September 2017

Where Are Your Results Really Coming From? -Mental Model 013

Sensitivity Analysis

Identifying how the uncertainty of individual inputs of a system effect the uncertainty of the system as a whole.

 

Sensitivity Analysis Example:

A business can determine the effect of a piece of information in their advertisements on their sales by comparing sales results from two ads – that only differ by including or omitting that piece of information.

 

Wisdom:

“The only people who see the whole picture are the ones who step outside the frame.” ― Salman Rushdie

 

Read more:

> Sensitivity analysis on Wikipedia.

 

Why Starbucks Don’t Care About Coffee -Mental Model 012

Systems Thinking

Considering the effect of both the individual components of a system, as well as the effect of the relationship between those components.

 

Systems Thinking Example:

Starbucks don’t focus on creating a great coffee shop. They focus on creating a system that creates great coffee shops.

 

For example, Starbucks recognise the energy their customers get doesn’t only come from the coffee they buy, it comes from positive interactions with Starbucks employees. But Starbucks don’t simply tell their employees to smile. They create a system.

 

Starbucks develop a training program that teaches employees to manage their emotions—so even when one customer is rude, they can greet the next customer with a smile.

 

Wisdom:

“Systems and processes will always surpass motivation.” ― Chris Matakas, The Tao of Jiu Jitsu

 

Read more:

>  System Thinking on Wikipedia.

What Can Peas Teach Us About Power? -Mental Model 011

Pareto Principle

Roughly 80% of the effects come from 20% of the causes.

 

Pareto Principle Example:

As Vilfred Pareto noticed, 80% of the peas in his garden came from 20% of his peapods.

 

Pareto also showed that 80% of the land in Italy, belonged to 20% of the population.

 

Aka: 80/20 rule, law of the vital few, principle of factor sparsity

 

Wisdom:

“80% of success is showing up.” —  Woody Allen, American filmmaker, writer, actor, comedian, and musician whose career spans more than six decades.

 

Read more:

> Pareto principle on Wikipedia.

 

Why The Rich Become Richer -Mental Model 010

 

Power-Law

Things that grow in power exponentially, rather than linearly.  

 

 

Power-Law Example:

If the length of the side of a square is doubled, the areas is multiplied by a factor of four.

 

A square with a 2 metre side doubled to 4 metres, sees the area quadruple from 4 square metres to 16 square metres.

 

Think about the NBA. Lebron James is a slightly better basketball player than other athletes in the NBA. But that slight difference has an enormous difference on the fame, recognition, and income that he gets. The amount of extra rewards he gets above other players is not proportional to how much better he is. It follows a power law. Because being slightly better makes him the best, he gets significantly more rewards.

 

A commonly misunderstood example of a Power Law is the Richter scale – the measurement of an earthquake’s power. A 5 out of 10 on the Richter scale is not an average earthquake. There is no average. A 2 is 10x more powerful than a 1, just as a 3 is 10x more powerful than a 2.

 

 

 

Wisdom:

“It’s amazing, the increase in grammatical errors in proportion to the level of hatred in the content of hate mail.” ― Christina Engela

 

Read more:

> Power-law on Wikipedia.

 

The Inefficiency of Efficiency -Mental Model 009

Premature Optimisation

Optimising something before it has been sufficiently tested.

 

Premature Optimisation Example:

In 1985, Coca-Cola changed their formula and introduced New Coke. They had conducted taste tests and concluded New Coke was a better product—optimised.

 

But consumers didn’t want New Coke. There was a backlash against the ‘better’ product, and three months later, Coca-Cola reverted back to their original formula.

 

Wisdom:

“We should forget about small efficiencies, say about 97% of the time: premature optimization is the root of all evil. Yet we should not pass up our opportunities in that critical 3%” — Donald Knuth

 

Read more:

> Premature optimisation on Wikipedia.

Why You Aren’t Addressing Your Real Problems -Mental Model 008

Proximate vs Root Cause

A proximate cause is immediately responsible for a problem. The root cause is the underlying reason. It’s the difference between a symptom and the actual issue.

 

Proximate vs Root Cause Example:

The 5 Whys is a tool used by Toyota to identify the root cause. When there is a problem, a proximate cause, you ask ‘why?’ until you reach the root cause. For example:

 

The vehicle will not start. (The proximate cause)

Why? The battery is dead.

Why? The alternator is not functioning.

Why? The alternator belt has broken.

Why? The alternator belt was well beyond its useful service life and not replaced.

Why? The vehicle was not maintained according to the recommended service schedule. (The root cause)

 

Wisdom:

“Shallow men believe in luck or in circumstance. Strong men believe in cause and effect.” ― Ralph Waldo Emerson

 

Read more:

> Proximate vs root cause on Wikipedia.

Why WWI Began So Quickly -Mental Model 007

Scenario Analysis

By predicting and planning for several possible outcomes and their implications, you are more likely to be prepared for the outcome that actually does occur.

 

Scenario Analysis Example:

Before WWI was triggered, there were a number of defence alliances between countries in Europe. If one country declared war on another, other countries would automatically enter the conflict.

 

The declarations of war by different countries were for different scenarios. Defence alliances allowed countries to be prepared for all potential outcomes.

 

Following the assassination of Austria’s archduke, Franz Ferdinand, Austria-Hungary declared war on Serbia. The alliance meant they had Germany’s backing. Then Germany declared war on Russia.

 

German troops then marched on France and took a route that went through Belgium. Since Britain had agreed to maintain the neutrality of Belgium, they declared war on Germany.

 

Because the war scenarios had been planned for before they occurred, it allowed countries to act immediately once they occurred.

 

Hesitation in war time can mean annihilation. The defence alliances that had been created as a result of scenario planning that allowed countries to respond to military aggression immediately.

 

Wisdom:

“By failing to prepare, you are preparing to fail.” ― Benjamin Franklin

 

Read more:

>  Scenario Analysis on Wikipedia.

 

Why The Fax Machine Was Ignored 150 Years -Mental Model 006

Critical Mass

The minimum amount of fissile material (such as uranium or plutonium) needed to maintain a nuclear chain reaction.

 

In social dynamics, critical mass is a sufficient number of adopters of an innovation in a social system, so that the rate of adoption becomes self-sustaining and creates further growth.

 

Critical Mass Example:

It’s hard to believe the following fact is true. But it is. The fax machine existed for 150 years before it became popular. Then in 1987, people “Began to assume that everybody else had a fax machine.” Once a certain number of people had a fax machine, it became worthwhile for others to buy one—as there were enough people they could send faxes to that made the purchase worthwhile.

 

Interestingly, as email reached critical mass—it diminished the fax machine’s critical mass.

 

Wisdom:

“Alone we can do so little; together we can do so much.” ― Helen Keller, American author, political activist, and lecturer. She was the first deaf-blind person to earn a bachelor of arts degree.

 

Read more:

> Critical mass on Wikipedia.

How Alexander The Great Made Decisions -Mental Model 005

Cost-benefit Analysis

Weighing the expected costs against the expected benefits to determine the best course of action.

 

Cost-benefit Analysis Example:

Alexander the Great and his army of 31,000 Macedonians stood against a Persian army over double the size in the Battle of Gaugamela. If Alexander lost the battle, he wouldn’t only lose his army. He would be killed. But if he won he would conquer the largest empire in the world. The cost was death, the benefit was becoming the most powerful man in the world.

 

Alexander determined the best course of action was to fight. He won the battle and became one of history’s greatest generals.

 

Wisdom:

“My way is to divide half a sheet of paper by a line into two columns; writing over the one Pro and over the other Con. Then during three or four days’ consideration, I put down under the different heads short hints of the different motives, that at different time occur to me, for or against the measure. When I have thus got them altogether in one view, I endeavor to estimate their respective weights; and where I find two, one on each side, that seem equal, I strike them both out. If I judge some two reasons con equal to some three reasons pro, I strike out five; and thus proceeding, I find where the balance lies; and if after a day or two of further consideration, nothing new that is of importance occurs on either side, I come to a determination accordingly.” – Benjamin Franklin

 

Read more:

> Cost benefit analysis on Wikipedia.

Simple Mistakes You Can Stop Making -Mental Model 004

Cognitive Biases

Cognitive biases are mistakes in our rational reasoning, remembering, and other cognitive processes – due to our subjective interpretations rather than observing verifiable data.

 

Cognitive Biases Example:

The Ben Franklin Effect: A person who has performed a favour is more likely to do another favour for that person than if they had received a favour from that person.

 

The Cheerleader Effect: People appear more attractive in a group than in isolation.

 

The Bizarreness Effect: Bizarre material is easier to remember than normal material. For example, it’s easier to remember the image of a pig walking on its hind legs than walking normally.

 

Wisdom:

“Humankind cannot bear very much reality.” — T. S. Eliot

 

Read more:

> List of 170 cognitive biases on Wikipedia