The 10 Best Mental Models
For Digital Entrepreneurs
If the brain is your Operating System, Mental Models are the apps. We use them to better navigate reality.
What are Mental Models?
A Mental model is a specific thought process that we use to better navigate through reality
- 🚀 Philipp Stelzel — Digital Creator (@dePAKES) April 18, 2022
They are pieces of mental software that attempt to improve your perception of reality. They simplify decisions and drive better outcomes.
Knowing which apps are running on your operating system is part of taking back control of one’s life. In this post, I am going to show you 10 useful mental models for entrepreneurs that should help you make better decisions in your business life.
But before we begin, some warning:
Duality is true for mental models, which means that there are bad mental models as well.
They can like badly coded software slow down and harm your system, and some could even be classified as mind viruses.
Another thing I need to point out is that mental models are tools for the mind.
Like every other tool they can be very useful in some situations, but in others, it makes no sense to use them. The person with a hammer sees just problems he can solve with a hammer. The same is true with mental models. Being aware of this bias is by the way a mental model.
1) 10/10/10 Rule
You base many of your decisions on short-lived emotions. Before you commit to a new task or project, take a step back and ask yourself the following three questions.
How will we feel about it 10 minutes from now?
How about 10 months from now?
How about 10 years from now?
How to use it:
This mental model attempts to make you aware of the long-term consequences of actions.
2) 80/20 Rule
Your actions don’t create an equal outcome.
It is said that 20% of input generates 80% of the output.
Of course, this number can vary.
Last month I started writing daily on Quora. In total, I wrote 44 answers. Just 4 got more than 1.000 views, and only 1 answer was viewed more than 10.000 times.
Of the total of 23.116 views, almost 20.000 were generated by just 4 answers. Or in other words:
9% of my answers generated 86.5% of the views.
You will find this principle everywhere in life. There is never an equal distribution.
Be aware of it as a content creator: The more content pieces you produce the higher the likelihood that one of them will go viral.
And it is also important in task management: Identify tasks that add the most value, ignore or outsource tasks that add just a little or no value.
PS: As a Notion user you could use my Freelancer Compass Template to calculate the priority of your daily task. This way it becomes easier to prioritize your work.
3) 90–9–1 Rule
In Internet culture, the 90–9–1 Rule is a rule of thumb pertaining to participation in an internet community, stating that only 1% of the users of a website add content, while 9% participate and the other 90% of the participants only lurk.
If you create something, you are already part of the 1%. be proud of yourself.
4) Abundance Mindset
People who view the world through the lens of an abundance mindset will often see others as potential collaborators, rather than competitors who want to take what they have.
Also known as the positive-sum-game vs zero-sum-game perspective.
In the current information age, possibilities and resources are endless. See others as collaborators and not as competitors. You profit more by building in public than you could lose through copycats.
5) Comparative Advantages
In economics: If a country has the absolute advantage in producing two given goods, it should still specialize in producing the good for which it has the lowest opportunity cost.
This is also true for individuals or companies
Outsource even when you could do the work more efficiently, you still profit because of the law of comparative advantage.
You could clean your apartment yourself or hire someone to do it.
Maybe you would even clean more efficiently than the house cleaner and finish cleaning in 1 hour instead of the 2 hours it would take the cleaner.
So, let’s do it yourself and save 1 hour?
No, it’s not that easy, because of opportunity costs.
If you for example get paid more than $ 50 per hour for your work after taxes and the cleaner gets paid $ 25 per hour it would still be more efficient to outsource cleaning.
This is because in the time you would have saved $ 25, you could have generated $ 50.
So, be aware of your comparative advantage and don’t do everything yourself.
6) Compounding Effect
Marginal gains in areas as diverse as health, education, personal growth, public policy, and career development compound and will result in exponential growth.
James Clear states in his bestseller Atomic Habits the following:
If you get 1% better in a given skill every day, you’ll be 37 times better by the end of the year.
Good habits compound, even if you don’t notice a difference in everyday life.
7) Curse of Knowledge
The curse of knowledge is a cognitive bias that occurs when an individual, who is communicating with other individuals, assumes they have the background knowledge to understand. Better-informed” people find it extremely difficult to think about problems from the perspective of “lesser-informed” people.
In general, you underestimate how much knowledge you already possess.
For freelancers: There are much more services you could offer as a freelance than you imagine because many people struggle with basic things that are routine for you.
For coaches and teachers: More experience doesn’t make you a better teacher, you need to be able to put yourself into other people’s shoes to really help them.
For creators: You are often not aware of the real struggles of a certain target audience.
8) Goodhart’s Law
When a measure becomes a target, it ceases to be a good measure. #
Followers on Twitter. You could grow your follower count by simply buying them, but is this really helping your business or just inflating a meaningless number?
Is the number you are tracking really a good measure of your success?
9) Sunken Cost Fallacy
People resist stopping an endeavor after investing time, money or effort into it.
Sunken costs are defined as costs that have already been incurred and cannot be recovered.
In your current decision-making, costs of the past shouldn’t be a factor, because it is irrational to use costs that cannot be recovered for your decision making in the present
Rational people would only take future costs into account, but most people are too focussed on their past investments.
10) Parkinson’s Law
Work expands so as to fill the time available for its completion.
Use strict deadlines to complete work more efficiently. use this mental model also to avoid overworking.
This is the curse of most self-employed people, who tend to overwork and sit in front of our computers all day.
But you could boost your productivity by simply applying strict working hours. If you don’t allow yourself to work after 6 pm, you will in most cases be able to finish the important stuff before.
PS: If you enjoyed this list, check out my Digital Creator Bundle. This Notion Template includes among many other things a List of 40+ Mental Models for digital Entrepreneurs.