Personal Finance

How managers can use mental models to talk, think differently

mental

Whether we are conscious of it or not, we all use mental models in our thinking about business and management. PHOTO | SHUTTERSTOCK

“Mental models are to your brain, as apps are to your smartphone” Jayme Hoffman

You can’t argue with reality. But did you ever notice how some successful managers see reality in a very different way. When they talk, it is almost as though they are talking in another language. Helps to think about how we think. To have a number of mental models in our management toolbox.

Interesting how we take our thinking for granted. How we slip into the default position of thinking on an almost automatic pilot. Helps to consider the mental models that can be used to shape approaches to management. Though we may have left school, education has to be a constant. “Education is not the learning of facts, but training the mind to think,” said Albert Einstein.

Imagine starting your business day with a blank slate, a sort of white canvas for painting.

Often things can seem overwhelming, too much to do, in too little time, Not to mention, how things can go painfully wrong. Business is complex, all sorts of systems [finance, marketing and sales, operations, logistics, HR] with many moving parts.

It helps to simplify, take things apart and chunk them into smaller set of tasks, so you only have to finish one more manageable piece of work at a time.

What would you do at your organisation if it was day one, despite the fact that you have been in business for many years?

We are often busy that we don’t take time to think about how we think. Our thinking can be more like a tiny cramped prison cell, with no room to stretch as opposed to seeing the big picture, the more beautiful blue sky thinking in Maasai Mara.

Whether we are conscious of it or not, we all use mental models in our thinking about business and management. In the worst case, a manager may see things in a rigid black or white, no room for shades of gray, or in an even worse, ‘us versus them’ mode, not open to another way of looking at things.

What can we learn from those that see things differently and apply some of the insights?

For instance, South African-born Elon Musk, with a background in engineering and physics, applies a mental model of cause and effect.

“I look at the future from the standpoint of probabilities. It’s like a branching stream of probabilities, and there are actions that we can take that affect those probabilities or that accelerate one thing or slow down another thing. I may introduce something new to the probability stream,” he explains.

Charlie Munger, Warren Buffet’s business partner in Berkshire Hathaway, uses a cognitive bias checklist when approaching investment decisions and inverts his thinking, looking at all the things that could potentially go wrong.

Ray Dalio, who runs Bridgewater Associates, one of the biggest hedge funds in the world, writes about how he sees things in his book, Principles: “Nature is a machine. The family is a machine. The life cycle is like a machine.”

For a CEO with many responsibilities, he describes his day in quite distinct terms: “I’m very much stepping back. I’m much more likely to go to what I describe as a higher level. There’s the blizzard that everyone is normally in, and that’s where they’re caught with all of these things coming at them. And I prefer to go above the blizzard and just organise.”

Jeff Bezos and Mark Zuckerberg apply mental models of always creating hundreds of [low risk] experiments for new products that may or may not work out.

Chances are that you may have just used one of those experiments that became a successful product.

Applying Musk’s probabilistic thinking, based on using a simple decision tree to make significant decisions, by assigning a cost and potential value and probability to each possibility is a useful way to visualise a thought process.

Eventually, one realises the interconectededness of subjects, how one area ties into another.

Physicist David Deutsch explains: “It’s in the nature of foundations that the foundations in one field are also the foundations of other fields…The way that we reach many truths is by understanding things more deeply and therefore more broadly. That’s the nature of the concept of a foundation… just as in architecture, all buildings all literally stand on the same foundation; namely the earth. All buildings stand on the same theoretical base.”

Bare brain

“You can’t do much carpentry with your bare hands, and you can’t do much thinking with your bare brain,” is how Bo Dahlbom, philosopher and computer scientist, expressed it.

Mental models can be just as powerful, and perhaps more so than physical tools. Prime example would be the Western alphabet, that you are using right now, that wasn’t invented till 1,100 BC.

Yes, there were pictorial writing systems like hieroglyphics that were invented much earlier, but when alphabet was created it was a cutting edge tool.

Using just one model is like a carpenter trying to build a house with just a one tool; a hammer.

Inevitably, no one model is absolutely perfect, so it helps to be able to apply a number of them, to cross-check, that reality of business and management you are facing.

Think of it this way. Imagine a novice chess player who knows how each of the pieces moves across the board. Contrast the novice with the chess grandmaster who has thousands of mental models of openings, and closings and can visualise 10 moves ahead.

When all is said and done, as repeated in many schools of thought, we become what we think about, based on the mental models we use.