George Mack

#253 – George Mack – Mental Models 104 – Bear Or Bull? | On Modern Wisdom with Chris Williamson

Check out the Modern Wisdom Episode Page & Show Notes

Key Takeaways

  • How to decide if you should outsource a task:
    • “If it involves judgment, creativity or is the number one priority, have 100% obsessive ownership over that” George McGill
    • If it’s a repetitive task or you can train someone for it, outsource it
  • How to take advantage of the Power Law
    • Find something that’s unique to you and double down on that
    • If you become the top 1% at something, the returns will be astronomical
  • In today’s chaotic world, it’s essential to have a simple guiding principle for all our decisions
    • If you don’t, you’ll be pulled in various different directions and won’t achieve much
  • One of Charlie Munger’s principles is to avoid envy at all costs
    • Work hard to prove that your success is earned and make your product so good so that people can’t stop using it

Key Products Mentioned

Intro

  • George McGill (@george_mack) is a writer, a growth marketer, and someone you should DEFINITELY follow on Twitter
  • Host: Chris Williamson (@Chriswillx)
  • In this chat, George and Chris discuss a variety of mental models and how we can apply them to our decision-making in life

Mental Model – Numeracy (Use Math to Explain the World)

  • Taking principles from basic arithmetic and applying them in our lives
  • Math is the only thing that’s probably true and we should it to guide our decisions
    • Many e-commerce owners are very clear about their brand values, but not about their margins
  • The way we are taught math in school makes it very boring
    • Most people are reluctant to focus on numbers
  • You can make up everything else, but not numbers
    • This is a good criterion to identify charlatans in business
    • If they don’t know their numbers, they are probably not serious about it
  • Keith Rabois had many CEOs state their business priorities and track how they spend their time
    • He found that they didn’t spend nearly enough time on their “stated” priorities

Mental Model – Anchoring

  • In negotiation, start a super high price to anchor your counterpart
    • If you’re looking to get $1M, start by asking $5M
  • In a restaurant (or other businesses), you can put a really high price item as the first one that people see on the menu
    • All other items will look cheaper in comparison
    • A study showed that using anchoring, you could have increased revenues for The Economist magazine by 40%
  • In dating, you can go out with a friend who looks quite similar to you, but a bit uglier
    • You will be classified in the same league, but more attractive

Mental Model – Power Law

  • It’s a model that comes from statistics
    • The more you win, the more you win (exponentially)
    • Jeff Bezos is a clear example, the more wealth he has, the more he can get
    • This model is behind Silicon Valley’s obsession with creating monopolies
      • They capture all the market and continue growing exponentially
  • As soon as this law starts to kick in, the advantages are huge
    • The more word of mouth you have, the more you’ll get
    • The more products you sell, the cheaper you can make them and sell even more
  • How we can take advantage of it
    • Find something that’s unique to you and double down on that
    • If you become the top 1% at something, the returns will be astronomical
      • The number 1 fighter in the Ultimate Fighting Championship (UFC) earns many multiples more than the number 10
      • 5% of the social media managers get most of the results

On Amazon, Avoiding Envy, and Having a Guiding Principle

  • Despite Amazon’s bad reputation as a huge corporation not paying taxes, no one has really boycotted them
  • One of Charlie Munger’s principles is to avoid envy at all costs
    • Work hard to prove that your success is earned and make your product so good so that people can’t stop using it
    • This is what Amazon has been doing and why they are still so successful
  • Jeff Bezos has one central guiding principle to make a decision, he asks himself:
    • Will this improve customer’s experience? If so, let’s do it
  • Similarly Elon Musk asks himself: “Will this get me closer to Mars?”
  • In today’s chaotic world, it’s essential to have a simple guiding principle for all our decisions
    • If you don’t you’ll be pulled in various different directions and won’t achieve much
    • “Before you even think about speed, just get a direction” Chris Williamson

Mental Model – Opportunity Cost Blindness

  • When making decisions, we tend to only see two alternatives
    • Keep the job or quit it
    • Stay with my partner or leave him/her
  • In reality, there are always countless other opportunities but we tend to be blind to them
  • Scott Adams talks about how we only look for a new job, once we are unhappy with our current one
    • In reality, we should be constantly looking for better opportunities
    • The odds that your dream job is available when you are ready for it are very slim

Mental Model – Principal Agent Problem

  • The principal is the one with skin in the game
    • The business owner whose income is dependant on his company’s performance
  • The agent is a 9-to-5 employee
    • He gets paid regardless of business performance
  • How can you shift agents to act like principals?
    • Offer equity. Many startups do this
    • Even if most startups don’t make it, just offering 1% of equity can get employees to work tirelessly
  • Naval likes to work only with one person
    • So that they take full responsibility and cannot blame others

Leverage – The Mental Model George wants to Implement more

  • George sees himself as a workaholic and tends to do most of the work himself
    • Having more people working with/for you allows you to access the power of leverage and get a lot more done
    • Zapier is another great tool to take advantage of leverage
      • It connects most apps from the internet and automates work
      • It doesn’t require code
  • If done too much, it can be counterproductive
    • George sees some companies outsourcing too much, including the most fundamental parts of their business
  • How to decide if you should outsource a task:
    • “If it involves judgment, creativity or is the number one priority, have 100% obsessive ownership over that” George McGill
    • If it’s a repetitive task or you can train someone for it, outsource it
  • When outsourcing, ensure you have enough knowledge of the field
    • To judge if they are doing good work
    • To be able to see if you’re being cheated

Additional Notes

  • Remote work is the best possible thing to happen for talented people in the developing world and the worst thing possible for talentless people in the developed world” – George McGill
  • Charlie Munger gave a talk in which he did a thought experiment:
    • Imagine that in 1884 you have to pitch a beverage brand, promising to turn $2 Million into $2 Trillion
    • Charlie shows that through mental models you could have predicted exactly what to do
    • In the talk Charlie goes into great detail to explain the mental models you needed to go through to reverse engineer Coca Cola’s success
Modern Wisdom : ,
Notes By Giorgio Parlato

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