Mental Models: The Ultimate Guide

Have you ever wondered why two heads are better than one -- and four heads are better than two?

It’s because we’re all limited by our own experiences, biases, and areas of expertise.

Your manager has a different background than you, which means she can bring different ideas to the table. You spend more time with customers on a daily basis, which means you have a better understanding of their challenges and priorities. Put you together in a room, and your combined insights can crack a challenging problem.

But it’s not feasible to host a roundtable discussion every time you need to make an important decision.

Luckily, there’s a way to hack the decision making process and reap the “two heads” effect by yourself: Mental models.

This guide covers the definition of a mental model, how to use them, and the most useful types. Let’s dive in.

The definition of a mental model

A mental model is a way of examining a problem. As James Clear explains, “Each mental model offers a different framework that you can use to look at life … If you develop a bigger toolbox of mental models, you'll improve your ability to solve problems because you'll have more options for getting to the right answer. This is one of the primary ways that truly brilliant people separate themselves from the masses of smart individuals out there.”

14 Mental Models That Will Improve Your Decision Making

Bayes’ Theorem

This describes the probability of something happening based on potentially relevant factors. To give you an idea, you might tell your prospect the average business has a 70% chance of failure. In their industry, however, that number is even higher -- around 85%.

Circle of Competence

We can thank Warren Buffett for this mental model. In 1996, Buffett told his shareholders, “You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”

Concentrate on your area of expertise, and don't be afraid to say “I don’t know” when you’re dealing with someone else’s circle of competence.

For example, a HubSpot rep can teach her prospect about inbound marketing and sales, but she shouldn’t try to teach him about his niche market. After all, he knows far more about his customers than she does.

Confirmation Bias

This is a human tendency to look for and interpret information in a way that reinforces or confirms what you already believe.

For instance, if you’re confident the prospect is going to buy, you might focus on their enthusiasm about the product’s features and overlook their hesitation about the price.

To protect yourself against confirmation bias, accept the idea that your perception doesn’t always (or even frequently) equal reality. Challenge yourself to find different interpretations of what’s happening.

In the above example, you might think, “Is there anything to suggest this deal won’t close? What might stand in the way of the purchase?

Being more skeptical will lead you to probe more deeply for objections -- which, in turn, will help you defuse the buyer’s price anxiety before it’s too late.

Inversion Mental Model

The inversion perspective is one of the most powerful mental models. Rather than thinking about your desired outcome, consider the outcome you’d like to avoid.

For example, say you want to be promoted to sales manager. Instead of asking yourself, “What are the top five things I could do to get promoted?” ask yourself, “What are the top 10 things that would prevent my promotion?”

Then, you’d make sure to do none of those things.

As Shane Parrish says, “Avoiding stupidity is easier than seeking brilliance.” While you won’t always find the answer by inverting the problem, you’ll definitely improve.

Fundamental Attribution Error

We’re more likely to believe someone is acting a certain way because of their character than the situation.

In other words, if your sales engineer doesn’t show up to the meeting, you’ll probably think, “They’re flakey,” not “They must have gotten stuck in traffic.”

Challenge yourself to give people the benefit of the doubt. Behavior is usually situational, so your predictions of how people will act will be more accurate if you don’t chalk things up to “how they are.”

Hanlon’s Razor

If your prospect goes dark at a critical moment of the sale, you’re probably going to assume they were kicking tires or decided to go with your competitor. But according to Hanlon’s Razor, which states “Never attribute to malice what could be explained by carelessness,” you should assume the buyer is busy instead.

Jealousy Tendency

There are two types of envy. The productive type is “inferiority,” or the desire to raise yourself up to another person’s level. Do you want to become as successful as the top-selling rep on your team? You’re motivated by this kind of envy.

The unproductive type is malicious envy, or the desire to take something valuable away from someone else -- not for your own means, but so they don’t have it.

These motivators are worth remembering when talking to buyers. Your prospect might be personally invested in a goal because they want to do as well -- or better -- than another person at their company or beat someone else’s record. Identifying these desires will help you craft a better pitch.

You should also be conscious of the jealousy tendency in your own decision making process. While a competitive streak (inferiority envy) usually benefits you in sales, wanting other people to fail (malicious envy) will only distract you. Overcome envy by reminding yourself of your similarities to this person, which will trigger your empathy, and avoid the temptation to sabotage them. Turn those impulses into growth opportunities: What skill or habit can you improve to get their results?

Law of Diminishing Returns

At a certain point, the incremental benefits you get from an investment get increasingly smaller. The first month you go on a diet, for example, you might lose six pounds. The second month you might lose three. The third month you might lose two.

This concept applies to sales in several ways. First, make sure you’re focusing on the most valuable activities. Let’s say you’ve spent 10 minutes researching your prospect before the call. You’re not going to double your results by spending 10 more minutes researching them -- so use that time to research a different prospect or send emails.

Second, analyze the deals you’ve won versus lost to figure out your optimal number of touches. Maybe just 3% of closed deals required 15 touches. That means you should probably stop reaching out to prospects after the 13th or 14th time.

Third, recognize what you need to know to be successful. Developing your qualifying and rapport-building skills might be more productive than learning about a little-used feature or rare use case. There are diminishing returns to memorizing obscure details about your product.

Margin of Safety

A bridge might theoretically handle up to 15,000 pounds, but it would be wise to cap the weight limit at 14,000. It would be a major disaster if the bridge wasn’t actually that strong -- and the risk isn’t worth it.

The margin of safety is the idea that we should leave ourselves room for mistakes or failures. For instance, when creating your sales forecast, you might count a deal as $400 even if the prospect wants the $600 package, just in case they change their mind.

Think of this model as a safety net. It’s better to be pleasantly surprised than proven right.

Occam’s Razor

This principle states the simplest explanation is usually the correct one. If you’re trying to understand what happened, develop the most basic hypothesis possible.

Opportunity Costs

Every choice comes at the cost of another. If you decide to send emails after lunch, you can’t use that time to make calls. If you pursue one large, high-risk deal, you won’t have the bandwidth or the risk tolerance to pursue another at the same time.

Keep this in the back of your mind every time you’re deciding what to do. What’s the alternative? Are you willing to give that up?

Pareto Principle

The Pareto Principle, also known as the 80/20 rule, means most results aren’t distributed equally. In other words:

  • 20% of the work generates 80% of the returns
  • 20% of your prospects lead to 80% of your sales
  • 20% of features are responsible for 80% of your usage
  • 20% of your time produces 80% of your results

If you can home in on your top customers, selling activities, and so forth, you’ll be dramatically more successful.

At my former company, for example, we analyzed our customers and found those who spent the most (i.e., the 20% who created 80% of our revenue) worked in HR. Once we knew that, our reps could target HR professionals. The company’s revenue increased by 230%.

Preferential Attachment

Imagine two runners competing in a race. The first runner to pass the one-mile mark gets water and a protein bar. The slower one gets nothing.

This describes the preferential attachment, where the leader is given more resources than their competitors. Those resources give them an even greater advantage.

As a salesperson, you’ve probably seen this effect with competitive deals. The first rep to establish a champion gets more information than her competitors, which helps her build trust more quickly than them, more accurately craft her pitch, and ultimately, win the business.

Redundancy

Along similar lines, good engineers always put back-up systems in place to protect against failure. This drastically reduces your chances of total failure.

As a salesperson, you can use this strategy to hit quota no matter how an individual opportunity turns out. Maybe you’re working on a huge deal that’ll push you 130% over your target. Pursue four or five smaller, low-risk deals at the same time to ensure you’ll still hit even if your prospect goes dark.

With these mental models at your disposal, your analytical and decision making skills will exponentially improve. 

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