Topic: Psychology


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Three Mental Models Great Managers Use

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Organizations, left unattended, move toward disorder.  The realities of Parkinson’s Law – the idea that work expands to fill the amount of time allocated to complete it – have been well documented.  So, Parkinson’s Law helps to explain why organizations naturally evolve towards disorder, and ultimately poor performance.  Managers, of course, act to correct this.  An array of mental models assist managers in working against this natural disorder, but there are three primary mental models that produce the majority of the results:  Read More »

How to Meet a Deadline: Mental Models Every Project Manager Should Know

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In order to get things done, we often use deadlines.  This is especially the case when managing projects.  Deadlines are often created, but rarely met.  There are a lot of reasons for this, but a good portion of it can be explained by Cognitive Misjudgment.  A combination of the Over-Optimism Tendency and the Excessive Self-Regard Tendency are generally to blame when we aren’t able to meet our deadlines.  The Over-Optimism Tendency explains why we often overestimate our ability to get things done – an excess of optimism is the normal human condition – and this tends to lull us into a false sense of comfort despite an impending deadline.  Most people call this procrastination.  The Excessive Self-Regard Tendency explains why we often don’t provide for enough time to realistically meet a deadline in the first place – we constantly mis-appraise our abilities on the high side.

But there are certain ways to combat these cognitive misjudgments, and the first is following what is generally considered the standard formula for carrying out any project.  Deadlines become a whole lot easier if this formula is followed.  Read More »

What People Want: Introducing the Hierarchy of Human Emotions

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Back in 1943, a guy named Abraham Maslow proposed an idea: there was a hierarchy of human needs, and he had a pretty good idea of what it was.  Maslow’s Hierarchy of Needs was designed to explain motivation and behavior, and numerous people have since claimed this hierarchy is very accurate.  Andy Grove, former head of Intel, says exactly that in his book High Output Management.   Grove experienced this hierarchy first hand at Intel, and as a result it shaped many of the Human Resources decisions that were made.

Maslow ranked human needs as follows:

  1. Physiological: breathing, food, water, sex, sleep, homeostasis, excretion
  2. Safety: security of body, employment, resources, morality, the family, health, property
  3. Love/Belonging: friendship, family, sexual intimacy
  4. Esteem: self-esteem, confidence, achievement, respect of others, respect by others
  5. Self-actualization: morality, creativity, spontaneity, problem solving, lack of prejudice, acceptance of facts

It’s very likely that human needs (per Maslow) are heavily involved in the decisions we all make. In a logical world, decisions would be made purely according to needs.  But we don’t live in a logical world, and wants often take precedence over needs.  And since wants reflect emotions, there must be some hierarchy of emotions that can better explain how emotions affect human behavior.

So just as Abraham Maslow created a Hierarchy of Needs, there is also a Hierarchy of Human Emotions.  Certain emotions drive our behaviors, decisions, and actions more than others.  Understanding the hierarchy of these emotions, and how people express them, has an interesting side effect: it often explains how to figure out what people want.  Read More »

How to Avoid Bad Decisions: The 3 Most Common Cognitive Biases

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Topics: Psychology
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Mental Models Used:

Cognitive Biases cause some of the most unusual decision-making I have ever seen.  When it happens to others, it can be amusing to watch, but when it happens to you, it’s just painful. Cognitive biases are those behavioral traps that are so often ingrained into the way we think and act.

There are so many cognitive biases that it can be overwhelming to get a handle on all of them.  Wikipedia has compiled an exhaustive list here.  This list is 168 biases long.  It’s self-defeating to look through it.  How effective are you really going to be if you have to constantly consider 168 cognitive biases?  So that’s not an option.

In a 2001 Scientific American article, Robert Cialdini constructed a broad summary of cognitive biases, noting six basic tendencies of human behavior that can irrationally influence decision-making: reciprocation, consistency, social validation, liking, authority and scarcity.  Grab a copy of this article to get an idea of what he’s all about.

Charlie Munger developed a list of 25 biases that he finds often mislead people, which he published in Poor Charlie’s Almanack in 2003.  This list is pretty easy to work with, and that’s exactly what Marc Andreesen did in a March, 2008 article on Venture Hacks.  Andreesen interpreted these biases (in the context of start-ups) in this article.

So there’s obviously a good bit of information out there on cognitive biases.  If you’re looking to quickly improve your decision-making skills, start by focusing on the three most common forms: Inconsistency-Avoidance Tendency, Social Proof, and Over-optimism Tendency (in that order).  Avoiding these three will make you far more effective in whatever you do.  Here’s how to do that.  Read More »

Mingle with Powerful Models: Using Mental Models to Make Better Decisions

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Charlie Munger likes to say that 80-90 mental models will give you the bulk of the material you need to be a “worldly-wise” person.  Part of being worldly-wise is making good decisions, and although Charlie mentions 95 models in his book (by my count), they can each be used and combined for different purposes.

So, how do we combine them to create the ideal decision-making process?  Since I’m in love with the number 7 (figuratively), I’ve put together what I consider the seven most useful mental models in decision-making.  Good decision-making will involve an understanding of Statistics, Economics, and Psychology.  And the decision-making process becomes much easier if you take mental models from these disciplines and put them into a checklist.  To me, the following seven mental models are the best checklist available.  Read More »

The $240 MBA: How to Be Better at What Matters

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The most important skills (or really, the most valuable) are the ones that are the hardest to codify.  I think this is probably true throughout life, but it’s especially true in business.  And in business, the single most important skill is decision-making.  It won’t guarantee success, but it will certainly increase the odds.  And since we’re all constantly having to make decisions without complete information, it’s understandable to think of decision-making as an art.  But, decision-making is likely as much science as it is art.  And in fact, understanding the science of decision-making is more valuable in the business landscape than all the knowledge you would gain from an MBA combined.  And you can become a pretty good decision-maker in way less than the 18-22 months that an MBA typically takes to complete.  You can also do it for WAY less money: $240 according to my latest review of Amazon. Read More »