It turns out that all great business people share a common, intuitive mental model of business. We look at how NDM researcher Lia DiBello extracted that mental model, and what it looks like in practice.
How one Naturalistic Decision Making researcher successfully explicated the tacit expertise of business, and what that mental model looks like in practice.
Has any one here tried the micro-worlds or strategic rehearsals that Lia says her company is offering? Curious to hear what effect they might have had. I suspect something very useful could be built for startup founders or those planning to found a company.
For those seeking simulations of one corner of her three-sided board, you might try Factorio for supply.
She mentions at one point in the podcast interview that Cedric linked to that her team can see “what” the experts concluded but not necessarily “how they reached that conclusion.” I’ll bet something like eye-tracking software could at least give us an indication of what they experts paid attention to on the screen as they made their decisions.
Outstanding post! I had read a lot of the Oxford Handbook on Expertise yet didn’t really catch on to exactly what was talked about here in that chapter. A lot to reflect on here…
Thank you @Roger 
@vonnik I, too, would like to talk to someone who’s gone through the assessment. But from what she says, it seems like a fairly straightforward experience if you’re on the user side of it — it’s the designer side of it that’s interesting and tricky and demands all sorts of things (e.g. a good grasp of business fundamentals + the extracted mental model).
For what it’s worth, I had a conversation with the hosts of the NDM podcast a few weeks ago, and I’ll ask them for a warm introduction to Lia. I plan to record a podcast interview with her, for Commonplace.
But I’d like to get a few things in order first — I want to collect questions, and I want to do my work and read everything she’s possibly published, so that I can ask good questions.
Feel free to chime in with some questions of your own here.
I’ve updated the post with a few edits — most of them minor corrections. The biggest addition is:
Can management consultants or former VCs become good business operators? With the triad in mind, we can be more specific about what must happen: management consultants are likely better equipped in the demand leg of the triad, with some understanding of the finance leg; VCs are better equipped in the finance leg, and somewhat skilled in the demand leg. How well they do is how quickly they level up on the supply leg of the triad, and how well they internalise the relationships between all three.
I’ve also added a link to a PDF copy to the bottom of the post, so that members will be able to download a copy and do with it what they wish.
I’m still chewing on how to use this. The very idea of ‘this is what business expertise is’ is useful, because it gives us an idea of what to aim for. But how to get to that level of expertise is a different, more difficult question entirely.
Best Commoncog post of 2021 so far. You are hitting your stride again.
I do echo the comments above that the big question is “What do we do with this model?”. Dibello states in this interview that “ * a business expert is somebody who through experience and through iterative trial and error has developed an in depth understanding of the business domain where they can see trends and they can read in the tea leaves or in the indicators events and forward simulate patterns in his head or her head that are coming that other people are blind to”. But that leaves a big question mark in my head as to how one can be sure that they are getting the correct experience and gleaning the right information through trial and error. There has to be an element of randomness in acquiring experience and being in the right position to become an expert. It would be helpful to hear of Lia has any research on which successful experts have built the best models of their environment and what distinguishes them from those who never master all 3 dimensions of the supply/demand/capital matrix.
I’ll speculate that the most successful practitioners aren’t masters of all three domains, but are most likely to be those who have developed just enough wisdom in each domain to avoid fatal flaws, have at least one domain where they have a high degree of mastery to exploit opportunities, and are adaptable enough to evolve their actions to avoid the fatal flaw of overconfidence in their own abilities leading to irreversible blunders.
This structure is loosely based on a key idea in John Zenger’s The Inspiring Leader. I have found it useful in many areas and I suspect this is another.
@cedric, it is great to hear you are connecting with the NDM community! In terms of potential questions, I’d love to hear if the Zenger pattern is the most typical success pattern or if more well-rounded practitioners tend to be most successful.
These are good questions, Roger. I’ll have to dig in deep on the nature of the triad when I talk to her. I’ll take a look at that summary you’ve linked as well.
If I could speculate a little: what I’ve gotten out of her writing so far is that business experts are masters of all three legs of the triad in their specific business. The expertise that a business person has is in the ability to model the relationships between all three legs for their specific business. So if my supply chain is screwed up, for instance, I immediately know what the market dynamics are going to look like for the next n quarters, and I’ll know the impact to my financials. Or if the capital markets shift favourably, I can predict — correctly — my competition is going to load up on cash and begin consolidating, which means I might need to do something in my operations to respond or raise a war chest myself to acquire smaller players.
In other words, the expertise is expressed in being able to notice cues that novices do not and predicting developments in the relationships between the three legs of the triad. It isn’t really about ‘mastery’ of any one leg.
Seconding @vonnik’s recommendation of Factorio for supply.
The simplest simulation of the supply/demand/capital triad I’ve found is Lemonade Stand, originally coded as a text game in the 1970s:
There are several more recent versions floating around. Here’s one that can be played in a browser:
The challenge seems to me to be: how does one apply this without Lia’s software or expertise? She has something valuable to sell, but many of us will probably never use it, and yet the idea of training oneself on simulations of business situations seems promising.
DiBello has mentioned in two different contexts that she’s moving on from making businesses more successful. This seems to be what she’s up to now: Project management expertise in weeks instead of years; the results are in.
It seems she’s into applying her accelerated expertise techniques to the skill domain of … project management. Really cool stuff.
Reading through the article it honestly reminds me a lot of Ender’s Game in the way they do training. Possibly through her language of ‘war game’. But that always struck me as a fantastic method of learning.
It also reminds me of Ray Dalio in his building a model which can be tested against historical data to see if the assumptions made were actually valid. It seems like another way to get ‘experience’ without needing to actually lose a significant amount of money (aside from the CapEx to build the solution).
I was awake last night thinking about using my year off work to build some kind of Capital IQ / Bloomberg Terminal + Business Model Visualizer which plugs into historical & current data to assist in thinking or test assumptions. Also including the political environment (and other environments) as variables as well. Will see if I still love the idea once I’ve sat with it for a while - but I’d be interested in both building the content to go in + actually using the tool.
Edit: There’s also something I like about the idea of taking tools which would appeal to venture capitalists rather than the current playbook I’ve seen the last few years of making tools for founders. At least I know they can afford it.
I’m pretty weak when it comes to the capital/finance aspects of business. A buddy of mine in my company’s finance department suggested I start with getting a really good understanding of:
I was planning on doing some Google research, but does anyone have any particularly good resources they know of for learning this content?
I’m currently going through Aswath’s Corporate Finance paper which is stunning (although not just focused on financial statements).
He has a quick overview of the financial statements linked in that same website. Which I found probably more valuable than an accounting paper I did through university. Particularly as he’s more slanted towards the valuation and understanding of a company. So is focused on using the financial statements rather than how to prepare them.
Super helpful @Dylan, thank you!
So I tend to recommend narratives first over non-fiction idea books (or textbooks), mostly because it’s an easier way to ease into the topic. My favourite book for this topic of ‘capital in a business context’ is The Outsiders, mostly because it gives you a high level, almost intuitive overview of the capital allocation perspective of business. It’s also a well written book.
If you’re an audio person, this episode with the author might be a shorter version (though IMO the book is well worth reading from front to back).
I think I made my way through 20% of Damodaran’s Corporate Finance: Theory and Practice, and I fully intend to finish it … eventually. But definitely read it after reading The Outsiders.
I don’t know if I heard of this book through this site or somewhere else, but it is definitely on my list so I’ll move it to the top. Very much appreciate the recommendation, I knew I could count on this group!
I will say that although the content in the course is extremely aligned with what’s in the textbook (unsurprisingly). The nice thing about Aswath’s lectures is that he’s one of the more engaging I’ve come across. So it’s easier to sit down and watch one of those than hitting the book. Plus I can then review the chapter while I’m making notes if I find my understand isn’t strong enough.
That being said
sounds like it’s pretty low on the priority list so the tactic of using course as an easier way through the content doesn’t really matter!
Did you ever get anywhere with this idea Dylan? I’m a VC, very interested