Dear Analyst
Dear Analyst #77: The top 3 mental models I never think about and live by (I think)
The promise of mental models is that it helps you bridge the gap between what's in your mind and what happens in real life. They are interesting thought exercises in how you think. But that's where it ends for me. How often do you approach a big decision in life and decide to pull from your little bag of mental models to make the best decision? Life (and the decisions you face) are messy. Yet, we see countless bloggers and authors provide their own takes on mental models (I've referenced Shane Parrish's mental models multiple times, to be fair). An entire industry of leadership and career coaches use mental models to describe a person:
Source: Amateur Coach
I'm sure this coach, does some great work with his clients, but something about having my entire being defined with a few lines and phrases doesn't sit right. Perhaps mental models are best left for VCs and thinkbois on Twitter. The issue I have with mental models is that they are easy to write and talk about, but the examples people cite seem too farfetched and "clean" to work in real life. With that said, here are a few mental models I like to read and think about, but rarely use in real life (because life is messy).
1) Power laws and the 80/20 principle
The classic Pareto or "80/20" principle. No doubt this mental model has come across your Twitter timeline in the last week. Via Wikipedia:
The Pareto principle states that for many outcomes, roughly 80% of consequences come from 20% of causes.
Thinkboi thoughts on Twitter:
https://twitter.com/shaneaparrish/status/1312735218776772608
One example a really like from history is from WWI and a German fighter pilot named Manfred von Richthofen (aka the "Red Baron"). Unlike other fighter pilots at the time, Richthofen approached aerial combat with conservatism. This meant less aerial acrobatics and what you might otherwise see in Top Gun.
Source: History.com
His fleet was constantly outnumbered by Allied forces and he knew if his men entered into combat head-to-head, he would always lose. Instead, he created a special formation for his fleet called "The Flying Circus." This formation would just hammer the hell out of a specific point in the Allied's defenses. This led to him taking down more Allied planes than he would have otherwise using traditional aerial combat techniques. In the context of combat, Manfred was able to 80/20 his results by taking advantage of the multiplier effect whereby one side can create outsized impact just from having a more numbers than the other side in a battle. I could be conflating two different mental models here, but the effect of dominating a small part the enemy's defenses day after day must have a huge impact on their strategy and morale.
80/20 principle and data
Back in the real world where you have numbers to crunch and spreadsheets to format, how might one use this mental model at work? Again, I don't actively think about using the 80/20 principle before I go and pull some data, but the simplest way for this model to manifest itself in a spreadsheet is sorting. What does this mean?
You're doing some analysis and trying to find the key driver for why sales are spiking or why customers are churning. Pull the data you need and instantly sort on the column that contains your key metric. 80% of the time (see what I did there?), that simple operation of sorting the data set will help you find the answer you're looking for because the product or customer that is driving the issue will s...