Utility
Model #0324Category: Economics & MarketsDepth to apply:
14 min read
Mental model
Asymmetric Payoffs
Seek situations where the upside is uncapped and the downside is limited. The ex
Mental model
Barriers to Entry
Structural obstacles that prevent new competitors from entering a market, protec
Mental model
Collective Action Problem
The difficulty of getting individuals to cooperate for shared benefit when each
Mental model
Comparative Advantage
The principle that entities should specialize in activities where their opportun
Mental model
Creative Destruction
Schumpeter's theory that capitalism progresses through cycles where innovative e
Mental model
Economies of Scale
Unit costs decrease as production volume increases, creating cost advantages tha
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— Jeremy Bentham, An Introduction to the Principles of Morals and Legislation (1789)"Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well as to determine what we shall do."
A founder allocates a full day to product work instead of sales. She has limited time and chooses product because she believes the next hour there will move the needle more.
A customer chooses Brand A over Brand B even though B is cheaper. The customer says B 'doesn't feel right.'
An investor passes on a deal with a higher expected return because it's riskier. He chooses a lower-return, lower-risk deal.
A team adds a fifth person to a project. Output goes up but by less than the increase from the fourth person.
Utility applied the Margin of Safety mental model
Utility applied the Revealed Preference mental model
Utility applied the Trade-offs mental model
Utility applied the Utility mental model
Utility applied the Scale mental model
Utility applied the Intuition mental model