least loved concept when it comes to first principles of physics but if applied judiciously, it can help generate positive and better outcomes in business. In the book Nudge, author Richard Thaler refers to it by Status Quo Bias. Put simply it means that we tend to remain on a course of action even if that course might not be in our best interest. For example if we subscribe to Netflix and don’t watch it beyond one month, we would still not cancel its subscription even though it is costing us financially every month. All the subscription services around the world play on people’s inertia to cancel the subscription hence raking in huge amount of recurring money. We put it to use to design our product better. Since we know that people don’t take too much hassle to change the default settings (due to inertia), we keep our product default settings to benefit our users.
- Tragedy of the Commons – No one captures tragedy of the commons better than Aristotle who remarked –
“What is common to the greatest number gets the least amount of care. Men pay most attention to what is their own; they care less for what is common; or at any rate they care for it only to the extent to which each is individually concerned. Even when there is no other cause for inattention, men are more prone to neglect their duty when they think that another is attending to it”
What Aristotle said way back is still relevant today. In an organisation, if a task is to left to be shared among 2 or more people then it always almost result in sub-optimal output. This model doesn’t go against teamwork but asks for pinning accountability of the task to one person.
- Margin of Safety – If you are a fan of Warren Buffett, then you would already know this. In financial terms, Margin of Safety is the difference between intrinsic value of stock and its share price. And any value investor would love to buy that stock that has good margin of safety for that allows cushion against loss of capital. We use the same theory to design our business models and product/service offerings. While preparing our annual financial plan, we always keep that cushion in case things don’t go our way, we don’t lose our sleep. Similarly we always try to build our margin of safety (from other competitors) through 4Ps framework.
These mental models have helped us immensely in making better decisions throughout our entrepreneurial journey. Do you use any mental model that you would like to share?
GET THE BOOK BY
ERIN FALCONER!
I was looking through some of your content on this site and I conceive this internet site is real informative ! Keep putting up
A round of applause for your blog article. Really thank you! Really Cool.
buy domains
Controle de Pragas – Proteção para sua Saúde.
cheap viagra online when will viagra be generic cheap viagra online canadian pharmacy
buy viagra online generic viagra price of viagra
non prescription viagra viagra for sale where to buy viagra online
high blood pressure and cialis buy cialis online best liquid cialis
A backup protects you against hackers, malware, and unintended server outages that might, otherwise, render your website unusable or cause you to rebuild your site from scratch.
viagra discount cheap viagra viagra discount
herbal ed natural ed drugs tadalafil without a doctor’s prescription
generic viagra buy viagra from canada canada viagra
drug store online
canada viagra generic viagra viagra no prescription
home remedies for erectile dysfunction
is there a generic for viagra generic viagra buy viagra online canada
best ed solution
how to buy viagra buy viagra from canada buy generic viagra
ed vacuum pumps
Thank you for some other magnificent article. Where else
could anybody get that kind of information in such a perfect approach of
writing? I’ve a presentation subsequent week, and I am on the look for such information.
samples of cialis generic cialis for sale viagra vs cialis vs levitra
Hey There. I discovered your weblog using msn. This is an extremely smartly written article.
I will make sure to bookmark it and return to learn extra of your helpful
info. Thanks for the post. I’ll definitely comeback.
Here is my site; biden 46 hat
cialis vs viagra effectiveness buy cialis buy cialis online
discount prescription drugs ed medications online cure ed
cheap erectile dysfunction pills online
cheapest ed pills online ed pills online pharmacy male enhancement pills
online ed drugs
730717 818378Low cost Gucci Handbags Is normally blogengine significantly better than wp for reasons unknown? Ought to be which is turning out to be popluar today. 635423
zithromax capsules zithromax cost canada
286946 155028Wow ~ Great stuff ~ Come and take a look at MY ?? 345640
buy zithromax canada can you buy zithromax over the counter in canada
tadalafil for sale tadalafil for sale
tadalafil canada generic tadalafil
payday loans direct lenders personal loans with no credit check
payday loans payday loans no credit check
have a sex
I always used to study post in news papers but now as I am a user of web therefore from now I am using net for content, thanks to web.|
Thank you for every other great post. The place else may anybody get that type of info in such a perfect manner of writing? I have a presentation next week, and I’m at the look for such info.|
erectile dysfunction natural remedies https://sildenafilxxl.com/ cost of viagra
cialis generic availability best liquid cialis cheap cialis
Thanks for the post
buy viagra online usa viagra for sale buy generic viagra online
best canadian pharmacy online cheap Doxycyline cheap drugs online
buy generic ed pills online canadian online pharmacy online ed drugs
coupons for cialis cheap cialis how does cialis work
generic viagra cost viagra no prescription viagra
cold snow
EIS Components is the stocking Distributor of EP1K50TC144-1N, we specialize in Altera all series electronic components. EP1K50TC144-1N can be shipped within 24 hours after order. If you have any demands for EP1K50TC144-1N, Please kindly submit an RFQ here or send us an email. We will reply you as soon as possible.
Laser Cap is a device that uses laser technology to stimulate hair growth. It’s easy to use and painless, which makes it appealing for both men and women. Read Kiierr Laser Cap Reviews Kiierr Laser Cap is a revolutionary product that can promote hair growth in just six weeks. It’s easy to use, it doesn’t cause pain or skin burns and the results are amazing!
에볼루션코리아
638HzJDPM@|!
에볼루션카지노
436ifUQFd”])
에볼루션바카라
526JaTKhi),/
에볼루션룰렛
805xslSRW)[=
에볼루션블랙잭085xTgFNe;)+
We’ve compiled a list of the top retail POS solutions in our FrontRunners for Retail Management. These are the POS systems that are most recommended by fellow business owners for their usability (full methodology here).
Spending more time in talking is without a doubt the best way to improve your language skills. Find Korean language groups nearby on sites like Meetup. If there are no Korean communities near you, you can also try to find a companion on forums and groups on Facebook, for example. Visit to South Korean language.