Mental Models and First Principles Thinking

A mental model is a simplified way of understanding how something works. It's a thinking tool — a framework in your head that helps you make sense of complex situations without having to analyze every detail from scratch.

You already use them, whether you've named them or not. Supply and demand is a mental model. So is the 80/20 rule. So is thinking about your business as a funnel, a flywheel, or a machine. Each one gives you a shortcut for interpreting what's happening and deciding what to do next.

First principles thinking is a specific type of mental model. Instead of reasoning by analogy — "what did someone else do in this situation?" — you break a problem down to its most fundamental truths and build your reasoning up from there.

The term gets thrown around a lot, usually in the same breath as Elon Musk or Aristotle. But at its core, first principles thinking is just asking: what do I know to be true, independent of what anyone else has told me? And what can I build from there?

Strategic thinking ties both together. It's the ability to step back from the day-to-day, see the bigger picture, and make decisions that move your business in a deliberate direction rather than just reacting to whatever lands on your desk.

All three — mental models, first principles, and strategic thinking — are ways of making better decisions. And for business owners, that's the whole game. Every day is a series of decisions, and the quality of those decisions determines the trajectory of the business.

So far, so good. But here's where most business owners run into trouble.

The Problem with How We Actually Make Decisions

Most of us think we're making strategic, principled decisions. In practice, we're usually doing something much simpler.

We're copying. We heard a peer describe how they structured their sales team, and we did the same. We read a book about a company that scaled with a particular operating system, and we implemented it. We saw a competitor run a certain type of promotion, and we followed suit.

There's nothing wrong with learning from others. It's how we all start. But if we're honest, a lot of the decisions running our businesses weren't made from deep thinking — they were inherited, borrowed, or defaulted into.

Why do you have a 40-hour work week? Why do you do annual reviews? Why is your pricing structured the way it is? If the honest answer to any of those is "because that's how it's done," then the decision wasn't really made at all. It was absorbed.

In my experience running a business for twelve years, and now working with other business leaders, I've found that most decision-making falls on a spectrum. In Craft: The Expedition of Business, I call it the Mountain of Why — five levels that describe how deeply we're actually thinking when we make a choice.

• Level 1 — Mimicry. We do something because someone else did it. It's the default when we don't have enough information or experience to decide differently.
• Level 2 — Heuristics. Rules of thumb from our own past experience. "It worked last time." Useful, but inconsistent — we're often missing key variables.
• Level 3 — Frameworks. Structured models for thinking about a problem. EOS, Scaling Up, SPIN Selling, Porter's Five Forces — these all live here. They help break complex decisions into manageable pieces.
• Level 4 — Synthesized Strategies. Taking a framework and adapting it to your specific business, market, and team. Not following a playbook, but bending one.
• Level 5 — First Principles. Identifying what you believe to be fundamentally true and building your decisions from that foundation.

Most business owners operate between Levels 1 and 3. And for a while, that's enough. Level 3 frameworks in particular feel sophisticated — they come with diagrams, workshops, and certified coaches. They give your team a shared language and they beat operating on gut instinct.

But as I wrote in the book:

All are general in their approach. Their design is for the average business, not necessarily your business. To find better tailored solutions, we need to climb yet higher on The Mountain of Why.

A framework designed for the average business is optimized for nobody in particular. Your industry, your team, your customers, your competitive landscape — none of that is baked in. The framework is a starting point, not a destination.

What First Principles Thinking Actually Looks Like in Business

Before the Wright brothers, everyone trying to build a flying machine started from the same mental model: birds fly, so we should build things that look like birds. They sewed feathers onto wings. They strapped on contraptions that flapped. They jumped off cliffs.

They all failed.

The Wright brothers asked a different question. Not "How can we fly like birds?" but "What are the fundamental requirements for controlled flight?"

The answers — more power without control is useless, three axes of control is the minimum, marine propellers don't work in air — had nothing to do with birds. Once they identified what was actually true, the design that followed looked nothing like what had come before.

Business decisions work the same way. The question isn't "What did the successful companies do?" It's "What do I believe is fundamentally true about my customers, my employees, my market, and what makes a business work?"

Jeff Bezos decided customers always wanted low prices, fast delivery, and lots of choices. Amazon was the extrapolation of those core beliefs. Netflix decided convenience trumped everything else in entertainment. A client of mine planted their flag on the belief that people want to feel included and hate uncertainty. They added one simple meeting in the middle of their process. It cured both problems and resulted in a measurable difference in engagement, morale, and project quality.

None of these came from a framework someone bought at a conference. They came from leaders who did the harder work of identifying what they believed to be true — and then building from there.

How to Start Climbing

This isn't about throwing out every business book and starting from scratch. That would be its own kind of hubris. The frameworks at Level 3 are valuable — but they're raw material, not finished product.

When you encounter the next "proven" system, try treating it as a Level 3 input rather than a Level 5 answer:

• What specifically is this designed to do? Does that match what my business actually needs right now?
• What assumptions is it making about the industry, the team, or the customer? Do those hold for me?
• What would this look like if I adapted it to my situation rather than adopting it wholesale?

And the most important question: what do I already believe to be true about my business that this either reinforces or contradicts?

If you can't answer that last one, no framework will save you. It'll just become the next thing that didn't work.

Why This Is a Competitive Advantage

Here's what most business advice leaves out. Your competitors are Googling the same best practices. They're reading the same bestsellers. They're implementing the same frameworks.

If you do what they do, at best you get what they get. And most of them are camped at Levels 1, 2, and 3 on the Mountain of Why. They have the same mental models, the same borrowed strategies, the same playbooks.

The advantage goes to the leaders willing to climb higher. To do the harder, less comfortable work of figuring out what they actually believe, testing those beliefs against reality, and letting those principles — not someone else's system — shape the decisions that run their business.

That's not a program you can buy. It's a way of thinking. And it's the difference between a business that looks like everyone else's and one that actually becomes what you set out to build.