Too busy to read?

The concept of inverse thinking can help you with the challenge of making good decisions. The inverse of being right more is being wrong less. Mental models are a tool set that can help you be wrong less. They are a collection of concepts that help you more effectively navigate our complex world.

Jeff Bezos again, in a 1997 letter to shareholders: Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you're still going to be wrong nine times out of ten. We all know that if you swing for the fences, you're going to strike out a lot, but you're also going to hit some home runs.

Cortes started a war with the Aztecs that led to the destruction of their empire. However, he had only six hundred men, whereas the Aztecs controlled most of modern-day Mexico. The odds were obviously thought to be heavily against the Spanish, and many of Cortes's soldiers were reasonably wary of his plans. To secure their motivation, Cortes sank his ships to make sure they had no option but to succeed or die. Without the escape hatch of going back to Spain on the boats, the soldiers' best option was to fight with Cortes. Translation errors led some to believe he burned the boats, but now we know he just had them damaged to the point of sinking. Nonetheless, burn the boats lives on as a mental model for crossing the point of no return.

The Streisand effect applies to an even more specific situation: when you unintentionally draw more attention to something when you try to hide it. It's named for entertainer Barbra Streisand, who sued a photographer and website in 2003 for displaying an aerial photo of her mansion, which she wanted to remain private. Before the suit, the image had been downloaded a total of six times from the site; after people saw news stories about the lawsuit, the site was visited hundreds of thousands of times, and now the photo is free to license and is on display on Wikipedia and many other places.

In your own life, you can use Hick's law to remember that decision time is going to increase with the number of choices, and so if you want people to make quick decisions, reduce the number of choices. One way to do this is to give yourself or others a multi-step decision with fewer choices at each step, such as asking what type of restaurant to go to (Italian, Mexican, etc.), and then offering another set of choices within the chosen category.

If you study the biographies of successful people, you will notice a pattern: luck plays a significant role in success. However, if you look deeper, you will notice that most also had a broad luck surface area. Yes, they were in the right place at the right time, but they made the effort to be in a right place. If it wasn't that particular place and time, there might have been another. Maybe it wouldn't have resulted in the same degree of success, but they probably would have still been successful.

We wish we had learned about these ideas much earlier, because they not only help us better understand what is going on around us, but also make us more effective decision makers in all areas of our lives.

You can use this 2 x 2 matrix to help you categorize events as either high or low impact and high or low cost (time, money, etc.). You want to attend high-impact, low-cost events, and ignore low-impact, high-cost events.

One reason why people procrastinate so much is present bias, which is the tendency to overvalue near-term rewards in the present over making incremental progress on long-term goals (see short-termism in Chapter 2). It's really easy to find reasons on any given day to skip going to the gym (too much work, bad sleep, feeling sick/sore, etc.), but if you do this too often, you'll never reach your long-term fitness goals.

In a 1968 paper in the Journal of Personality and Social Psychology, Robert E. Knox and James A. Inkster described two experiments they conducted at two different horse tracks. They asked as many people as possible to rate the chances of their horses' winning. Some of the people were interviewed right before their bets were placed, and others right after. The group questioned after they made their bets rated their horses' chances significantly higher. This supported the scientists' prediction that, post-bet, bettors were more confident in their choices. Evidently, simply the act of committing to the bet convinced bettors that their odds of winning had increased (see cognitive dissonance in Chapter 1). Remaining data-driven can help you avoid this mistake. The "power of positive thinking" can only get you so far.

In other words, there are usually several dimensions underlying a negotiation, and each party will value these dimensions differently. This opens up the possibility for a give-and-take where you give things you value less and take things you value more. As a result, both parties can end up better than they were before, getting things they wanted more and giving things they wanted less.

Politician Rahm Emanuel offers this perspective: "You never want to let a serious crisis go to waste. And what I mean by that [is] it's an opportunity to do things you think you could not do before."

There is a natural conflict between the desire to make decisions quickly and the feeling that you need to accumulate more information to be sure you are making the right choice. You can deal with this conflict by categorizing decisions as either reversible decisions or irreversible decisions. Irreversible decisions are hard if not impossible to unwind. And they tend to be really important. Think of selling your business or having a kid. This model holds that these decisions require a different decision-making process than their reversible counterparts, which should be treated much more fluidly.

Radical candor is giving feedback in a way that both challenges directly and cares personally (upper right quadrant of the matrix). Your feedback is completely candid and gets to the root of an issue, its radical form. It goes hand in hand with deliberate practice because this type of feedback is exactly the type that should be given in a deliberate practice session: a specific account of what the person could be doing better at a particular skill they are trying to improve.

An apt adage is Don't kick a hornet's nest, meaning don't disturb something that is going to create a lot more trouble than it is worth. With all these traps--Goodhart's law, along with the cobra, hydra, and Streisand effects--if you are going to think about changing a system or situation, you must account for and quickly react to the clever ways people may respond. There will often be individuals who try to game the system or otherwise subvert what you're trying to do for their personal gain or amusement.

Reversing course once a strategy tax is established can be even more costly. In 1988, George H. W. Bush delivered this famous line at the Republican Party's national convention: "Read my lips: no new taxes." Later, this commitment caused significant problems for him when he faced a recession as president. Ultimately, Bush decided he had to break his pledge and raise taxes, and it cost him reelection. The lesson here is that you should, as much as possible, avoid locking yourself into rigid long-term strategies, as circumstances can rapidly change.

luck surface area, coined by entrepreneur Jason Roberts. You may recall from geometry that the surface area of an object is how much area the surface of an object covers. In the same way that it is a lot easier to catch a fish if you cast a wide net, your personal luck surface area will increase as you interact with more people in more diverse situations.

Craft unique roles that amplify each individual's strengths and motivations. Avoid the Peter principle by promoting people only to roles in which they can succeed.

Once you get specific enough with your assumptions, then you can devise a plan to test (de-risk) them. The most important assumptions to de-risk first are the ones that are necessary conditions for success and that you are most uncertain about. For example, in the startup context, take the assumption that your solution sufficiently solves the problem it was designed to solve. If this assumption is untrue, then you will need to change what you are doing immediately before you can proceed any further, because the whole endeavor won't work otherwise.

Actively seek out other perspectives by including the Devil's advocate position and bypassing the filter bubble. Consider the adage "You are what you eat." You need to take in a variety of foods to be a healthy person. Likewise, taking in a variety of perspectives will help you become a super thinker.

When arguing from first principles, you are deliberately starting from scratch. You are explicitly avoiding the potential trap of conventional wisdom, which could turn out to be wrong. Even if you end up in agreement with conventional wisdom, by taking the first-principles approach, you will gain a much deeper understanding of the subject at hand.

preserving optionality. The idea is to make choices that preserve future options. Maybe as a business you put some excess profits into a rainy-day fund, or as an employee you dedicate some time to learning new skills that might give you options for future employment. Or, when faced with a decision, maybe you can delay deciding at all (see thinking gray in Chapter 1) and, instead, continue to wait for more information, keeping your options open until you are more certain of a better path to embark upon.

In a closed system, like our kids' rooms, entropy doesn't just decrease on its own. Russian playwright Anton Chekhov put it like this: "Only entropy comes easy." If our kids don't make an effort to clean up, the room just gets messier and messier. The natural increase of entropy over time in a closed system is known as the second law of thermodynamics. ... On a more practical level, the second law serves as a reminder that orderliness needs to be maintained, lest it be slowly chipped away by disorder.

Japanese proverb, "Vision without action is a daydream. Action without vision is a nightmare."

When you don't use mental models, strategic thinking is like using addition when multiplication is available to you.

Availability bias stems from overreliance on your recent experiences within your frame of reference, at the expense of the big picture. Let's say you are a manager and you need to write an annual review for your direct report. You are supposed to think critically and objectively about her performance over the entire year. However, it's easy to be swayed by those really bad or really good contributions over just the past few weeks. Or you might just consider the interactions you have had with her personally, as opposed to getting a more holistic view based on interactions with other colleagues with different frames of reference.

When you try to incentivize behavior by setting a measurable target, people focus primarily on achieving that measure, often in ways you didn't intend. Most importantly, their focus on the measure may not correlate to the behavior you hoped to promote.

Given that the discount rate is always a key driver in cost-benefit analyses, figuring out a reasonable range for the discount rate is paramount. To do so, consider again the factors that underlie the discount rate: inflation (that the purchasing power of money can change over time), uncertainty (that benefits may or may not actually occur), and opportunity cost of capital (that you could do other things with your money). Since these factors are situationally dependent, there is unfortunately no standard answer for what discount rate to use for any given situation.

And more commonly, remember not to confuse a conditional probability with its inverse: P(A|B) is not equal to P(B|A). You now know that these probabilities are related by Bayes' theorem, which takes into account relevant base rates.

Fortunately, there are many straightforward ways to positively shape culture: * Establishing a strong vision--"Our north star, our vision for the future, is X" (see Chapter 3). * Defining a clear set of values--where your organization sits along the various cultural dimensions, e.g., "Our organization values taking calculated risks, even if they fail." * Reinforcing that vision and those values through frequent communications--including at all-hands meetings and through team-wide broadcasts. * Creating processes that align with that vision and those values--such as how you decide on hiring new team members. * Leading by example--making sure leaders adhere to the norms and values you want everyone else to adhere to. * Establishing traditions--gatherings that celebrate stated values, such as holiday celebrations, group volunteer events, or recurring award ceremonies. * Fostering accountability--e.g., reviewing previous experiences for lessons learned in post-mortems (see Chapter 1) or giving honest feedback on performance reviews. * Rewarding people for exhibiting exemplary cultural behaviors--giving them promotions, awards, etc.

Pierre-Simon Laplace wrote in his 1812 book Theorie Analytique des Probabilites: "The most important questions of life are indeed, for the most part, really only problems of probability."

Second, try writing. Even if you never publish anything, the act of writing clarifies your thinking and makes you aware of holes in your arguments. You can combine writing and finding a partner by participating in an online forum or blog where the complex topics that interest you are discussed and analyzed.

"Leadership is unlocking people's potential to become better."

cobra effect, describing when an attempted solution actually makes the problem worse. This model gets its name from a situation involving actual cobras. When the British were governing India, they were concerned about the number of these deadly snakes, and so they started offering a monetary reward for every snake brought to them. Initially the policy worked well, and the cobra population decreased. But soon, local entrepreneurs started breeding cobras just to collect the bounties. After the government found out and ended the policy, all the cobras that were being used for breeding were released, increasing the cobra population even further.

Walmart teamed up with Sheets Energy Strips and offered to put on a concert by international recording artist Pitbull at the Walmart location that received the most new Facebook likes. After an internet prankster took hold of the contest, Walmart's most remote store, in Kodiak, Alaska, won. Walmart and Pitbull still held the concert there and they even had the prankster who rigged the contest join Pitbull on the trip!

Jeff Bezos stressed the importance of this model: Some decisions are consequential and irreversible or nearly irreversible--one-way doors--and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don't like what you see on the other side, you can't get back to where you were before .... But most decisions aren't like that--they are changeable, reversible--they're two-way doors. If you've made a suboptimal [reversible] decision, you don't have to live with the consequences for that long. You can reopen the door and go back through .... As organizations get larger, there seems to be a tendency to use the heavy-weight [irreversible] decision-making process on most decisions, including many [reversible] decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention.

Deterrence, containment, and appeasement are all strategic mental models to keep you out of costly direct conflict. You want to enlist these models when other conflict-avoidance models have failed and you are still faced with a situation that you think you can't "win," as when engaging would create so much damage it isn't worth it or when you want to preserve your resources for more fruitful engagements (see opportunity cost in Chapter 3

First, consider the gambler's fallacy, named after roulette players who believe that a streak of reds or blacks from a roulette wheel is more likely to end than to continue with the next spin. Suppose you see ten blacks in a row. Those who fall victim to this fallacy expect the next spin to have a higher chance of coming up red, when in fact the underlying probability of each spin hasn't changed. For this fallacy to be true, there would have to be some kind of corrective force in the roulette wheel that is bringing the results closer to parity. That's simply not the case. It's sometimes called the Monte Carlo fallacy because in a widely cited case in August 18, 1913, a casino in Monte Carlo had an improbable run of twenty-six blacks! There is only a 1 in 137 million chance of this happening in any twenty-six-ball sequence. However, all other twenty-six-spin sequences are equally rare; they just aren't all as memorable.

higher roles tend to involve more strategy than tactics. Generally, strategy is the big picture; tactics are the details. Strategy is the long term, defining what ultimate success looks like. Tactics are short term, defining what we're going to do next to get there.

According to the National Institutes of Health, in the U.S., nearly half of young people who inject heroin started abusing prescription opioids first.

Rightly or wrongly, the media infamously has a mantra of "If it bleeds, it leads." The resulting heavy coverage of violent crime causes people to think it occurs more often than it does.