Daily cycle

You have a biological clock like most living things. This clock is called a suprachiasmatic nucleus, or SCN. It controls your body temperature, metabolism, and sleeping patterns. Your SCN produces personal fluctuations in your bodily functions. Even though people have different fluctuations, they are similar in many ways. This text focuses on the daily cycles during the moments you are awake.

People with normal fluctuations and owls

Let's keep things simple and acknowledge that there are two kinds of daily patterns. First, and a much bigger group of people have normal fluctuations. Then there is a second group called owls who have an inverse type of fluctuations compared to normal people. To understand how you can use these patterns into your advantage, you have to first find out which group you belong to. The best way to do it is to have the next day off and go to sleep in a normal time without artificially controlling the moment you wake up or you go to sleep. Now ask yourself three questions:

1. When did I go to sleep?
2. When did I wake up?
3. What was the midpoint of the sleep?

The midpoint of sleep for normal people is somewhere between 02.00 am and 05.00 am. If you are an owl, the midpoint of your sleep is 06-00 am or after. Age can make a difference. Around puberty most people are owls. After becoming twenty, people start changing their sleeping patterns from owls to normal. If you cannot define your type after a first attempt, try again. Your type defines the optimal timing for different tasks and the way you normally feel during the day.

Two different three-part daily patterns

Let's divide your daily fluctuations to two different three-part patterns:

1. Normal people have a peak-slump-rebound pattern
2. Owls have a rebound-slump-peak pattern.

What these patterns mean is that all the people have to maximize the advantages of the peaks and rebounds and minimize the effects of slumps. Peaks are the high points of the day. They are good for analytical tasks, you feel happiest, most refreshed, and focused during them. The best thing you can do during the peaks is to perform the most important analytical tasks. Normal people have their peaks somewhere from early to midmorning and owls have their peaks somewhere from the late afternoon to evening. Peaks are the ideal times for doing analytic tasks or making decisions. Rebounds are good for creating insights. Your creativity is at its highest point in rebounds. Brainstorming sessions should be performed during them. Normal people are the most creative in the late afternoon and owls are most creative in the morning.

Minimizing the effect of slumps on you

Slumps start in the early afternoon and end in the early evening. The exact timing depends on the person. You can find out the exact timing by checking out how you feel in the afternoon and how productive you can be. Repeat this often enough and you will find the timing for your slumps. The most fatal failures and errors happen during the slump. Avoiding them is as important as using your peak hours for the most important tasks. If you can only relax during the slump, do it. Take a short nap, have a long break, preferably for the whole afternoon, and forget all the important things. If you cannot have a break in the afternoon, do the less important tasks, like answering your emails or some other administrative tasks.

The next best thing after having a long break in the afternoon is to have a shorter break that lasts, for example, from 20 minutes to an hour. The perfect afternoon break has several elements. None of them includes your workplace or your colleagues. Do not stay close to your desk or even the building where you work. Leave your smartphone to your desk and go outside and start moving. Have someone with you, preferably someone who doesn´t care about your work. To have an ideal break, you need to be detached from your duties.

Sleep is an important way of recovering from the day and avoiding slumps. I will write about it next week.

-TT

Backcasting and Premortem

A normal way of making decisions about the future is to imagine where you want to be and how will you get there by thinking about the goal and the objectives you need to achieve. You start doing it from the beginning. This is not the way to maximize the probability of getting there. What you should do instead, is to invert. Backcasting and premortem are better ways of doing things. They start from the future and move backward until you get to the beginning.

Backcasting

Backcasting means a process in which you move back from the positive outcome. You have an availability bias. One way it represents itself is that you focus more on the here and now and for the immediate future. Longer timeframes are more problematic for keeping the focus on the most important things. When you focus on the present, you consider only things that are in your mind right now. You can probably design a few next steps. This is not enough for successful planning. The better way to think is to start from the point in which you have already success. From this point, you start going backward. Ask questions like:

• Why did I get here?
• What events occurred?
• What decisions you had to make to get here?
• How I must have changed to get here?

You can probably understand the probability of accomplishing a goal better. Sometimes you can decide not to pursue the goal by seeing that it is too improbable related to the expected value of the success. You can also identify responses to developments that can cause interference in reaching your goals. For example, what you should do to get back on track when you move away from your goals. These slumps are facts of life. You cannot move straight toward a successful future. Progress has some fast movements and some slow points. Boredom and excitement have variations.

Premortem

Premortem is the exact opposite of backcasting. You start from the negative outcome and move backward toward the present. Premortem helps you to anticipate problems along your way. You can ask yourself the same questions about the future as you did in backcasting, but with a negative twist. For example, instead of asking ”Why did I get here” you can ask ”Why didn´t I get here?” You have better chances for success when you have thought about the negative scenarios. You can also imagine how some obstacles can become too hard to overcome. Dreaming about achieving a goal is not as efficient as doing the premortem. You can have positive goals, but it is better to think about the negative outcomes while having them.

Both have equal importance

Since backcasting and premortem are two sides of the same coin, you have to do both. Positive and negative outcomes have a combined probability of 100%. By doing both, you get a better view of the future. You reduce the probabilities of negative outcomes and increase the probabilities of positive outcomes. Failures and obstacles become less surprising and you have better chances to cope with them. It is easy to lie to yourself by focusing on backcasting and forgetting premortem. You cannot put your head into the sand and forget the negative outcomes. You will make better decisions by doing both.

This is all for now, until next week,

-TT

Thinking in probabilities

One way of understanding the world or your future is thinking in probabilities. Sometimes you do it without knowing it. For example, you go for lunch and choose from different options. You choose the option that you think has the highest probability of being the best one. If you have a habit to make the choice, it is your unconscious mind that does the decision. You did the probabilistic thinking before you established the habit or someone else did it for you, for example, your parents. You live in an uncertain world. You can make better decisions in it by assigning probabilities for different outcomes, and deciding which outcome to aim for.

The quality of your thinking and luck defines the outcome of your decisions

You can divide the probabilistic thinking into two different categories: Certain and uncertain environments. In certain environments, you know the exact probabilities and the best wins. In an uncertain environment, the exact probabilities are unknown and the worse player can win. You can put games like lottery, professional chess, and many games in the casino, like roulette or slot machines into the first category. In the lottery, and in the other games in the casinos, you have fixed probabilities and professional chess is very close to it. In theory, you can always find the right next moves. In practice, you cannot find them when there are enough pieces left on the chessboard. Most of the time, the better player doesn´t lose in chess. And novice practically never wins the expert. Luck doesn´t have a role in the outcomes, casinos do not lose money in these games.

There are always hidden and incomplete information in uncertain environments. You cannot calculate precise probabilities. When you make decisions in these environments, the quality of your thinking and randomness define the outcomes. Some people call randomness luck. It is easy to believe that you made an excellent decision when you were lucky. In these environments, even the best decisions can have undesirable consequences. In the short run, the quality of your thinking matters less in the outcomes than randomness. In the long run, vice versa. Time is the enemy of the bad quality thinking and the friend of the good quality thinking. In these environments, you always have to think about the probability of being lucky.

Think about the probabilities of different outcomes

Thinking about the probabilities of different outcomes increase your probability of being right and making the best possible choice for further action. The simplest situations have only two different outcomes. For example, getting a job after a job interview has only two possible outcomes. You either get it or not. You can think about what is the probability of getting this job and make a decision about spending some time to apply for another job. If you think that the probability of getting a job is high, you can postpone the other application. If you have a low probability of getting that job, you should apply for another job as soon as possible. In reality, things are normally not that simple. You can have multiple outcomes. These multiple outcomes can have different outcomes which have different probabilities. These secondary outcomes can be more important than primary outcomes.

Thinking about the probability of understanding what you are doing

In an uncertain world, you have to live with hidden or incomplete information. You also have to think about the probability of having the right information and about the probability of understanding what the information you have means. These probabilities are never a hundred percent. Certainty doesn´t exist in these environments. You have to add this to your thinking. Depending on the sources, you have different probabilities of having the right information. Official statistics and academic research have a higher probability of being right than getting the information from sources that ”quote” them. Sometimes these people don´t offer possibilities to check the information. To be honest, I have done this sometimes by pure laziness. Be careful of what you read.

You can find ways to verify if the information you have is right. The bigger problems is that you can misunderstand or misinterpet the things you read or hear. Reading text with a foreign language increases the probability of misunderstanding. Your psychological tendencies are even worse enemies. You can read only texts that confirm your beliefs. And you can have many other psychological things that can move you into a wrong conclusion. As you can see, you have to consider many factors, when you make a decision. The more important the decision is, the more factors you need to worry about the probabilities of being right.

Sources:

Thinking in Bets, Annie Duke

Thinking Fast and Slow Daniel-Kahneman

Have a nice week!

-TT

Latticework of mental models and Apple

Latticeworks of mental models can be created and used for many purposes. For example, creating decision making systems, designing strategies, and analyzing businesses. In this text, I will show you how you can analyze Apple as a business. I will mostly go through the intangible assets of the business. I will not analyze any numbers, only products, services, and how they are sold or how people perceive them.

Apple is one of the most successful companies in the world. You can use the latticework of mental models to understand the past, the present, and the future of the business. I am not going through all the mental models that have to affect Apple. In reality, the amount of models is bigger than what I will represent. You cannot have a business of that magnitude without many models working in the same direction. Many psychological tendencies affect Apple´s brand. Some of the tendencies have a bigger effect on the brand than others. Apple sells most of its products for consumers. Their perceptions of Apple and its products are the most important factors in its success. Technical superiority is not required. Only the perception of the technical superiority consumers has about the products and services matters. The moment when technical superiority mattered was after it launched the touch display for an iPhone and the next few years after. The next important moment comes when the next disruption in its devices becomes real.

About the products, name and the logo of the company

Apple has a simple range of products. It has only a few product groups. The most important ones are iPhones, iPads, and MACs. The small capital letter ”i” in the product names is for the internet. When it is used in the spoken language, it has an ego enhancing effect. People love the word ”I”. They might not be happy that other people use it, but they love it when it comes to them. It is hard to find a better word in a product name. All the names should be as simple and short as possible. The product name has an ideal length which is not more than seven letters or two syllables. Apple´s product groups have shorter lengths. They are also easily understandable and don´t have many meanings. This is true, especially for iPhones and iPads.

Apple´s product prices are high. Customers need to have perceptions about the products and services that are equal to the prices. The product design and packaging need to look better than their competitors´ products. All the products need to look expensive. One way to have a better perception of the price is to sell products with metallic colors. The image of the components used in the products needs to be excellent. Higher prices are highlighting the association between the high quality and the products. People have a better perception of the expensive products because they value the increased effort they needed to have to afford it. High price also helps people to highlight their status among their peers. Luxury image improves the pricing power of the company. Sales margins become higher.

Many other psychological tendencies affect the perception of Apple´s products. Steve Jobs is one of the heroes of the creative people. Many of them see him as an ultimate hero of the beautiful product design and great advertising campaigns. He used his authority by introducing new products himself. Some authorities are worth more when they are dead. It is hard to say whether this is true about him or not. The most popular products have higher sales figures because they have created an enormous amount of social proof. When the social proof is created, it sells more because it creates a self-reinforcing feedback loop, in which new customers affect their social circle and this circle gets bigger and bigger, and more customers will join this movement. It also creates more customer satisfaction, because people see their improving status among their social circles.

Jobs gave the name ”Apple” for his company. It is simple with five letters and one syllable. The fewer syllables and letters you have, the simpler the name. Big groups of people associate the name ”Apple” for forbidden fruit. This associates the name with scarcity. The company´s logo, in which somebody has bitten a part of Apple reinforces this association. The product line is simple. They have three main lines. Many other companies have much more. Power laws, especially Pareto´s law have an effect on it. Profits and turnover are distributed unevenly. For example, iPhones produce more than 50% of sales and profits. Apple also has an app store, in which it uses the leverage of other people´s efforts. App developers can sell their products only through the app store and the company takes some of their profits by only upkeeping the app store.

Inversion, what Apple shouldn´t do

Apple´s success is unbelievable. Most of the time, it doesn´t have to do anything to sell its products and services. It has inertia. It moves in the same direction without any extra push needed. To continue this kind of success, they have to be careful in doing something. By using inversion, Apple has to think about what it shouldn´t do in the future. Apple´s brand is based on its luxury image. It cannot start selling cheap, ugly, and/or cheap-looking products. Their designs need to stay beautiful, so does their packaging. The technical level of the products cannot be too far behind the competitors´ products. All the product names, their user interfaces, and designs need to stay simple. It cannot let its competitors copy its product names and technology patents. It has to protect them with war-like efforts. It has to protect everything that makes the company unique.

Remember that you have to use figures to analyze a company. And you need some specialized mental models like the economies of scale.

Until next week,

-TT