13 Mental Models Every Founder Should Know

This column is by serial tech entrepreneur Jayme Hoffman

Mental models are to your brain as apps are to your smartphone. Just like apps, there are a ton of mental models. They help you make decisions, solve problems and see the world in an entirely new way… they basically make your brain more useful.
Charlie Munger, Elon Musk and many others have stated that you’ve got to have a collection or latticework of models in your head to be able to make sense of the world around you. Trying to remember all the facts is not a winning strategy.

“You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You’ve got to hang experience on a latticework of models in your head.” — Charlie Munger

There’s never a drought of new information to remember in the startup world. Between ProductHunt ( which I love ), Medium, Twitter, Quibb, TechCrunch, HackerNews, Quora, TheMacro and many many podcasts… it’s tough to remember the basics and what’s actually important when building something new.

Thanks to Buffett and Munger, there is a large collection of mental models for identifying and investing in moats or defensible businesses. What about creating new moats or new defensible businesses? What’s the latticework of mental models needed in the startup world?

Here is a small and early collection of some of the most important mental models you need as a founder. The news sources I listed above do a great job in helping you with what to think. The models below will help you with how to think.

Regret Minimization Framework

Maker: Jeff Bezos

Regret minimization framework helps you make tough decisions by projecting to your future self and looking backward on your current decision. RMF will help you leave your job and build the thing you’ve been thinking about for the last 2.5 years.

I knew that when I was 80 I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried.
— Jeff Bezos

regret minimisation

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The Idea Maze

Maker: Balaji S. Srinivasan

The idea maze is a framework for thinking about and planning the many paths your startup may take.

“A good founder is capable of anticipating which turns lead to treasure and which lead to certain death. A bad founder is just running to the entrance of (say) the “movies/music/filesharing/P2P” maze or the “photosharing” maze without any sense for the history of the industry, the players in the maze, the casualties of the past, and the technologies that are likely to move walls and change assumptions.” — Balaji S. Srinivasan

Idea Maze

Schlep Blindness

Maker: Paul Graham

Schlep blindness prevents founders from seeing overlooked startup ideas.

“A company is defined by the schleps it will undertake. And schleps should be dealt with the same way you’d deal with a cold swimming pool: just jump in.” — Paul Graham

Sclep Blindness

Jobs to be Done

Maker: Clayton Christensen

Jobs-to-be-done helps you understand why a customer may choose to hire your product. Knowing this will help you more accurately develop and market to customer needs.

If you understand the job, how to improve the product becomes just obvious. — Clayton Christensen

Jobs to be done

Minimum Viable Product

Maker: Frank Robinson

Minimum viable product is a process for testing assumptions and making sure theres a need for your idea.

The MVP process:

  1. What is my riskiest assumption?
  2. What is the smallest experiment I can do to test this assumption?

MVP

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Confirmation Bias

Maker: Thucydides

Confirmation bias is a type of thinking where you tend to notice or look for what confirms your beliefs rather that what contradicts them. This type of thinking is very dangerous as you move through the idea maze and MVP-process.

“It is the peculiar and perpetual error of the human understanding to be more moved and excited by affirmatives than by negatives.” — Francis Bacon

Confirmation Bias

Product Market Fit

Maker: Marc Andreessen

Product market fit is when you’re in a good market and the product you’re working on satisfies the market. Getting to PMF is crucial because the biggest company killer is a lack of market.

Product Market Fit

100 People Love

Maker: Paul Graham

Getting a 100 people to love you is far better than having a million people just sort of like you. 100 customers or users that love you will tell the world about your tiny little company and give you feedback or ideas that help you make the experience much better.

“It’s better to make a few people really happy than to make a lot of people semi-happy” — Paul Buchheit

100 people love

AARRR

Maker: Dave McClure

AARRR or ( Acquisition, Activation, Retention, Referral, Revenue ) is a framework for customer lifecycle.

AAARR

Network Effects

Maker: Robert Metcalfe

Network effects occur when a product or service becomes more valuable as more people use it. Network effects help you build better, faster-growing and more valuable products and businesses.

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Network Effect

Economies of Scale

Maker: Adam Smith

Economies of scale are simple economics where the costs of your product or service decreases as the volume increases. Facebook, Amazon, Apple and Google all have strong economies of scale.

“Economies of scale are a good thing. If we didn’t have them, we’d still be living in tents and eating buffalo.” — Jamie Dimon

A product with an economy of scale: costs decline with volume.

A product with an economy of scale: costs decline with volume.

Disruptive Innovation

Maker: Clayton Christensen

Disruptive innovation is when your product or service starts out as a simple solution at the bottom of a market and then relentlessly moves up market, eventually displacing the established competitors and redefining the industry.

“If I had asked people what they wanted, they would have said faster horses.”
— Henry Ford

Disruptive innovation

Conjoined Triangles of Success

Maker: ’Action’ Jack Barker

Conjoined triangles of success or “CTS” do a great job of helping you understand just how truly ridiculous the startup world can be.

Now what do those two triangles make together? A box. They make a box. You can’t make that shit up. — Jack Barker

Conjoined triangle of success

There are so many more mental models out there that I didn’t mention. Stuff like: Diffusion of innovations, Moore’s law, Do things that don’t scale, Founder market fit, Longtail, Value migration, Counterfactual thinking, Voice vs. Exit and much much more are equally important and can be just as useful.

Is there a mental model you or your startup relies on? Leave a reply here or let me know on twitter ( @jhoff ) where I often talk about mental models and startup stuff.

Disclaimer: This is a curated post. The statements, opinions and data contained in these publications are solely those of the individual authors and contributors and not of iamwire and the editor(s). This article was initially published here.

Image Credit: Teamlewis

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