1. Inversion thinking
Charlie Munger the legendary investor is a big fan of inversion thinking. The basic premise is that you want to reverse the way you are thinking about a problem.
For example: Instead of thinking about how to design the best office chair. You want to think about the worst possible office chair and all its features. Then reverse them to come up with new ideas for the world’s greatest chair.
2. The Flywheel Effect
It works by small incremental changes that eventually hit a tipping point. One big push won’t move your flywheel – but 5 small pushes and it reaches a breakthrough moment. Then it becomes easier to push with less and less effort.
Jeff Bezos leveraged this model when he started Amazon. His small pushes started with great customer service, then a larger product range… Then came the final push that changed everything – same day delivery.
3. Margin of Safety
This is an investment principle that dates back to the 1930’s. The idea is that whenever you’re making an important decision… You should always leave a margin of safety to mitigate risk.
We carry spare tires, we have rainy day funds…
So this principle should be applied to most business decisions as well.
Which will reduce the amount of losses when they come.
4. Survival of the fittest
Charles Darwin coined the term when he observed that in order for animals to survive…
They needed to be constantly adapting to their surroundings.
Although cockroaches are way down on the food chain – they’ve been around for 300 million years.
What’s the lesson? You don’t need to be the big fish to still thrive. Find your sub niche and dominate. And then start making your way up the food chain.
5. Circle of competence
When you are running at scale – it’s suicide to be a “jack-of-all-trades”.
You will burn out and never be able to grow very big.
This is why you need to have a good hiring process.