Three Mental Models of Successful Entrepreneurs

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Almost every aspect of business would be considered a soft science.  This means there are no strict rules for starting, managing, or growing a business.  It also means business is more art than science.

Without the predictive ability to determine success, it’s better to develop a system of thought.  And the best system of thought is a latticework of mental models.  Induction, or the prediction of unobserved events from knowledge of observed (similar) ones, is the result of a well constructed latticework.  And induction is the ability to go from specific concepts to a multidisciplinary understanding of the world.  This ability is critical in entrepreneurship.

There are three mental models that should constantly be on the forefront of every entrepreneur’s mind.  Read More »

An Accelerated Master’s Degree: Innovation in One Book

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Topics: Innovation
Innovation

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There have been plenty of books recently published on the concept of Deliberate Practice, which essentially says that it takes 10,000 hours of a certain kind of practice (called ‘deliberate’) to gain expertise in something.   It makes sense that the majority of what we want to learn in any discipline is going to be experiential (or gained through practice).  But in order to better understand our experiences, we want to have some kind of framework of what to expect.  We want to develop a theory structure.

Books are what give us this theory structure, and certainly the quality of the theory structure we begin with impacts the amount of deliberate practice we need to become an ‘expert.’  So it’s important to choose the right books, as they will provide the base infrastructure upon which we will layer our experiences.  We’re looking for books that concisely capture the overriding concepts of a particular discipline.

And in any discipline, at least one fairly well defined, there doesn’t need to be that many books to accomplish this.  I would generally say that 3 books or fewer, for each discipline, will give you a proper theory structure.

With that in mind, let’s look at Innovation…  Read More »

A System of Marketing: The Story of John H. Patterson and National Cash Register

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Mental Models Used: , ,

In 1884, a small, wiry, middle-aged man named John Henry Patterson acquired the majority stock of a blandly named company called National Manufacturing Company.  That same year, Patterson renamed the company National Cash Register Company (let’s call it NCR, for short).  Although it was his first entrance into the cash register business, he realized the potential of the cash register immediately.  And Patterson, being forty years old at the time, had a fairly clear idea of what he wanted in a company.  He set right to work on creating a uniform management system, which included a uniform system of marketing.  Read More »

Is There an Ideal Team Size?

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People are always looking for ways to get things done better or faster.  Depending on the task, that can often mean putting together teams.  Of course, a team isn’t always the best way to accomplish something.  I mean, there’s obviously no need to create a team to do something an individual could do as well or better.  However, if a team makes sense, what is the ideal team size?

Unfortunately, there’s no consensus on what the ideal team size should be.  This is probably because there just simply isn’t one.  And that, of course, is fine.  But everyone seems to have an opinion on what’s best.

Steve Jobs liked to keep his teams to no more than 100 people so that he could remember names; Peter Drucker said teams work best, as a rule, if they have three or four members (and should normally not exceed five or six); Google likes to limit teams to a max of six people; 37Signals thinks three people is the optimal team size for a product release; Reid Hoffman (of LinkedIn) would likely refer to Dunbar’s Number to substantiate groups of up to 150.  And the list could go on…  Does this mean that teams are effective at any size between three and 150 members?  It’s more likely that this simply means teambuilding is a situational exercise, and nothing more.  Read More »

The Most Important Organizational Behavior: Empathy

Empathy

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Mental Models Used: ,

Peter Drucker once noted that the basic personality profile of an individual has been formed by about age five.  If even close to true, this has noticeable effects on organizational behavior within a group.  It implies that trying to alter someone’s personality to “better fit” an organization is a fruitless exercise.  But although attempting to change people is likely wasted effort, understanding them is most certainly not.

Understanding people, or the ability to share feelings with them, is what we call empathy.  And a group using empathy in its communications with each other will create stronger connections between themselves.  Stronger connections = better performance.  And as a side benefit, using empathy within a group often creates an environment where empathy is naturally used for communications or interactions with people outside the group as well.  And this is just like a little waterfall of goodness.  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 »

An Accelerated Master’s Degree: Marketing in One Book

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Topics: Marketing
Marketing

Photo by Stuck in Customs

There have been plenty of books recently published on the concept of Deliberate Practice, which essentially says that it takes 10,000 hours of a certain kind of practice (called ‘deliberate’) to gain expertise in something.   It makes sense that the majority of what you want to learn in any discipline is going to be experiential (or gained through practice).  But in order to better understand your experiences, you want to have some kind of framework of what to expect.  You want to develop a theory structure.

Books are what give you this theory structure, and certainly the quality of the theory structure you begin with impacts the amount of deliberate practice you need to become an ‘expert.’  So it’s important to choose the right books, as they will provide the base infrastructure upon which you will layer your experiences.  You’re looking for books that concisely capture the overriding concepts of a particular discipline.

And in any discipline, at least one fairly well defined, there doesn’t need to be that many books to accomplish this.  I would generally say that 3 books or fewer, for each discipline, will give you a proper theory structure.

With that in mind, let’s look at Marketing…  Read More »

There’s No Best Age to Start a Business: The Story of Sam Walton and Wal-Mart

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After graduating from the University of Missouri in 1940, Sam Walton took a job with J.C. Penney.  He was 22 years old.  He spent five years with J.C. Penney learning the retail industry.  In 1945, Walton became an entrepreneur and bought a Ben Franklin variety store in Arkansas for $25,000.  He was 27 years old.  Walton spent five years growing his Ben Franklin store.  But in 1950, after Walton’s landlord refused to renew the five year lease he had on the Ben Franklin store location, Walton had no choice but to sell the franchise.  He sold it for a fair price, and then had to start all over again.  Walton was now 32, and it was at this age when he opened his first Walton’s Five and Dime (again in Arkansas).  But it wasn’t until he was 44 years old that he opened the first Wal-Mart.  It was a very gradual progression.  So, does age really matter when starting a business?  I doubt it.  There is no best age to start a business, no perfect time – none of that.  And Sam Walton is the perfect example of this.  Read More »

How to Avoid a Bad Business: The Ravages of Commoditization

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Certain aspects of business can behave in fairly predictable ways.  One of the ways, which is more painful than funny, is the tendency of products or services to become commodities over time.  When this happens, it’s often five mental models that come together and drive everything towards commoditization.

First of all, Zipf’s Law (R.I.P. George Zipf) has been repeatedly observed in many different environments.  Zipf noticed that the most common word in the English language appeared 10 times more often than the tenth most common word.  He noticed it in other languages as well – he got excited.  What he really noticed was the phenomenon we now call “winner takes all.”  So in any market, this is at work.  Get to number one – it’s just better that way.  Read More »

How Great Leadership is Created: The Building Blocks of a Super Company

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People don’t want to be managed, but they are absolutely willing to be led.  How do I know this?  There is a cognitive bias that we all suffer from called the Authority-Misinfluence Tendency.  Charlie Munger summarizes it as follows: “Man was born mostly to follow leaders, with only a few people doing the leading.”  It’s just the way we are.

But just because people are willing to be led, doesn’t mean that any type of leadership will be effective.  Read More »