Inversion Mental Model & the Board Deck Checklist
How might we improve the “reviewing board decks and engaging at board meetings” aspect of portfolio monitoring? A checklist. Specifically, we can rely on the Inversion Mental Model to craft a really good checklist. It asks you to consider what could go wrong. To quote Farnam Street: “avoiding stupidity is easier than seeking brilliance.” (BTW, that’s a “must read” article on the topic. James Clear’s “Inversion: The Crucial Thinking Skill Nobody Ever Taught You” is another.)
“Point of Information: What’s the Inversion Mental Model?”
In essence, the inversion model is a way of thinking that focuses on what you want to avoid, rather than what you want to achieve. Considering the opposite of what you want to achieve deepens your understanding of both the problem and the solutions. It will reveal previously-unidentified obstacles, risks, and unintended consequences, and this will help you develop more robust plans and contingencies.
“Give me an example…”
Say you’re CRO at a promising startup and you want to lay out a roadmap for organic growth for the next year. “Normal” thinking: sketch out the plan. Inversion thinking: first ask yourself what would inhibit organic growth in the coming year, and avoid those things. It’s a simple and powerful framework used by successful people like Jeff Bezos, Sara Blakely, Charlie Munger, and Melinda Gates. Investors in particular will gain an edge — otherwise known as alpha — in avoiding costly mistakes and making better decisions in portfolio construction and portfolio support. Inversion thinking also has the benefit of being simple and “quick,” for those VCs who only have limited time to think about their existing portfolio.
“So give me the checklist already”
Here are a few boilerplate questions in 4 categories. From this you can develop your own checklist of must-ask questions when you receive a board pack and gear up to engage with founders.
Growth
- “Normal” thinking question: what’s the plan for growth? Inversion thinking question: what would unsustainable growth for this company look like?
- “Normal” thinking: tell me how you’ve built a defensible moat. Inversion thinking: give me 3 ways you could get blindsided by the competitive landscape.
“FinOps”
- “Normal” thinking: what’s your runway? Inversion thinking: what’s going to burn your cash faster than you think?
People
- “Normal” thinking: what’s your talent acquisition strategy? Inversion thinking: what would make this a terrible place to work for the kind of team we’re trying to build?
Product-Market Fit
- “Normal” thinking: what’s the GTM strategy for this vertical? Inversion thinking: which assumptions about team, product, or TAM would spell disaster if you were wrong about them?
tl;dr
- You need a set checklist of questions for reviewing board decks and engaging meaningfully at board meetings.
- Generating your questions using the Inversion Mental Model framework is a simple and quick way of getting to important and significant questions.
- The Inversion Mental Model asks what you want to avoid rather than what you want to achieve.
Originally published at https://www.japlanninganalysis.com on March 9, 2023.
