Impact is a fallacy, the 3X framework, and more mental models 💡

Monday Ideas — Edition –95

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Back to this week’s ideas!

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1) 🔮 Impact is a fallacy

When I was younger, I was obsessed with the idea of achieving maximum impact in my career. As a founder, when people asked me what I loved about startups, I always replied: impact!

Impact is our idea of how much our work matters. I argue that in most cases, this idea shouldn’t be trusted.

Impact is unreliable for two reasons: 1) it is hard to measure, and 2) it is subjective.

Impact is hard to measure

Our actions have first, second and third order consequences that are hard to fully grasp.

For example, as an entrepreneur, you live in the trenches and you have the opportunity to see the first-order impact of your work. This is enthrilling, but is it the only way to do meaningful work?

In my last years of university, I didn’t even know what a startup was, until I attended a course on entrepreneurship. The course was held by a gifted professor, and it had a decisive influence on me — I went on to found a startup right after my master's.

How should this professor evaluate his own impact? Is it the combined impact of the startups he helped to create? Is it higher or lower than that of the individual entrepreneurs he influenced?

Impact is subjective

I know several people who work at Google.

A couple of years ago, I happened to have chats with two of them, within a matter of days. I asked each of them how things were going and if they were happy with their work (they both came from a startup environment).

• 🟢 The first person was very happy — She could see her work being used by billions of people — it was a dramatic shift in scale from her previous job.

• 🔴 The second person was not happy — She felt she had just become a cog in the machine.

They both described their impact (high vs low) as if it was an objective truth, failing to see how their personal preferences about the environment, culture, and style of work influenced their judgement.

Today, I don’t trust myself to evaluate my own impact, so I ask myself mostly two questions:

• Is what I do a net positive to the world? I have found that this is an easier question to answer, and I don’t bother to calculate how much of a net positive it is.

• Do I enjoy doing it? This question is more profound than it may seem. Enjoying what you do is a clue for many things, including that your values are aligned with those of that company / activity; that you feel an intrinsic reward for it; that the workload is sustainable, and more.

I wrote a full piece a while back where I reflect on my journey from entrepreneur to employee to creator. I talked about impact, autonomy, community, and more 👇

On Founders, Creators, and Employees 🎭

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2) 📊 The 3X Framework

A few weeks ago I interviewed Kent Beck for the podcast.

Among other things, we discussed Kent’s own mental model about product maturity, which identifies three stages (the three Xs):

1. 🔵 Explore — you are in the search for what works. The goal is to minimize the cost of individual bets and spread small investments across a wide range of experiments. If one of these proves successful, it leads to the next phase. This is typical in early-stage startups, before product-market fit.

2. 🔴 Expand — the product experiences rapid growth and user adoption. You will encounter unanticipated issues and bottlenecks, and the primary goal is to address them to sustain growth. You may employ suboptimal solutions to keep the product alive and meet the increasing demand.

3. 🟢 Extract — you have a clear understanding of the problem/solution space. The product has reached a stable level of high demand, and the focus shifts to efficiency, optimization, and maximizing profits.

Borrowing a famous analogy by Nassim Taleb, these three stages unfold as you progressively move from a convex to a concave world:

• 📈 Convex world — you have little to lose, while a single successful bet has the potential to turn your business around. In this context, the right way to play the game is to place as many bets as possible, keeping them cheap. You want to be able to keep playing the game until you find the successful idea.

• 📉 Concave world — in a concave world, your business is steady and well understood, and the level of investments is already high. You have a lot to lose, and single bets have smaller potential. The right way to play the game is slow and thoughtful, maximizing the chance of getting things right.

So, different stages just call for different product development approaches.

We mentioned Shape Up in the past, which plans work in 6-week cycles. Shape Up is the framework that 37Signals uses to work on Basecamp, their flagship product.

Basecamp has been around for 20 years, makes a ton of money, and has stable growth. The company is privately owned, not VC-funded, and not in a rush for hyper-growth.

In other words, Basecamp lives in a concave world, which rewards the slow and the thoughtful.

Conversely, if Basecamp were an early, pre-revenue startup, 6 weeks would be too much to push the next experiment out. You should probably make it cheaper, throw it at the wall in one week, and see if it sticks.

We talked more about this, team maturity, and the role of dev processes, in a recent piece 👇

Should you use Scrum in 2024? 🗺️

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3) 🧠 Second-order thinking vs first principles

Two of my favorite mental models for making good decisions are second-order thinking and first principles.

Also, they are complementary.

Second-order thinking is about considering the future consequences of a decision, going beyond the immediate implications.

In engineering, this is literally the name of the game. Whenever you design a system, or create an abstraction, you are never only thinking at the problem here and now — you are also thinking at the impact on the larger system, on your team workload, on infrastructure, and more.

On a practical level, I know two ways to prompt second-order thinking:

• ➡️ Logically → “and then what” — For any decision you are considering, ask yourself “and then what?” many times over. Do that 4-5 times and you will be surprised by how far you can go.

• ⏳ Temporally → the rule of 10 — many choices look different under different timeframes. Ask yourself about the consequences in 10 hours, 10 days, 10 months, and 10 years.

The dual version of second-order thinking is first principles.

When you ask yourself “and then what”, you are moving forward. Likewise, you can ask yourself “why” several times (e.g. the five whys) to go backwards, and get to the principles backing the decision, or root causes in case of a problem.

Combining forward and backward reasoning is powerful to come to better conclusions.

I covered many more mental models, like Binstack, Cynefin, and Map vs Territory, in this recent piece 👇

Mental Models for Engineers and Managers 🎲

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I wish you a great week! ☀️

Luca