‍Do your smartest choices hold up under stress?

We've all been there. A key hire turns toxic. A market expansion flops. A strategic partnership fizzles into distraction. From the outside, our choices seemed rational - even obvious. But in retrospect, they falter. Not because we lacked intelligence or data, but because we relied on narrow patterns of thinking.

Strategic decisions aren't just about what we choose. They're about how we think when the pressure is high, timelines are tight, and ambiguity reigns.

Mental models help us think better where it counts most.

They are distilled ways of seeing the world - borrowed from physics, psychology, economics, and beyond - that allow us to weigh options with more rigour, precision, and foresight.

This isn’t about becoming an armchair philosopher. It’s about becoming a more adaptable, clear-eyed leader.

Why better models = better strategy

In complex systems like organisations, thinking in straight lines fails us. We need tools that help us zoom out, reframe, and anticipate unintended consequences.

According to Farnam Street, mental models are “how we simplify complexity, why we consider some things more relevant than others, and how we reason.”

McKinsey research shows that high-performing organisations are 5x more likely to use structured decision-making models consistently in their strategic planning.

We’ve seen it firsthand: the most effective leaders aren’t those who always have the right answer - they’re the ones who ask better questions, challenge assumptions, and pressure-test scenarios using the right thinking tools.

Let’s explore the ones we keep coming back to.

The Strategic Thinking Stack: 5 Essential Models

1. First Principles Thinking

Break it down to the bare bones. Then rebuild.

Instead of reasoning by analogy ("This is how our competitors did it"), first principles thinking asks: What do we know to be absolutely true? What are the physics, not the folklore, of this problem?

Elon Musk used it to challenge assumptions about rocket cost. We’ve seen founders use it to reinvent cost structures, supply chains, even org charts.

Reflection prompt: What part of your current strategy is built on borrowed assumptions rather than foundational truths?

Micro-action: Host a 45-minute session with your team to strip one current initiative down to first principles.

2. Second-Order Thinking

What happens after what happens next?

Most decisions trigger ripple effects. Second-order thinking forces us to forecast those ripples, not just react to surface gains.

Example: A client considered slashing customer support to cut costs. First-order logic said: “Save $400K.” Second-order thinking revealed: lower retention, increased churn, and a $2.3M revenue dip within 18 months.

Reflection prompt: What unintended consequences might follow your current top 3 priorities?

Micro-action: Run a “What if?” chain for any major decision - five steps deep.

3. Inversion

Instead of asking “How do we succeed?”, ask “How could we fail?”

This mental judo move reframes the problem to spot hidden risks, blind spots, and counterforces early.

Amazon’s Jeff Bezos famously used inversion to build AWS: “How could we screw this up?” shaped everything from pricing to onboarding.

Reflection prompt: If your current strategy were guaranteed to fail, what would be the most likely cause?

Micro-action: Schedule a 30-minute “pre-mortem” on any upcoming high-stakes launch.

4. The Map Is Not the Territory

Every dashboard lies a little. Every model oversimplifies.

This model warns us not to mistake abstractions for reality. A spreadsheet, a persona profile, or a Net Promoter Score isn’t the business - it’s a lens on it.

We’ve worked with leaders who over-optimised for the dashboard, only to miss real-world signals: culture drift, customer nuance, and frontline feedback.

Reflection prompt: What’s one area of your business where the ‘map’ might be distorting the ‘territory’?

Micro-action: Spend one hour this month listening to frontline teams without filters or decks.

5. Circle of Competence

Know what you know. Know what you don’t.

Warren Buffett’s favourite model, the circle of competence, invites humility. It helps leaders avoid overreach and delegate wisely.

We watched one executive decline a high-risk M&A move, despite board pressure, citing lack of operational familiarity. Six months later, a peer company made the same deal - and suffered a $70M write-down.

Reflection prompt: Where might pride be dragging you outside your circle?

Micro-action: Document your personal and team circles of competence. Revisit quarterly.

From Model to Motion: How to Embed This Thinking

Great thinking tools don’t live on whiteboards. They shape agendas, influence hiring, and redirect resources. To operationalise mental models in your business:

1. Create a “Decision Charter” for strategic bets
   
   
   
   • Include sections for first principles, second-order impacts, and failure modes.
     
     
2. Build model fluency into leadership development
   
   
   
   • Make mental models part of your coaching, offsites, and skip-level check-ins.
     
     
3. Run monthly “Thinking Clinics”
   
   
   
   • Dedicate one session each month to explore a strategic challenge using a different mental model.
     
     

Pro Tip: Give every exec team meeting a “model lens” for discussion. Rotate monthly.

Where Leaders Get It Wrong

Even seasoned operators misstep. Here’s how:

• Treating models as gospel, not guides.
  Use them to stretch your thinking, not replace your judgment.
  
  
• Applying the wrong model to the wrong problem.
  Inversion is great for risk analysis. It’s terrible for vision setting.
  
  
• Over-using one model they like.
  Some execs get addicted to inversion or second-order thinking. Result: decision paralysis.
  
  
• Skipping the basics in favour of intellectual showmanship.
  Mental models don’t work if your org lacks execution hygiene, feedback loops, or alignment.
  
  

Thought Prompts for the Strategic Leader

Where has your thinking stayed flat while your context changed?

When was the last time you updated your decision-making playbook?

What Changes When You Use Better Thinking Tools?

When mental models become cultural language, we’ve seen:

• More resilient strategies under uncertainty
  
  
• Faster decision-making with fewer blind spots
  
  
• Better team alignment on how decisions are made
  
  
• Higher-quality post-mortems and learning loops
  
  

And perhaps most importantly: leaders sleep better at night, knowing how they reached a choice, not just what they chose.

Try This This Week

Pick one live decision and run it through two models from this post. Not in your head - on paper.

Then share your thought process with one peer. Invite challenge.

If you’d like us to help facilitate a “Thinking Clinic” inside your team, or run a model-mapping session tailored to your current strategy dilemmas, we’d love to hear from you.

Team SHIFT

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