Mental models have always been a topic of discussion, and for good reasons. They help us understand how people think and what spurs them to do what they do. Have you ever wondered what happens in successful people’s minds and what they have in common?  No matter how diverse their actions might seem, everyone will often fit into one of the categories. Welcome to Alux.com, where future billionaires come to get inspired. If you don’t feel like reading the article here’s the video version:

1

Incentive

The concept of incentives holds that you persuade individuals to take action by promising to reward them with something they want.

We, by default, act in our own interests. Incentive, as a mental model, is used by successful people to achieve their set objectives by giving others the reason to do as they say.

Successful people often ask themselves how they can satisfy the needs of those working for them so that they can be in the right mental space to work better for the business.

Most importantly, they find ways to prevent their strategy from failing due to the discrepancies between other people’s incentives and theirs.

2

Margin of safety

Margins of safety are thought patterns that encourage the adoption of backups and fallbacks in the event of system failure or other unplanned circumstances.

If you needed to build a bridge to carry 3-tonne trucks, planning with a margin of safety may entail building the bridge to hold 10 tonnes altogether.

Redundancy and margin of safety are related concepts, but instead of creating a backup copy of a system’s essential components, margin of safety requires planning for extra space than is actually required.

3

Preferential treatment

Imagine a race between two runners. Water and energy bars are awarded to the first runner to cross the one-mile marker, while other people receive nothing. This is what preferential treatment is.

We see preferential treatment in business when the best-performing assets are given the most resources to get even better.

Successful people use this in a variety of ways.

When they believe that they should consolidate the losses in areas they are not good at, they pour resources into their best-performing gigs, and then they observe when the attention is given to something and can divert this effort to other areas if need be.

The temptation to just serve material to your most qualified leads might be strong.

However, in the process, you could be overlooking those who are just starting to learn about your company or who take a little longer to open emails and download particular information.

4

Feedback loop

Picture yourself wearing a blindfold, noise-canceling headphones, and wandering through a completely furnished room with your arms tied behind your back.

After about 20 trials of making it across the room, you will learn an important but probably painful lesson on the value of feedback loops in directing the action.

Feedback loops are created when the results of a process affect the inputs of the same process, for example, your thermostat.

Every system in the real world has a feedback loop of some kind.

Feedback loops can be positive or negative, and successful people use feedback loops to evaluate the progress they’ve made in a particular time towards their goals.

5

Curiosity Instinct

Although we see other animals like cats as curious beings, we are actually the most inquisitive living things on the planet.

This curiosity propelled us out of the prehistoric era and enabled us to learn a great deal about the environment around us.

Humans invented stuff out of curiosity even before there were clear financial incentives to do so. Have you noticed how inquisitive many successful people tend to be?

Well, it’s a given; curiosity tends to promote knowledge seeking, and as long as it is the healthy kind, no matter how steep the learning curve might be or how difficult situations may present themselves, one will be encouraged to find solutions.

6

Supply and demand

There is a finite quantity of resources at any given time, and competition for them is a fundamental constant in our ever-evolving world.

Organizations battle for limited client wealth and limited demand for their products, much like biological organisms do for limited useful energy.

A market is a collection of consumers and providers of a certain item or service.

The supply of the commodity is decided by the sellers collectively, and the demand for it is decided by the buyers collectively.

Successful people always consider the supply and demand in a market when formulating plans. That is why they always seem prepared for whatever happens.

7

Jealousy tendency

Jealousy results in one of two things. Either as motivation to put yourself on another person’s level, which is the beneficial kind, or the destructive kind, where one has the desire to steal and creates unhealthy competition amongst people.

Successful people channel their jealousy in a way that lets them work harder and improve their craft.

They are also careful of how they take on the competition, drawing a line where they believe it to be unhealthy.

People often feel jealous of others who have more than them and want to “obtain what is theirs” eventually.

Although it is as ancient as mankind itself, the impulse toward jealousy is powerful enough to motivate otherwise illogical actions.

Over time, any system that is unaware of the repercussions of jealousy will often set itself on fire.

8

Pareto principle

According to the Pareto Principle, about 80% of the consequences result from 20% of the causes.

Vilfredo Pareto was an Italian economist who made this discovery in 1906. In his observations, he noted that 20% of Italy’s people held 80% of the country’s land, and he noticed that this distribution was consistent throughout every sector.

Successful people use the Pareto Principle to concentrate on a small number of high-performing endeavors in order to get the best outcomes where they get the most value from what they do 20% of their time.

9

Tribalism

Organizations are like tribes, and tribal leaders have a more significant impact than others on the culture of their own tribes. Successful and ambitious leaders concentrate on developing, adapting, and upgrading the tribal culture of their team, and this drives up their productivity.

Like a feedback loop, the tribe rewards them with loyalty and greater success.

Although tribal allegiances spur many honorable actions, they can influence people to forego good judgment and judgment accuracy in favor of a sense of belonging and devotion to a group.

10

Compounding

No financial advice is complete without a detailed explanation of the power of compounding interest.

But it goes far beyond finances.

In practically every situation where exponential growth is observed, years of compounding is credited, whether it be riches, relationships, health, or skills.

Successful people compound their gains, preferring modest, consistent improvement over dramatic increases that cannot be sustained.

We are easily tempted to look for quick, visible solutions to things, but compounding interest helps us grow without losing what we already have.

11

Pavlovian Association

Remember the famous dogs salivating at the sound of a bell? Ivan Pavlov very persuasively proved that animals might respond not just to direct rewards but also to related items. Like other living things, humans can feel both pleasant and negative emotions toward immaterial objects.

• These feelings are based on prior associations rather than actual events.
• Successful people condition their minds to act automatically in certain conditions.
• In sports, it is called muscle memory gotten from constant practice.

12

Inversion

The Stoics held that by anticipating the worst-case situation, one might conquer one’s dread of unpleasant events and develop better preparations to avoid them. The Stoics thought about how they would handle failure while other people concentrated on how they could succeed.

• Inversion is the process of thought in which you contemplate the opposition to what you desire.
• Want to enhance teamwork? Consider “What could inhibit or hamper collaboration” and steer clear of that.
• Desire project success?
• What obstacles will you face along the line?
• People often mistake stoicism for nihilism and, as a result, think inversion is a bad thing.

13

Surfing or “Riding the Wave”

In his presentation on “Elementary Worldly Wisdom,” Charlie Munger utilized the metaphor of surfing to convey the concept of a developing, powerful commercial force that a firm may ride to grow.

Surfers ride the wave’s natural tide, not against it, and do not attempt to control its tremendous ocean current.

Successful people know how to ride the waves of their emotions without disrupting their productivity.

No one can be in tip-top shape all year, so in those dark times when you want to quit. Riding out the wave is the best course of action.

Embracing your emotions yet performing efficiently is what it means to “ride the wave.”

14

Working Backward

The backward working method is, if there ever was, a hidden ingredient in what major companies like Facebook and Amazon do. These companies are successful because they always manage to find unique solutions to troublesome problems.

Successful people ask themselves, What should the ideal product include? What resources do we have right now? From then on, they connect the dots. Although they have many similarities, working backward and inversion are fundamentally distinct.

15

Scarcity

According to the “scarcity principle,” when opportunities are scarcer, people place a higher value on them. This prejudice results from a universal human propensity to avoid losses. Successful people make themselves reasonably scarce for people that need them the most.

They know that if they are readily available to render their services, their value will drop over time.  Our understanding of the world is based on mental models. They influence not just the way we interpret and think but also the connections and opportunities that we see. No mental model is perfect, and oftentimes, they cause one’s failure due to misuse.

Notwithstanding, the finest mental models from those fields have helped us build roads and bridges. Create new technologies, and even travel to other planets. Have you wondered how to make better decisions without wasting valuable time? We made a video that gives the best tips and practices titled ‘How To Hack Your Brain Into Making Better Decisions. We’re sure you’ll love it. If you liked this video, please leave a like, and subscribe to the channel for more content like this.