CEL Webinar – The Power of Mental Models

CEL Webinar – The Power of Mental Models


Good morning everybody and welcome today. Hi this is Tom Ulbrich Assistant Dean for Entrepreneurship and Social Innovation at the University at Buffalo’s Center for Entrepreneurial Leadership. Thank you for joining us for our short webinar this morning on mental models. So we thought we would share this with you today and give you a little bit of background on mental models and a couple good takeaways hopefully for your spending some time with us this morning. So before we start I want to make sure that we take a moment to thank our CEL sponsor the Bonadio Group for all of their support both financially as well as in helping us with mentoring, reacting teaching. So thank you for all you do and helping us to be able to present these
type of activities to small business owners and entrepreneurs in Western New
York and beyond. So why mental models? Many people may be thinking like what are mental models? Why are we talking about mental models? Why cover this subject? And I got interested in mental models after taking a course from Michael Simmons about a year or so ago. And you actually already know much what I’m about to tell you but the knowledge is below your normal awareness. And my goal today is to make sure you pay attention to existing mental models that drive your behavior. Well maybe we can also look at stealing some mental models that might help you in in some ways. So mental models can be a great tool or they can also cause you to make some poor decisions if you have a poor mental model and we’ll talk a little bit about that. But also I want you to think about as entrepreneurs what are the opportunities out there in disrupting existing mental models, perhaps launch a new entrepreneurial venture. And I’ll give you a few examples of how that has occurred in society and great opportunities for entrepreneurs or when we can disrupt some of these models if it makes sense. So just an observation – you take actions based on your beliefs. So mental models have to do with beliefs. And I love this one quote the world is made of circles and we think in straight lines. So really what that is is talking about is the nature of complexity in the world that we live in today. And a lot of times we want to solve complex problems linear like point A to point B when often it takes you approaching a problem from many different angles at the same time to be able to do that. And mental models are your perception of reality about how something happens in the real world. So they are basing your perception and many have data that underlies them but it is ultimately your perception, and again as I stated when we first get on here, there are some very positive things about mental models and benefits that you can take away from this. But there’s also some drawbacks and I want to make sure that we talk about both those. So just another more formal definition here – mental models are the mental constructs that dictate the decisions that we take in the actions we gauge in. So there’s a there’s an older model here that I wanted to share with you that this visual I think is super helpful from Chris Argyris. It’s a it’s a bit dated in the sense that it this was made quite a quite a while ago but the information is still really good night and I think it helps you think through how mental models work. So if you look at the bottom of this ladder and what they call the ladder of inference, when we’re trying to make a decision we start with a pool of data at the bottom that we have. Then we move up this ladder so if you think about it what would you do? You’ve got available pool of data to look at you would dig through the data, select the data, maybe sort the data, probe the data, do some analytics on the data. You start to have to make some interpretations or assumptions along the way. Then eventually along the right side you’ll draw conclusions. You’ll make evaluations, it will give you an explanation, you can make a decision. So you’ll ultimately take action. So you start with a pile of data or a pool of data you take action. If you look on the left side of the ladder though this is where mental models come in and I think this does a great job of reinforcing that. So what the mental models do, as you’re doing the logical steps of selecting data, making interpretations, drawing conclusions, you are constantly being reinforced by your own personal context, your beliefs, your values are influencing those decisions you make. And this is what mental models are and where they play in is that context, that belief, the values. So just to maybe set the stage there for you about how do mental models influence your decision-making. And if we’re aware of this it can be really powerful. It can be powerful in the fact that we can make great decisions using mental models. It can also be powerful if we recognize when mental models may be causing us to make decisions that aren’t fully informed because we’re defaulting to a mental model that we have. So this is really really a long quote but worth looking at here for a second. And this is from cognitive science – “our mind is full of conflicting thoughts and must do – that’s where models come in. Models cut through all the confusion and challenge common thinking. Each mental model represents a possibility. Mental models are kin to architects models or to physicists diagrams and that their structure is analogous to the structure of the situation that they represent, unlike say the structure of logical forms used in formal rule theories.” So they represent something the best way that you possibly can. They are way for you to contextualize, a way for you to visualize. And it’s a little bit much I know but I found that helpful and kind of framing this up. And this maybe will help bring it all together for you and the fact that you’re all familiar with this diagram that I’m depicting here of the three circles. They intersect in the middle and the intersecting space is where they intersect are different from the three parent areas, if we call each circle a parent area, where they intersect there is a difference because there’s two things coming together. This is actually a model and this model helps us understand that something new was created by marrying three unique things together. And you all know what it’s called, it’s called a Venn Diagram. And the names not important but it’s a great example of how a mental model can nudge your brain into thinking that something is new or some or understanding something that is more complex. It can nudge your brain into simplifying a little bit and that’s good. And we’ll also look at about where that can be dangerous. So other terms for mental models that you may hear out there if this helps you kind of solidify this in your own mind. Sometimes called Cognitive Maps, mental templates, belief structures, mental picture, some people call it managerial lenses and organization behavior will sometimes call them organizational frameworks. Your worldview. Some people call them perception filters and in the simplest form routines are mental models. So I’ve already mentioned they’re good and they’re bad so they in the good part they help us to make sense of complexity. So to help us process information quickly and make decisions under uncertainty because they give us a model to deal with, and if we know the model and we can enter situation to apply the model, it helps us move quicker. And they often provide good enough solutions for us but at the same time they’re not always accurate representations. They’re a model, they’re incomplete, they’re often always involving, and they typically can contain biases, errors and contradictions. It’s important that you know that. So if you look at the benefits and the drawbacks and again a bit of this is repetitive but from the benefit side they can be the filter that speeds up your ability to process information. They can help take away any internal confusion that may be being caused by your other mental models that you have or just the current situation you’re in. And also if a mental is widely accepted in our world, it can help you predict behaviors and actions that you or others may take. So if we validated a mental model on at some level and I’ll show you a couple examples as we get in here, if it’s validated and generally accepted in the world it can certainly help you. Draw by X R if you’re not careful you can trick yourself as sometimes mental models are not based on the facts at hand. Your own mental models that we all have and we all have many many mental models. You will talk about those that are commonly shared but we all build our own mental models based on our experiences. They could help you from engaging in new ideas if they challenge your deeply held beliefs or worldview. And it can cause you to default to simplify thinking and divert your attention or attention from potentially important clues. So go back to the inference ladder and the in the puddle or the pool of data at the bottom. The drawback would be if you if your mental model causes you to quickly dismiss what’s in that data at the bottom of the pool and jump to a conclusion based on your mental model, this is can be a drawback in what you’re doing. So let me give you an example that somebody else had showed me once and I think this is a good one. So what happens when we have a mental model and they fail. So if I show you this picture of a stove with a burner and somebody about to put their hand on it and you can see that the water is not very good in this picture but the water is boiling, what does the establish mental model say to us? It quickly says you will burn your hand but the reality is in this situation your hand won’t burn. This is an induction cooktop where you can touch it and although it’s able to do through induction able to boil the water it will not burn you. So the point is that most of us would have jumped to the conclusion that we’re gonna get burned – stove, hot, burned, boiling water. The point is that we all use mental models constantly this is just a simple example of one of those. So this is just another reminder of why do they fail us. Some of the same information I gave you maybe reworded a little bit differently but just remember that they can fail you. And I think the the important part is remember that last bullet there. The models are below the level of awareness. So models are so ingrained in us that we are unaware of their influence on us often. And one of the things I want you to take away from this is just pay attention to those mental models that you yourself have and that you engage in on a daily basis, and that will help you make even better decisions. Just recognizing that they are influencing your behavior. So how do we how do we protect ourselves from these mental model drawbacks? So remember this this ladder of inference that I showed you. If we recognize again that our beliefs influence what we observe that we make conclusions based on our own beliefs, and the assumptions are usually obvious to us but we often skip this process and we jump by missing steps and objective facts. So if we can change where we focus our attention and make sure we start at the bottom of the ladder at that pool of data and spend more time observing, asking questions, selecting data, doing a more deep thinking, this will help us from preventing some of the drawbacks with mental models. So let’s look at some common mental models and you use lots of mental models and there’s some newer ones which I’ll which I’ll share with you that we’ve talked about here on earlier webinars. So one of the newer mental models for entrepreneurs probably the last five six years or so is Simon Simmons model. Start with why.
And really this model states that the the core reason you do anything begins by understanding why it needs to be done. So we’ve talked about this before, you’ve heard it before, you’ve watched his TED talk before but it’s not what you do or how you do it that’s as important as why you do it. So what’s the purpose of the business that you’re in. So there’s a mental model many of you are familiar with here’s an other mental model the Eisenhower box. So the Eisenhower box you may not recognize it labeled as the Eisenhower box but Stephen Covey’s Urgent Important Matrix which you’ve all been exposed to at one time or another is a model that is to get you to trick or to effectively use time and do things that are important before they become urgent. You all have seen this model in one form or another but many people do not tie this back to President Eisenhower and that’s where where it started. Another another Covey model is Seven Habits of Effective People. And this was a you know will wasn’t is continues to be a famous book and these Habits of Highly Effective People are a model that some people engage in to be more effective in their work and their life. So another model that you have probably seen maybe not quite drawn like this but the Circle of Influence versus the Circle of Concern. Really what this states is there’s only so much we can each effect and there’s always much more that we can be concerned about. So the point is what should we be concerned about but there’s a whole bunch of other things in life that we need to be concerned with that they do concern us but they we cannot necessarily influence them. We can influence at some level inside the Circle of Influence. Again on this I believe came comes out of a lot of Covey’s work who’s made a bunch of mental models. So this model you will not recognize but I just put this up here as a representation of system thinking in system theory. So some of you will recognize system thinking system theory if you’ve ever done anything with family businesses or have been planning. So really all this recognizes is that problem solving by viewing the problem as part of an overall system. Very important, we use this a lot in in with family businesses. Just meaning that everything is interconnected and if you move one piece how does it impact another piece. So here’s where I think there’s great opportunity for entrepreneurs to think about is our mental models even those that are long-standing can be and are disrupted sometimes. So if we’re disrupting mental models these can be opportunities for entrepreneurs to engage in a new business, to generate a new source of revenue. So let’s let’s look at some disruptive mental models. So the first I’ve got up here is that is the public library, I’ll talk specifically maybe about university libraries. So these are book stacks, that’s what we always thought of libraries is we go to libraries because of the books and the book stacks. Well we know because of technology and other ways to access information that people aren’t using the books as much as they used to. So libraries are looking about how we make the stacks go away we’re not going to take them all out but not use so much based on book stacks and what do we use a new space for. So if you look in a university they’re turning libraries into innovation space or spaces along with with being a traditional library. More study spaces more maker spaces for entrepreneurs or young entrepreneurs on campus to be able to create new products and look at new ideas for starting businesses. So let’s stay on a book another mental model. The mental model would be we always believe that reading required a book. So the disruption here is that we know that reading can take place in audio and digital podcasts. These all came out of these new technologies which are no longer that new but came out of the idea of disrupting a mental model that said if we’re gonna read a book we have to hold it in our hands. Another opportunity a lot lot happening. Here’s another another disruption of the mental model – food trucks, right? And even I will challenge you fine dining food trucks. So we assume our mental model says if we are going to have fine dining it has to happen sitting down. But the mental model that’s being challenged is can gourmet food be created in a truck? Can you eat it standing up? Can you enjoy it that way? And the answer is yes. Another mental model that’s disrupted and that would be here’s an example of way of a company that has grown rapidly. You can the mental model that was disrupted here is you can only buy high quality name-brand products in a store with sales people that walk you through a process. So versus buying high-quality and being able to buy it online. The reality is you can buy high quality name brands online or designer brands I should say online. And Gilt is an example of a company that’s disrupted that. So Netflix and we all know this story right which started way back before Netflix and Netflix disrupted Blockbuster but this mental model that was disruptive 20 years ago is you’d have to go to a movie theater to see a movie. Now we know that we can see anything on our TVs at home not that we don’t still want to go to a movie theater but we don’t associate seeing a new movie just with a movie theater. Or a new show. There’s an article in yesterday’s I think Wall Street Journal as an example that showed Netflix was investing hundreds of millions of dollars in three new high production films. So they are spending to create their own films that are Netflix branded films. They’re spending the money of traditional film companies, the big name the blockbuster film companies they are in that same marketing even above them with some of their spends. And maybe one other one that you’re familiar with a little bit but this mental model that you had to go to and optometrists to purchase eyeglasses. Where now we can purchase online. This industry is being disrupted like crazy because there are companies now that are very close to and they may already be there and I’m just not aware of it but I had been watch few companies a couple years ago there were close to be able to do a legitimate eye exam that you could do it yourself online. Totally disrupts an industry right and new opportunity for entrepreneurs. Some areas that you may be these are brand new technologies where things are ripe for disruption. But here’s a here’s a mental model around banking and banking in Africa. Almost all the banking as technology expands across Africa is being done mobile not with bank branches, which is interesting in the fact the opportunity here is we have billions of people coming online that have not been any internet before, have not used technology before but will all be coming online in the next few years. And the opportunity with just this one example is just massive. In technology is especially in healthcare, mental models are ripe for disruption. So we look at things like digital healthcare the internet of medical things or the the the million-dollar sensor technologies that are coming out. Telehealth, all these are areas that we can disrupt the mental models where we had to go to a doctor, we had to go to a hospital. And I’m not saying we don’t still do those but technology is allow us to monitor people at home, to dispense medicines at home, to be diagnosed remotely, to have surgical procedures some of them done remotely using telemedicine and robotics. So there’s all types of opportunities in here in disrupting our traditional mental models. And you can take that all across this this is slide from a research study from Frost & Sullivan that looks at all the different areas around blockchain, analytics, digital health, all these things that are impacting healthcare. And what is that going to do things moving forward. This is the area where entrepreneurs that it’s just ripe for entrepreneurs to come in and to change things and to start new companies. So those of you out there that are small business owners and entrepreneurs look for mental models that can be disruptive and in there can be your next business idea. We will make this available to you but this is actually from Michael Simmons. This is from that course that I took. You can’t really read this but this is just a list of some of the more common mental models that are that are proven out in our world that you can use to help jump-start things for you, to help move things through things quickly. So if I’ll point out a couple of them. If you look under goal-setting you can’t really see this but there’s the principle of the B-HAG which we’ve talked to her the Big Hairy Audacious Goal or that marching towards a North Star for a company out in the future. There’s a lot of mental models around creativity and imagination. One of them that we’ve used if you’ve been in any of our classes is Simplexity from Ambassador up in Burlington. Another mental model if you look under prior to prioritization that you’ll use a lot that many of us use and see you’ll see listed underneath or if you could read this or things like the Eisenhower Matrix but there’s also the Parental Effect or the 80/20 rule that many of us use. You can also look under cognitive biases. So there’s a lot of biases these are all mental mental models. So I want you to just realize there’s many mental models out there that are well tested. So now that we’ve learned how to be cautious with mental models there’s many we can apply to speed up our decision-making because they’re tested, they’re proven, and if we’re aware of them that can help us. So this is what I want to introduce you to today. So another one just to point out to you is under network building which you can’t really read there is a mental model that you may or may not be aware of but many people engage in certain industries and so wisdom of crowds, which really just states that if you ask people to estimate something if you have a large enough population, the crowd itself will come up with the answer very very close to the right answer. So this is used in its simplest form you would use it if you know there’s been experiments done at fairs where they’ll show people an animal and have people guess to weight. The weight guesses will be wildly divergent but the wisdom of the crowd will come very very close to guessing the right weight. Or if you were to have a as you’ve seen it maybe some events let’s just say a jar of jellybeans and people are asked to guess how many jellybeans. When people are guessing individually the distribution of the gases will be insanely divergent but when you take them all together and average them, the wisdom of crowds will come very very close to to getting the correct a number of jellybeans in the jar. So these are mental models that if we know they work we can apply them. Another thing you can do and we do this all the time is you can create your own mental models. So you start by separating facts from your opinions, make sure you identify and clarify assumptions that you may be making, and really dig deep and look for and reveal those assumptions that may be hidden assumptions. And be aware of these common traps that we talked about earlier where you selectively notice things that support your own models, again which are percolating below the surface of your consciousness, while ignoring facts that don’t support your model. Or you stay tightly connected to what you know from the work before you that’s good but just don’t get trapped in it. And you want to make sure that you’re making accurate assessments. So when you’re assessing accuracy, you have to be thinking about what data you have or can you collect that will support or refute your mental model. What assumptions are you making and are included in your mental model that may not be accurate. And again what expectations have you already made based on your other existing mental models. And then lastly, don’t forget to go back to that pool of data in the ladder of inference and ask yourself what information is missing. Am I just guessing or need to dig a little bit deeper? And if you open your mind you’re willing to change, you can look at other industries for ideas. So a great way is what our mental models potentially in other industries that you can use and apply to your industry and create a new mental model within your industry. So kind of bring things to close here for you. Once you understand where the potential pitfalls and mental models you can then confidently use them in other things too. To speed up coaching with your teams, for teaching, for the sales process, for making more intelligent decisions and more. But don’t forget that we have to be really really careful about digging a little bit deeper and remembering the downside of mental models at the same time. And if you don’t believe me, look at some of today’s biggest business training gurus. They’re constantly disrupting, deconstructing, reconstructing mental models and charging lots of money to do so. So on the left you won’t recognize but this is Charlie Munger with Warren Buffett. Charlie Munger talks a lot about mental models in the investment world. You all recognize Tony Robbins. Tony Robbins is constantly creating, using, deconstructing mental models. And for those of you that are local here or maybe from from the Toronto area our Robin Sharma another another motivational type of speaker has built his reputation on deconstructing mental models. I don’t think he uses that word. I know he uses deconstructing all the time. I don’t think he refers them as mental models but that’s exactly what he’s doing all the time. So used all the time and I’m gonna leave you with a few additional resources here. So a lot of my talk came out of a lot of Michael Simmons’ work and a course that I had taken. There’s a great blog that has a really nice article on mental models – the Farnam Street blog which you can look at. Poor Charlie’s Almanac talks a lot
about Charlie Munger and the mental models that he’s used. There’s a great book called Super Thinking. And of course I showed you earlier on The Fifth Discipline. So with that I’m gonna close this off we look forward to being with you again we try to keep these to under 30 minutes and I think we’re right on. I look forward to seeing you some around some of you around the Center for Entrepreneurial Leadership and if not we may communicate remotely. But the best of luck to you all in your businesses. Hopefully you can take a little this apply it to your business and use it in a positive way to create your own models and maybe disrupt some existing mental models out there to create some new opportunities for your business. So thanks so much for joining us and we will talk to you again soon.

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