I have always loved learning about mental models for decision-making. This started as soon as I came across Charlie Munger’s speeches. I realized that to become an entrepreneur, one must be willing to work across disciplines and departments. To share my learnings back in 2011, I gave a mini-talk as an introduction to mental models. My intent was to highlight the best books for those interested in this, especially co-founders of new ventures. Since entrepreneurs deal with risk and uncertainty on a daily basis, they must create a mental framework in which to operate and make decisions.Introduction-to-Mental-Models
It’s a myth that mental models are taught only in business schools to MBAs. In fact, entrepreneurship is one of those areas that remain underserved when it comes to educational programs. Thankfully, both practitioners and researchers continue to share useful content through mainstream media, journals, and online channels.
As seen above, effectuation is one such mental model. It is based on findings from entrepreneurial research that show how successful entrepreneurs deal exploit commercial opportunities. A founder’s mindset has to be fundamentally different than that of a corporate manager or an academic professor. It requires one who wishes to become an entrepreneur to differentiate between risk and uncertainty, deal in probability, and appreciate the role of luck.
An important mental model is that of developing business expertise in the startup context. One can start and run only so many companies in a lifetime. How does a founder then get to try enough times so as to fail, learn from failures, and go on to entrepreneurial success? The answer is ‘lean startup’. This is a mental model that teaches entrepreneurs to iterate quickly – on both technical and commercial fronts. By taking small risks and operating at a fast pace, co-founders can run business experiments without putting the entire company at risk.