~ MEGA THREAD ~
A running list of mental models to analyze technology, business, and product strategy.
They shape my thinking, guide my writing and help me understand what is going on in European tech.
↓
A running list of mental models to analyze technology, business, and product strategy.
They shape my thinking, guide my writing and help me understand what is going on in European tech.
↓
1. Bundling
Combining multiple small offers into one large offer. The more offers contained in a bundle, the higher the Perceived Value of the bundle will be.
This helps create value without having to create something new.
Combining multiple small offers into one large offer. The more offers contained in a bundle, the higher the Perceived Value of the bundle will be.
This helps create value without having to create something new.
2. Unbundling
The opposite of bundling, it means splitting an offer into multiple smaller offers.
Just like bundling, this can help create value for different customers without having to create something new.
The opposite of bundling, it means splitting an offer into multiple smaller offers.
Just like bundling, this can help create value for different customers without having to create something new.
3. Legibility
3a. The Map is not the Territory
The map of reality is not reality. Maps are reductions of what they represent. This is important to keep in mind as we read, think through problems and make better decisions.
(Related to Legibility)
The map of reality is not reality. Maps are reductions of what they represent. This is important to keep in mind as we read, think through problems and make better decisions.
(Related to Legibility)
4. Fragmentation
Europe is a fragmented continent across borders, language, regulations and culture.
Europe is a fragmented continent across borders, language, regulations and culture.
4b. City Scale and Continental Scale
The European ecosystem need both scales to work appropriately:
- a city scale to start a company
- a continental scale to scale it by accessing capital and customers
The European ecosystem need both scales to work appropriately:
- a city scale to start a company
- a continental scale to scale it by accessing capital and customers
5. Occam's Razor
Simpler explanations are more likely to be true than complicated ones.
Simpler explanations are more likely to be true than complicated ones.
6. Incentives
Humans are driven by incentives. They are the backend of the world. When you want to understand how something works look at where the incentives are pointing.
Humans are driven by incentives. They are the backend of the world. When you want to understand how something works look at where the incentives are pointing.
7. Aggregation Theory
In a post-Internet world it is far more important for companies to aggregate (and control) demand than to control supply.
h/t @benthompson
In a post-Internet world it is far more important for companies to aggregate (and control) demand than to control supply.
h/t @benthompson
7a. Aggregators
Companies that collect a critical mass of users and leverage access to those users to extract value from supplier.
(@stratechery)
Companies that collect a critical mass of users and leverage access to those users to extract value from supplier.
(@stratechery)
8. Platforms
A platform is a group of technologies that are used as a base upon which other applications, processes or technologies are developed.
It is the foundation on which entire ecosystems are built and what tie everything together.
(@stratechery)
A platform is a group of technologies that are used as a base upon which other applications, processes or technologies are developed.
It is the foundation on which entire ecosystems are built and what tie everything together.
(@stratechery)
9. Second-order Consequences
When making decisions, we should consider not only the immediate effects but the subsequent consequences of those actions as well.
Useful when thinking about regulating.
When making decisions, we should consider not only the immediate effects but the subsequent consequences of those actions as well.
Useful when thinking about regulating.
9a. Chesterton's Fence
Before changing anything, assume someone put the "fence" up there for a reason. Until you figure out that reason, don't take it down.
Useful when thinking about de-regulating.
Before changing anything, assume someone put the "fence" up there for a reason. Until you figure out that reason, don't take it down.
Useful when thinking about de-regulating.
10. Loops
Loops are closed systems where the inputs through some process generates more of an output that can be reinvested in the input – A causes B, which in turn influences A (and C), and so on.
The world is better represented as a system of loops, not funnels.
Loops are closed systems where the inputs through some process generates more of an output that can be reinvested in the input – A causes B, which in turn influences A (and C), and so on.
The world is better represented as a system of loops, not funnels.
10a. Reverse Loops
A golden rule for Loops is that they can go both ways.
A golden rule for Loops is that they can go both ways.
10b. Success of the Successful
Two reinforcing structures which interact in such a way as for create a single reinforcing structure.
If two search engines start with 51% and 49% market share each, the 51% won't get ahead linearly.
Two reinforcing structures which interact in such a way as for create a single reinforcing structure.
If two search engines start with 51% and 49% market share each, the 51% won't get ahead linearly.
11. Gresham's Law for Talent
(Related to Loops)
(Related to Loops)
12. Great Surges of Development
The process of diffusion of technological revolutions and their new paradigms. They in cycles of 50-60 years with very pronounced periods.
Installation Period → Turning point → Deployment Period
The process of diffusion of technological revolutions and their new paradigms. They in cycles of 50-60 years with very pronounced periods.
Installation Period → Turning point → Deployment Period
13. Zero-sum Games
In a zero-sum situation, it is impossible for one party to advance its position without the other party suffering a corresponding loss.
Useful when thinking about market dynamics.
In a zero-sum situation, it is impossible for one party to advance its position without the other party suffering a corresponding loss.
Useful when thinking about market dynamics.
14. Embedded Growth Obligations
How fast a structure has to grow in order to maintain its honest positions.
This produces institutions that are more concerned with growth and self-preservation than holding honest positions.
How fast a structure has to grow in order to maintain its honest positions.
This produces institutions that are more concerned with growth and self-preservation than holding honest positions.
15. Zero Distribution Costs
The internet allowed a new business model in which a high investment is done upfront to create a product and that product can be then replicated and sold infinite times at no increasing cost.
The internet allowed a new business model in which a high investment is done upfront to create a product and that product can be then replicated and sold infinite times at no increasing cost.
16. Speed of Feedback Cycles
Delays in feedback loops are critical determinants of system behavior.
Think of an old shower that doesn't respond to faucet twists. You'll never get the right temperature because the delayed response will lead you to overshoot and undershoot.
Delays in feedback loops are critical determinants of system behavior.
Think of an old shower that doesn't respond to faucet twists. You'll never get the right temperature because the delayed response will lead you to overshoot and undershoot.
17. Bottlenecks
A bottleneck describes the place at which a flow (of a tangible or intangible) is stopped, thus constraining it back from continuous movement.
A useful exercise is to think about removing bottlenecks.
A bottleneck describes the place at which a flow (of a tangible or intangible) is stopped, thus constraining it back from continuous movement.
A useful exercise is to think about removing bottlenecks.
18. Cargo Cult Thinking
People try to extract lessons from the successes of others, but fall prey to numerous biases and fallacies.
i.e. Designing a blue social network won't make your product Facebook.
People try to extract lessons from the successes of others, but fall prey to numerous biases and fallacies.
i.e. Designing a blue social network won't make your product Facebook.
19. Network Effects
The increased numbers of people or participants improve the value of a good or service.
Useful when thinking about product and social graphs.
The increased numbers of people or participants improve the value of a good or service.
Useful when thinking about product and social graphs.
20. Verticalization
A company’s strategy to specialize how it sells and markets by industry vertical or function.
A company’s strategy to specialize how it sells and markets by industry vertical or function.
21. Changing Rules Changes Systems
One of the most impactful ways of changing how a system operates is by changing the rules.
Example: Removing the offside rule in football would change the entire game.
Useful when thinking about management, regulation and markets.
One of the most impactful ways of changing how a system operates is by changing the rules.
Example: Removing the offside rule in football would change the entire game.
Useful when thinking about management, regulation and markets.
22. Single Point of Failure
A part of a system that, if it fails, will stop the entire system from working.
They undesirable in any system with a goal of high availability or reliability, be it a business practice, software application, or other industrial system.
A part of a system that, if it fails, will stop the entire system from working.
They undesirable in any system with a goal of high availability or reliability, be it a business practice, software application, or other industrial system.
23. Northern vs. Southern Side
Companies have Northern Side with diminishing returns to scale (logistics) and a Southern Side with increasing returns to scale (software).
If returns increase more on the South than North, a company can grow.
h/t @Nicolas_Colin
Companies have Northern Side with diminishing returns to scale (logistics) and a Southern Side with increasing returns to scale (software).
If returns increase more on the South than North, a company can grow.
h/t @Nicolas_Colin
24. Monopolies
The sole provider of a good or service, giving it a tremendous a competitive advantage over rivals, suppliers and consumers.
Dominance is not equal to monopoly (think Amazon holding 6% of all retail).
The sole provider of a good or service, giving it a tremendous a competitive advantage over rivals, suppliers and consumers.
Dominance is not equal to monopoly (think Amazon holding 6% of all retail).
24a. Consumer Preferences Matter
Monopolies (or dominance) doesn't (necessarily) stem from malpractice. People use Google because they love the service. Competition is one click away.
This might seem obvious but is often forgotten.
Monopolies (or dominance) doesn't (necessarily) stem from malpractice. People use Google because they love the service. Competition is one click away.
This might seem obvious but is often forgotten.
24b. Defaults Matter
Consumer Preference Matter, but assuming a functioning product, most consumers don't engage enough to switch to the optimal service.
That's why Google paid Apple $12b to remain Safari's default search engine.
Consumer Preference Matter, but assuming a functioning product, most consumers don't engage enough to switch to the optimal service.
That's why Google paid Apple $12b to remain Safari's default search engine.
25. Narrative Instinct
Human beings have been appropriately called “the storytelling animal” because of our instinct to construct and seek meaning in narrative.
Data is necessary, but the story is the foundation.
Human beings have been appropriately called “the storytelling animal” because of our instinct to construct and seek meaning in narrative.
Data is necessary, but the story is the foundation.
26. Dominance Friction
Any misalignment between a company and its customers or its value chain.
A company whose business model is not aligned with its customers’ interests is vulnerable to another competitor beating them with better alignment.
h/t @beyroutey
Any misalignment between a company and its customers or its value chain.
A company whose business model is not aligned with its customers’ interests is vulnerable to another competitor beating them with better alignment.
h/t @beyroutey
27. Survivorship Bias
We over-attribute success to things done by the successful agent rather than to randomness or luck, without considering losers who acted in the same way but weren't lucky enough.
History is famously written by the victors.
We over-attribute success to things done by the successful agent rather than to randomness or luck, without considering losers who acted in the same way but weren't lucky enough.
History is famously written by the victors.
28. Opportunity Costs
Doing one thing means not being able to do another. We live in a world of trade-offs, and the concept of opportunity cost rules all. Most aptly summarized as “there is no such thing as a free lunch."
Doing one thing means not being able to do another. We live in a world of trade-offs, and the concept of opportunity cost rules all. Most aptly summarized as “there is no such thing as a free lunch."
28b. Comparative Advantage
Two individuals, firms, or countries could benefit from trading with one another even if one of them was better at everything.
Useful when thinking about management and capital.
Two individuals, firms, or countries could benefit from trading with one another even if one of them was better at everything.
Useful when thinking about management and capital.
29. Power Law distributions
In VC, returns are governed by break-out companies achieving 10x+ returns, not a bunch of investments earning 10%.
Useful when thinking about markets, competition and capital deployment.
In VC, returns are governed by break-out companies achieving 10x+ returns, not a bunch of investments earning 10%.
Useful when thinking about markets, competition and capital deployment.
30. Leading vs. Lagging Indicators
- A leading indicator looks forward at future outcomes and events.
- A lagging indicator looks back at whether the intended result was achieved.
Useful when looking at changes over time.
- A leading indicator looks forward at future outcomes and events.
- A lagging indicator looks back at whether the intended result was achieved.
Useful when looking at changes over time.
31. Permanent Assumptions
Instead of trying to predict the next trend, focus on what will stay the equal over the next decade.
Useful for thinking about markets and capital.
Instead of trying to predict the next trend, focus on what will stay the equal over the next decade.
Useful for thinking about markets and capital.
