Posted in Value

How To Think Like A Business Owner

Instinct Education


After studying many of the most successful entrepreneurs, I realised they all have a very different way of thinking…

They all have certain mental frameworks and models they use to make effective decisions, problem solve and overcome challenges. In this video I breakdown 5 of these frameworks that you can use to rapidly make effective decisions.

Here’s what we cover:

  • Systems thinking
  • First principles
  • Feedback loops
  • Decision half-life
  • Asymmetric results


Hey everyone. It’s Connor Marriott here and in this video, I’ll be talking about how to think like a business owner and how to use a scientific method to make decisions in your business Now, I remember when I started out in business I had no way to really make good decisions. I didn’t know that there was a method of making decisions and whenever something went wrong, I would just go and change random things. I’d just try and fix different things but I had no process of critically analyzing what was actually going on and I would change things that didn’t need to be changed and I was trying to solve problems that weren’t actually problems and what I realized was that I was never taught how to think like a business owner or like a scientist and I realized by studying and researching like the most successful people, they had a very different way of looking at problems and solving problems.

They had different frameworks that they used and so by researching them, I was able to uncover these frameworks and now whenever there’s a problem, I’m able to use them and make far better decisions and the likelihood that the decisions I make are actually the right things to do is far greater because of these frameworks and so what I’m gonna do in this video is share with you five frameworks that you can use.

So anytime you have a problem, any time something comes up, anytime you wanna plan ahead into the future, you can quickly run through these frameworks and really increase the likelihood that you make the right decision. So there’s gonna be two frameworks for problem solving and then three frameworks for decision making and it’s really important that you use the problem solving frameworks first because quite often something will happen and we’ll think that the problem is this thing and so we go and try and solve this thing but you haven’t properly identified what that problem is and it’s not actually the problem you’re trying to solve something that isn’t the cause and so the first thing you need to do is take a step back and actually identify what the problem is and then from there, you can start to look at a solution.

A great example of this would be that you know, very often we have clients say, ah you know, none of our prospects wanna sign up. They don’t have enough money, right? So they think the problem is their prospects don’t have enough money but then I might ask, well you know, how many people would be spoken to? And they might say like two and then you realize, well, like 2 people is not a statistically relevant sample size.

That’s not enough people. The problem is not that your target market don’t have money. The problem is you haven’t spoken to enough people, right? So it’s important to first of all, identify what the actual problem is and only then you can solve it. So the first two frameworks are for identifying the problem.

The first is what we call systems thinking and so most people look at things as their own individual parts and so a traditional thinker would just see all these different parts but a systems thinker looks at all the parts and sees how they interconnect and so a really great example of this would be, there was a CEO of a pharmaceutical company and he was looking at all their expenses and he saw that their R and D department was costing them a lot of money every single year and so he thought, well, if we just got rid of R and D our profits would double and so that’s a really traditional way of thinking, right? Just looking at one part, looking at R and D and not realizing how that one part affects the entire system and so he did, he got rid of R and D and their profits like doubled and everyone was like oh my God, this guy’s amazing.

He’s doubled our profits overnight but then what happened was over the next two, three, four years, all of their competitors who were still putting money and research into R and D, they started to develop better products and better formulas and this company that wasn’t doing any R and D really just fell behind and then their profits went to zero because they weren’t innovating. They weren’t putting money into R and D and so that’s a really great example of how like a traditional thinker might look at like one aspect of the whole but not look at how that affects the other areas.

Another example would be like, quite recently, one of our sales reps was in a rut and he had like 20 or 30 calls that he just got, no, no, no, no. like 20 or 30 times and he was like, I don’t know what’s going on because I haven’t changed my scripts. Like nothing’s changed, I’m saying the exact same things and like that would be a traditional way of looking at things, right?

Just looking at the one piece that the script hasn’t changed, so what’s going on? And then we’re like, well what else is going on? And this sales rep, he would normally listen to call recordings of calls that he’d had done that resulted in a yes and that was something he would do quite regularly and he got really great results with his sales calls. However, he had stopped doing that for a couple of weeks and that was when this rut kind of started and so by zooming out and looking at the big picture of the entire system, we’re able to identify that okay, that’s actually the problem. It’s not the script.

It’s the fact that you’re not putting the right inputs in and that’s affecting your calls and so as soon as he kind of fixed that and started listening back to those yes calls, his closure rate went straight back up and so that’s another example of systems thinking. So if you ever find a problem, don’t just look right at the problem, zoom out at the whole system and see how different things might be affecting this. If your Facebook ads stop working, it might be your Facebook ads.

Maybe it’s your offer. Maybe it’s your audience, maybe it’s your entire business, right? So don’t just look at the one thing, look at the parts within that thing. So that’s framework number one, systems thinking and then framework number two is kind of the opposite and this is what we call first principles and so first principles is basically looking at a thing and then breaking it down into its individual parts and so rather than looking at the thing as a whole, you look at the individual parts.

So an example of this might be like looking at pizza and rather than just saying hey, that’s a pizza, You could break that down and say it’s like cheese and dough and vegetables and meat and so you’re looking at the individual parts and this is really useful when you’re trying to solve a problem. So an example of this would be, there’s an interview with Elon Musk where he’s talking about when he was first building Tesla, people saying well, you can’t use batteries in cars because the battery is $600 and that’s too expensive and so that’s like a traditional way of thinking and looking at things, like a battery is $600, so you can’t do it but Elon Musk just broke it down into first principles and he looked at it, okay what are the individual elements and metals that make up a battery? And then can we source those elements and then combine them ourselves?

And he was able to actually create batteries for about $80 versus 600 because he used first principles. He was able to not just look at the thing but break it down into its parts and then he could source those parts and actually put the battery together itself and so first principles is also very, very important when looking at a problem because, let me give you an example. Sometimes people’s Facebook ad accounts get shut down, right? And I hear this all the time.

People’s ad accounts get shut down and then they’re like, Oh my God, our business is like over, we can’t run Facebook ads and so like, that’s just one way of looking at it but if you were to kind of use first principles and like dive into, okay, what is an app? Like, what is a Facebook app? Well, it’s like a message and it’s going in front of people and then it’s getting those people to go to a page, right? Like that’s breaking down a Facebook ad.

It’s a message in front of people and then once you put that message in front of people, you’re then getting them to do something and go somewhere. So by using first principles, you can break that down and then you can say, okay well, if our goal is really just to get people to go somewhere, get the message in front of people and get them to go somewhere, well, there’s a lot of ways we could do that, right? We could use TV ads. We could send emails, we could use Instagram, we can use YouTube. Like, there’s a lot of different ways to do that thing when you actually break it down using first principles.

So that’s systems thinking and first principles, this is how you uncover a problem and figure out what the actual problem is. Then from there, you can start to create ways to solve that problem. Now, when you do this again, you don’t just wanna do random things. You wanna use these different frameworks to figure out the best way to move forward and so when we’re using scientific method there’s a couple of things that you wanna be thinking about.

Number one is the speed of feedback. So if I draw a very basic feedback loop, so in business and in science you don’t just wanna have an assumption and then assume that that’s correct. You wanna test it, right? This is how science is done, people have a hypothesis and then they test that and so business is the same but what you wanna be aware of is the speed in which you get feedback because the quicker you can get feedback, the quicker you can improve and iterate and then test again and improve and iterate and test again. It would be like you know, let’s say you were trying to learn from someone and you ask them a question and they took like two hours to reply to that question versus if you ask them a question and it took like one second to reply to that question.

The second scenario when they’re replying much faster, they’re giving you feedback much faster, you’re gonna learn so much more because you’re able to ask a question, get it answered, ask a question, get it answered versus if you’re talking to someone and they take like two hours to respond, then that’s gonna be a lot slower. So this is kind of how feedback loops work. So whenever you have an idea or whenever there’s a problem and you need to solve it, one thing you wanna look at is what is the feedback loop? How long is that feedback loop to figure out if this is gonna solve the problem? So going back to the example of, let’s say your Facebook ad account got shut down.

You know, you could have two decisions. You could say, well we could send an email to get people, traffic to go to that page or we could run a TV ad, right? These are two options to solve the problem of we’re not running Facebook ads. We need traffic to go to our page. How can we do that? Send an email or run a TV ad. Well, one thing you might wanna look at is what is the feedback loop of each different option? What is the feedback cycle? So the feedback of sending an email, you could send an email today and you would probably get feedback today, right? So it’s a very short feedback loop.

On the other hand, if you were to create a TV ad, well, you might decide to do that and it might not be six months before that thing’s ready and launched and there might be another three months until we actually get data from that, if it was successful. So the feedback loop there is like nine months versus one day for an email. So this is one thing you wanna look at when you’re trying to consider what to change once you’ve identified the problem using first principles and systems thinking, you wanna then look at what are the different feedback cycles of the different options? So that’s one thing you wanna look at.

The other thing you wanna look at is the half life of the decision and so what that means is if you’re gonna make a decision, what is the half-life? How long is that decision going to last? So an example of this would be if you decide what you’re gonna have for breakfast or what you’re gonna eat, like the half life of that decision is like a couple hours, right? Because you decide what you’re gonna eat, you make that decision and then you need to eat again a few hours later, right? So that’s a very short half life, a longer half life would be something like you deciding who you’re gonna hire because you’re gonna hire someone and hopefully they’re gonna like stay working for you for at least a few months, ideally much longer but that’s a much longer decision half-life, right? And so that’s one thing you wanna look at too when you’re making decisions.

So the decision half-life of doing an email, that’s quite small, right? ‘Cause you send the email and then you might get results for like a day or two but then the results start to fade, right? Short half life. On the other hand, another option could be to let’s say, learn YouTube ads. Now immediately, the feedback of that might actually be negative, right? ‘Cause you’re not doing anything, you’re just learning but then what will happen is as that starts to work, that, like the result will start to increase. If this is like results and this is time, that will actually continue to rise. So the half life of that decision may actually be better in the long term, right? So hopefully that makes sense. If you make a decision, like let’s say your decision is to do an Instagram story.

Well, what’s the half life of that decision? In 24 hours that’s gone. So it’s very short half life, right? Whereas you might decide to, you might decide to run a TV ad and that you know, in the short term might be negative so it’s a longer feedback loop but then longterm, that might continue to work over and over again and so this is another framework and so you can see already by using these frameworks there could be some contradiction in what you wanna do. So by using the feedback loop framework, you might think doing a TV ads a bad idea but using this framework you might think that’s better than using an email because it’s got a longer decision half-life and it will continue to get results longterm.

But ultimately the one thing you really wanna think of and this is the third framework for decision making, is the input versus output. So whenever you make a decision, you want to understand that you wanna be thinking about what has the smallest input and is gonna get the biggest output and what we’re looking for is an asymmetry. So what we wanna do is say if this is the input, we want a very big output, right? So it’s asymmetrical and so when you’re looking at the input, what you wanna be looking at is what option has the minimal cost and cost can be time, it can be energy or it could actually be like costs like money and then you also wanna look at what is gonna have the lowest risk.

So lowest risk, right? So let’s say, let’s say your Facebook ads aren’t working, right? And so, let’s say you’ve got a funnel, a sales funnel and you’re running ads and you’re sending people to a landing page and then on that landing page, people are then, let’s say they’re watching a webinar and then they’re making a purchase, right? Let’s say this is your sales funnel and you decide that something’s not working in this sales funnel. So first thing you wanna do is identify what’s actually not working, right? Using systems thinking and then using first principles.

But then from there, when you’re looking at what to change, you wanna run this framework to figure out what’s gonna be the smallest input for the biggest output, whilst at the same time have the lowest risk. So I know like recording a webinar, that’s a very high input that takes a lot of time and the risk of doing a webinar and it like ruining the webinar you’ve got is very, very high. Like it’s really hard to improve a webinar. So the risk of fixing the webinar in this funnel is very, very high.

The inputs very, very high and the output is probably not that high. Like you might make it a bit better, but realistically, probably not that much better, so it’s probably gonna look more like this, like pretty symmetrical which is not really what we want. However, something like changing the ads, well this you can do very, very quickly, very small input and the output is potentially very, very big. Like the risk is very low because if it doesn’t work, it doesn’t matter. It’s just an ad then you can just delete it but if it does work, then the output’s very, very high and so this is how you kind of run this in your mind.

The other thing you’d be looking at then is also the feedback. How quickly can you get feedback on changing the webinar versus how quickly can you get feedback on changing an ad? With a webinar that might take you a month to build but the ad might take you a day and then you can get feedback in a day. So that’s much faster and then the half life of that, well, in that situation they’d probably be the same ’cause a good ad could run for months. A good webinar could run for months. So in that case, they’re kind of the same but hopefully you can see how already you’re able to make much better decisions with anything by figuring out first of all, what the problem is and then using these frameworks to decide what course of action is gonna be most effective to solve that problem and you’re not just changing random things.

Like I said, when I started, if an ad wasn’t working I’d probably just change the Webinar. Like randomly, I’d changed the offer, I’d changed the emails, I just do everything ’cause I didn’t know what was going on. I just wanted to fix something. So it felt like I was improving something but realistically it probably just kept us stuck for a long time and so by understanding this and using these frameworks whenever there’s a problem, number one, systems thinking, look at the entire system.

Number two, use first principles to actually like break it down into its constituent parts and figure out like what’s going on and then once you actually identify the real problem, then you might wanna use feedback, figure out the feedback cycle of the decision as well as the decision half-life and then finally the input versus output, minimal risk to figure out which option is gonna be best with the lowest risk and then from there you should be able to know what to do and the likelihood that you make the right decision is gonna be exponentially higher.

So hopefully this helps, hopefully this made sense and hopefully you can use this when you start making decisions. Even if you start using one or two of these frameworks, I’m sure you’ll notice that your decision making and the speed in which you can make decisions is gonna be much, much higher because you’re using frameworks that are going to be much more likely to actually result in what you’re trying to accomplish. So that’s it. Thanks for watching. If you have questions, let us know and I’ll see you next time.

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