The One Mental Model That Transformed My Business Decisions
This can transform your business by amplifying small efforts into significant results.
What Are Mental Models?
Mental models are like mental blueprints.
They’re cognitive tools that help us navigate the world, solve problems, and make informed decisions.
Think of them as frameworks for simplifying complexity, allowing us to analyze situations more effectively.
What makes mental models so powerful?
They draw from diverse disciplines—economics, psychology, philosophy, physics, and more—and give us a well-rounded approach to decision-making.
In business, where high-stakes decisions are routine, mental models can be a secret weapon for success.
How do I know if I’m applying mental models correctly?
Focus on outcomes. If your decisions lead to better results or clearer thinking, you’re on the right track
7 Most Commonly Discussed Mental Models
Here’s a quick look at some popular mental models people swear by:
First Principles Thinking: Breaking problems down to their most basic elements and building solutions from the ground up. Elon Musk is a big fan of this one!
Second-Order Thinking: Anticipating the ripple effects of your decisions. It’s not just about the immediate outcome but the long-term consequences.
Inversion Thinking: Instead of asking “How do I succeed?” ask, “How could I fail?” and work backward to avoid pitfalls.
Confirmation Bias: Recognizing and avoiding the tendency to seek out information that confirms your pre-existing beliefs.
Margin of Safety: Leaving room for error in your decisions, especially when risk is involved.
Leverage: Making small, smart moves that result in significant, outsized returns.
The Map Is Not the Territory: Understanding that models and plans are just representations of reality, not reality itself.
Other Notable Mental Models
Some lesser-discussed (but equally useful) mental models include:
The Pareto Principle (80/20 Rule): Focus on the 20% of actions that produce 80% of the results.
Parkinson’s Law: Tasks expand to fill the time allotted. Deadlines matter!
Opportunity Cost: Every choice you make comes at the cost of what you didn’t choose.
The Red Queen Hypothesis: Staying still means falling behind. You have to keep evolving.
Circle of Competence: Know what you’re good at, and stick to your strengths.
The Mental Model That Changed the Game for Me: Leverage
Out of all the mental models I’ve come across, leverage is the one that has had the most profound impact on my business decisions.
What Is Leverage?
Leverage originates from the physical concept of a lever—a simple machine that amplifies a small input force to create a larger output force.
In business, leverage works the same way. It’s about identifying small, strategic efforts that can lead to significant outcomes.
Naval Ravikant, entrepreneur and philosopher, popularized the idea of leverage in his famous tweetstorm on happiness and wealth.
He explained that leverage allows you to “earn without your time.”
It’s about decoupling effort from output, scaling your results without needing to put in linear amounts of work.
How I Applied Leverage in My Business
Delegation: I realized I couldn’t do everything myself. Hiring specialists for tasks like marketing, design, or operations created a domino effect of efficiency. By focusing on what I do best and outsourcing the rest, I amplified my results.
Digital Tools: Automating repetitive tasks through software tools saved time and allowed me to focus on higher-level strategies. For instance, using CRM platforms helped me streamline client communication and improve conversions.
Content Creation: Instead of 1-on-1 communication, I started creating content that could reach hundreds (or even thousands) of people at once. A well-written blog, podcast, or video has an infinite shelf life and keeps working for you long after it’s published.
Partnerships: Partnering with complementary businesses brought in new customers and expanded my reach without doubling my efforts.
The Big Takeaway
Leverage is about working smarter, not harder.
By identifying areas where a small action can produce a massive reaction, you can maximize your time, energy, and resources.
It’s not just a productivity hack but it’s a way of thinking that transforms how you approach problems.
Also check out this post:
When you’re a solopreneur, it can feel like you have to do everything yourself.
But what if you could amplify your efforts, get more done, and achieve greater success without burning out?
Naval Ravikant, a successful entrepreneur and investor, champions the concept of leverage - using resources to get bigger results from the same amount of effort.
He breaks leverage down into four main types: capital, labor, code, and media.
3 Ways to Remember and Apply Mental Models in Business
Knowing mental models is one thing. Applying them is what makes the difference.
Here are some practical tips:
1. Build a Mental Model Toolkit
Keep a list of your favorite mental models and revisit them regularly. The more familiar you are with them, the easier they’ll be to recall when making decisions.
2. Run Your Decisions Through a Filter
When faced with a business decision, ask yourself:
What’s the opportunity cost?
Am I leveraging my resources?
Have I considered second-order effects?
This simple checklist can prevent you from making impulsive choices.
3. Learn from Experience
The more you practice using mental models, the better you’ll get at recognizing patterns and applying them effectively. Every success and failure becomes a learning opportunity.
Conclusion
Mental models are the ultimate cheat code for making better decisions, especially in the high-stakes world of business.
While there are many to choose from, leverage is a standout for its ability to amplify your efforts and create outsized results.
By understanding and applying leverage, you can work smarter, not harder—and who doesn’t want that?
So, the next time you’re faced with a tough decision, take a step back, think in terms of mental models, and see how they can help you navigate with confidence and clarity.
If you believe it will work, you'll see opportunities.
If you believe it won't, you will see obstacles.
- Wayne Dyer
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