I don’t think Jack Black ever thought of using any of these tools to help explain things, but YOU should.
While I’ve been developing an SMU course, I recently came across Charlie Munger’s 1995 speech, The Psychology of Human Misjudgment, which introduced me to an explanation of what I’d been doing all my business life – using the power of applying mental tools from a wide array of disciplines and applying these to the business questions I had.
In the first our our series let’s talk about how to explain things.
A mental tool or analogy, or model or heuristic is a concept you can use to help try to explain things. This post is the first in a series where I attempt to show the mental tools that have been repeatedly of use. This set is clearly biased from my own experience and is incomplete. But I’ll go through a series of topics and outline the tools I have found useful. I’ve included a link to wikipedia for your reference to explain these tools in more depth.
Hanlon’s Razor — “Never attribute to malice that which is adequately explained by carelessness.” The next time an e-mail comes through that you read and reread to see what they really meant, and you think they are trying to say something between the lines, think of this. Next time a colleagues shows you a message that they believe is proof of a consiracy in your partners or suppliers, think of this.
Occam’s Razor — “Amongst competing explanations, the simpler is usually better. Another way of saying it is that the more assumptions you have to make, the more unlikely an explanation is.” Take the simpler answer for any set of facts.
Arguing from First Principle — “A first principle is a basic, foundational, self-evident proposition or assumption that cannot be deduced from any other proposition or assumption.” Thats why I try to teach the first principles of many of the subjects I work on- strategy and marketing. Once you know the base foundation of a discipline you can work upwards towards a better answer. If you know HOW consumers make decisions, you can understand why an advertising agencies course of action may or may not work.
Check out how Elon Musk explains First Principles here
Proximate vs Root Cause — “A proximate cause is an event which is closest to, or immediately responsible for causing, some observed result. This exists in contrast to a higher-level ultimate cause (root cause or distal cause) which is usually thought of as the ‘real’ reason something occurred.” Work to identify root causes to the problems you have- work on causes not symptoms.
Next, I think I should talk about mental biases in business.