12/10/2022 ☼ risk ☼ not-knowing ☼ mindset
tl;dr: Mindset mismatch is when the mindset you use to interpret and act in the world inaccurately reflects reality. All mindsets are inaccurate in some way, but some are less so than others, and some are actively awful. This article explains what a mindset is and why bad outcomes result from mindset mismatch. This is the first of two articles about the consequences of mindset mismatch; the second article is about the insidiousness of the formal risk mindset.
🙏 to David Bray, James Cham, and Ian O’Donnell for their comments. I am responsible for any remaining poor thinking.
We use the word “risk” to describe many different situations of not-knowing when it should only be used to describe situations of formal risk. This makes us instinctively adopt a decisionmaking framework that is only appropriate for formal risk situations. Sloppy thinking about risk creates dangerous mindset mismatch. (Here’s more on how to think more clearly about risk.)
In this article, I unpack what a mindset is, why mindset mismatch happens, and what happens when there’s a dangerous mindset mismatch.
A mindset is a set of beliefs you hold about the world. Mindsets matter because they shape how we view the world, how we choose to act as a result, and therefore the outcomes we achieve.
The best known of the mindsets is Carol Dweck’s growth mindset. To have a growth mindset is to believe that “your intelligence or personality is something you can develop” — in contrast to believing that it cannot be changed (a fixed mindset). 1
Believing that intelligence and personality can be changed is a fundamental belief about the world and how it works, specifically about yourself. This belief influences how you interpret events and what actions you take.
Compared to someone with a fixed mindset, someone with a growth mindset is more likely to treat a failed first business as an opportunity to figure out what he did wrong and how he could do better next time. (Someone with a fixed mindset is more likely to conclude that he’s not cut out for entrepreneurship.) The person with a growth mindset is more likely to think about failure as an opportunity for personal change, take actions to learn from failure and change themselves and what they do in future, and thus more likely to eventually succeed.
The growth/fixed mindset model was the first to become widely known, but multiple mindsets exist and we have multiple mindsets in play at the same time.
You don’t have to be consciously aware of having a mindset to have it. Whether conscious or not, mindsets shape the actions you take, and the actions you take determine the outcomes you achieve. What we believe affects how we behave even when we don’t consciously believe it.
Becoming part of a culture is all about learning a whole collection of beliefs, often connected to what gets treated as a norm in the culture. These beliefs are what allow us to behave how other people in the same culture expect us to — and we take most of these beliefs for granted. We don’t think about these implicit beliefs consciously until they get challenged.
Someone growing up in the southern US, say in Texas, is more likely to implicitly believe that a stranger who is interested in being friends will be overtly friendly. This Texan might interpret lack of overt friendliness from a stranger as their lack of interest in making friends). This belief will probably persist until they travel to Japan (or France, or even New England), where it’s pretty common for people to be quite reserved until they already know each other quite well. Seeing others act differently when exposed to the same world is often how we recognise an implicit or unconsciously held belief.
The same is true for mindsets. One way for a mindset to be challenged is for the actions we take based on that mindset to result in outcomes that are very different from what we expected.
A mindset in isolation isn’t interesting. It only becomes relevant when there is a world out there for the mindset to help you make sense of and take action in. This means that you must think about mindsets in relation to situations.
A mindset is useful in a given situation when the Mindset ➠ Actions ➠ Outcomes chain produces outcomes that you expect, for the reasons you expect. When this happens, it’s a good sign that the mindset is appropriate for the situation.
For instance:
After a successful decade in ad sales at Big Tech, Jeff decides to leave #dayjob to start his first company and be its CEO — it builds and sells a digital advertising scheduling tool to under-served medium-sized advertisers. He gets some traction and investment, but as the company grows he finds that his senior team turns over a lot. Especially, he hires great Chief Sales Officers but they seem to leave after only a few months. Existing customers seem to love and use the scheduling tool, but the flow of new customers is low because the sales team can’t close enough deals. After 18 months of stagnating revenue, Jeff has to lay off a bunch of employees to manage cashflow. Jeff sits down with his mentors for a post-mortem after the bloodbath. One of them suggests that the product seems good, and that the problem might be that Jeff isn’t giving his senior team enough autonomy to do their jobs — in particular the CSOs he’s hired. Jeff eventually comes to the painful conclusion that he might indeed have been micromanaging the sales team and undercutting the authority of the various CSOs. He decides to try again to hire a CSO, and eventually finds a great candidate who accepts the offer. He sets up a meeting to introduce her to the board of directors, and during the meeting tells her that he’s aware that he has a tendency to micromanage sales and that he wants her to push back hard when she notices it happening again.
One of the mindsets Jeff has here is a growth mindset. With help from mentors, he interprets the facts (no revenue growth, a product customers are happy with, a chain of swiftly departing CSOs, a low conversion rate for new customers) as reflecting a problem with his management approach which he had not previously been aware of (a tendency to micromanage, especially for sales). Jeff also recognizes that 1) turning the company around requires him to change this aspect of his management approach, and 2) this personal change is something that he can achieve with difficulty and discomfort (highlighting the problem in front of his board and giving his new CSO explicit permission to push back).
Thinking about mindsets in context of situations is much harder when the beliefs that make up a mindset are taken for granted. When we aren’t even consciously aware that we have a mindset in place, it’s hard to think about it, let alone evaluate whether it is the right one for the situation.
Here’s the crucial thing: Sometimes, the mindset you apply is not the correct one for the world you apply it to.
If Jeff and his mentors had the correct facts of the situation, his growth mindset will have helped him hire a good CSO and stay out of her way — empowering her to grow sales and making it more likely that revenues start growing again.
A key part of the growth mindset is the belief that investing effort creates personal change, and personal change leads to eventual success.
What if Jeff’s growth mindset led him to focus too much on personal change and ignore a more important aspect of the company’s situation? Say Jeff and his team didn’t fully investigate customer reactions to the product, and only spoke to an unrepresentative sample. They might not have realized that most customers found the product lacked essential functionality, and was more expensive than competing offerings.
Jeff’s efforts to change his management style would still have been laudable. But hiring a new CSO to sell an uncompetitive product would have been throwing bad money after good. It wouldn’t have helped get the company back on track. A growth mindset would have been much less useful if the facts of the situation had been different — especially if it prevented Jeff from seeing and considering other reasons for the company’s mediocre performance.2
A mindset influences what you see in the situation you face, how you interpret what you see, and how you choose to act. This means:
All mindsets are inaccurate in some way, but some are more useful than others. The problem is that some mindsets are so seriously mismatched with reality that they’re actively awful — they aren’t just less useful, they’re actually counterproductive.
This article is part of a project on not-knowing. Next: Why serious mindset mismatch leads to bad outcomes.
To be clear, a growth mindset is almost always useful because it promotes the double-loop learning that lets people eventually figure out whether their mental models need to be change. My point here is that there are situations in which a growth mindset can be relatively less useful than an alternative mindset that offers a lens through which the world can be seen more clearly (and an interpretive framework and causal model that allows the agent to better achieve their desired outcomes).↩︎