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Scenario Building: A Mental Models Cookbook

By Juan Carlos

The Setup

After you have a strategy in place, it’s time to build scenarios that determine the successful implementation of a project. Weighing the potential pitfalls of a given problem and conducting experiments will generate success criteria. Then by shortening the time horizon, folks will adhere to a tighter timeline.

The Approach

  • Think about the problem you are solving and decipher whether it exists in an additive or multiplicative system. In the former, making a mistake is sustainable, but in the latter, it could cost the entire project.
  • Run an experiment often for conclusive results, as an improbable success or failure might be an anomaly.
  • Add a contingency or buffer to ensure a failure does not end catastrophically.
  • Be cautious when adding more resources to a problem, as those costs might only deliver an incremental gain.
  • Constrain the time in which you will complete the project as time will expand to fill whatever boundaries you set on it.

​The Latticework

  • Multiplying by Zero determines the type of system you are working in and what kind of failures are acceptable.
  • Regression to the Mean is a helpful reminder that improbable outcomes occur and that you must test multiple times.
  • The Margin of Safety helps determine what contingency is required to implement a project safely.
  • Law of Diminishing Returns helps assess an optimal state for an input, and when adding more resources will be ineffective.
  • Parkinson’s Law notes that work will expand to fit the timeline you set to complete it.

​The Deep Dive

Multiplying by Zero
Are you in an additive or multiplicative system? Additive systems add to one another and create a result. Conversely, in a multiplicative system, the addition of zero is catastrophic because everything is interdependent. When a zero is present, the equation results in a zero. This rule in mathematics is valid in life as well. In a multiplicative system, a chain is only as strong as its weakest link. For example: a lauded professional cyclist may, for example, win the Tour De France seven times, but after finding they used performance-enhancing drugs, they are stripped of all their titles. Practicing x Winning Tours x Performance Enhancing Drugs = No Tour De France Titles. The use of drugs is zero, and the result is having earned none of the titles.

Regression to the Mean
An improbable outcome will most likely be followed by an outcome that is nearer to the average. In a regularly distributed system, the more one observes an outcome, the closer outcomes approach the mean and cluster around the average. When there’s a remarkable result, folks often unintentionally assign meaning to random chance when future results most likely return to the average. The phenomenon occurs in business, weather, sports, and many other areas. Confusing a causal event and a statistically probable one is easy.

Margin of Safety
It is a contingency or buffer to keep one safe from a negative or unfortunate outcome. In engineering, it’s a concept that describes a system’s capacity to bear greater loads than anticipated. In finance, investors use the term to purchase securities when the market price is below their intrinsic value. In accounting, it refers to the discrepancy between actual sales and break-even sales. The margin of safety is a critical part of some decisions to absorb miscalculations, errors, or just plain bad luck.

Law of Diminishing Returns 
A condition after a process reaches an optimal state where adding more resources yields a minimal increase in production and reduces profitability. The law illustrates a moment on the production curve where an additional unit results in negative returns or a loss. There is no reduction in output but rather a decrease in efficiency and productivity. The value obtained from increasing one output but maintaining others will eventually diminish. Improving a process requires adjusting other inputs properly rather than focusing on the same.

Parkinson’s Law
Work expands to fill the time available for its completion. Simply, the amount of time you have to complete a task is how long it will take to finish it. Say you had a task that should take a couple of hours, but you have given yourself five hours to accomplish it, you will spend those five hours anyway. You may use the time to investigate, research, or procrastinate, but the task’s outcome is the same, even though you gave yourself twice the time necessary to complete it. Knowing that time is malleable, be mindful when setting goals for yourself. Recognize that extending the amount of time something will take might counterintuitively result in no difference in quality. When folks are confronted with scarcity, they are more likely to think unconventionally. So, adding constraints could make you more creative than you’d have been otherwise, and might result in a better outcome.

Hi, I’m
Juan Carlos

I’m a creator at heart, a filmmaker by instinct, and a polymath who thrives on diversity. My life’s work is about framing: capturing, exploring, and sometimes breaking conventional boundaries to uncover deeper truths.

My Story

From directing award-winning films to leading product innovation at startups, my career spans the creative and the analytical. I’ve authored children’s books under desert skies, each designed to spark curiosity and independent thought in young minds. Whether through technology that simplifies complex issues or through mental models that enhance clarity, I constantly strive to reimagine how we perceive and interact with the world.

In my personal life, I’m a father fascinated by nature and humanity’s marvels. I share this wonder with my children as we explore the world’s beauty together. Every day offers a new frame, reminding us that what we focus on defines our lives’ story.