I’m watching people come and go on the dusty streets of Kuta, Lombok, an island in Indonesia. The foreigners I see through the coffee shop window come from dozens of countries, yet as they walk through the dusty streets and hop on their motorbikes it’s clear that about 80% of them are all cut from the same cloth.
I sip my coffee and wonder about the deep similarities that would let anyone pick these people out of a lineup. They don’t talk to one another or really acknowledge each other much, yet its clear they are of a type. But why? It’s not just that they are all here on this relatively untrodden island. It’s not just that they all appear deeply tanned and sun-kissed either. The other 20% of the tourists I see look like that too and they’re not of this group. What I’m seeing is a nebulous similarity to their energy, their movements, their vibe. If you got closer you’d see that many of the mannerisms, dress, and speech patterns were shared too.
But you don’t have to get that close to know. These Kuta tourists are all very obviously surfers.
There is something about the commonality of surfing that touches all of its participants. It is as if the “mere” pursuit of waves is a single act that births a kinship that then helps define an overarching, robust culture that extends far beyond the shoreline. To surf is to become part of a tribe.
There’s no such thing as an average leader. Or employee. Neutral impact is a myth.
One is either a multiplier in the organization or one is actively destroying value.
In some ways I think this dichotomy is fairly obvious to most managers. But why then do so many net-negative employees seem to remain in their jobs far longer than they should?
Would you like to build a business with your friend to $120,000+ in revenue while keeping your full time job?
I’m sure many of you are screaming, YES.
Well, I’ve done it, and I’ve done it in about the stupidest way possible. Let’s talk about what to do, and what not to do.
Achieving mastery requires some uncommon things. That’s obvious enough, if it were simple and common, there would be many more masters.
There’s no doubt that mental models are powerful. Whether rules-of-thumb, more elaborate heuristics, or complete scaffolds on which to hang components of knowledge, each mental model serves as a framework to better understand the world. That’s why, amongst others, Charlie Munger stresses their utility across all professions.
In this post, I want to talk about several related mental models from finance that have been invaluable in all parts of running a business (GoStudy) and scaling the G2M organization of another (CB Insights).
The eleven models covered here are:
- Opportunity costs
- Time Value of Money (+ compound interest)
- Net Present Value
- Expected Value and Tree Diagrams
- Sunk Costs vs. Thinking on the Margin
- The Normal Distribution
- Comparative vs. Absolute Advantage
- Game Theory & Prisoners Dilemma
- Pareto Principle and Power Laws
- Economic Moats
Let’s dive in.