On mental models, refusing a five billion dollar offer, and petting a cobra

Mental models are ideas of how things are. They are not about how things are in reality – they are beliefs about how things work or should work. People’s mental models can be wrong. If they are, they tend to be persistent, creating problems and at the same time impeding the ability to fix these problems. Here are two real-world stories about mental models.

Andrew’s company

In 2010, Andrew Mason was the CEO of what was at the time called the fastest growing company in history: Groupon.

Mason started Groupon with the help of a former client. While studying public policy at the University of Chicago, he also designed websites. One day in 2006, one of his clients called, businessman Eric Lefkofsky. He said, why don’t you drop out of school, because there is something I want you to do. I give you one million dollars.

His idea was to create a site where consumers could create collectives to raise funds and initiate action. Only when a certain number of people would commit to a cause, they would all donate – a bit like Kickstarter today, but for causes. The site, called thepoint.com, didn’t get much traction. People did not quite know what to do with it – Masons admits it was “too abstract”.

But at some point, users figured out a way how to use the site: they would create campaigns for discounts. When enough people committed to buy something, they would get a discount. Mason didn’t like it – he says “it always felt like kind of the dumbest and least inspiring application of the model compared to what we imagined it being used for, which was power to the people”.

After nine months, there was no growth on the site. Eric Lefkofsky and other investors thought about shutting the site down. During that time, they decided to focus on the idea their users came up with and launched getyourgroupon.com. They would procure discount deals themselves and email it to their users.

Initially, they couldn’t get businesses to sign up, except a bar and pizza restaurant downstairs from their office. Eventually, they ran a discount promotion on a sushi restaurant and sold 500 groupons. As they expanded from Chicago to Boston, they already encountered their first competitor, a site which, as Mason recalls, “literally copied a bunch of the writing on our website”. At some point, Mason says, there were thousands of Groupon clones out there. But more than a threat, this was a driver for the rapid growth of the company, as they realized that if they would not expand fast, the others would get that business.

Always with the idea of thepoint.com in mind, Mason was particular about the principles guiding the site, wanting it to be pro-consumer. At some point during the growth phase, some employees came up with the idea of sending out two emails a day instead of one. Mason was against it, thinking it would annoy people. They did a test, and it turned out that although his users would unsubscribe at a slightly increased rate, the additional purchases would be significant. Mason did not like it. He thought it “took away from the spirit of the site”.

Exponential growth followed and employee numbers exploded. In 2010, two years after he launched the company, Groupon made over a billion dollars in revenues.

Still, he did not like the idea of Groupon as a “dumb coupon company”. When he got an offer by Yahoo, he thought Yahoo was a “graveyard for cool companies”. With the Yahoo offer on the table, he reached out to Google. They made him a five billion dollar buyout offer.

He refused. Groupon was at the peak of its growth, and he decided that they could make more money doing it alone.

Instead of being acquired, they decided to go public a year later. In the 3 months before Groupon was listed on the stock exchange, the negative press started. The media ran stories about strange accounting practices and broadcasted that Groupon is a scam. At some point, Mason spent half of his time trying to contain the media fallout instead of continuing to build the business.

A year later, in 2012, several members of the board wanted Mason to leave. They let him stay if he would deliver good results for the next quarter. But the numbers remained below expectations. Mason knew his time was over and proposed another CEO, whom the board refused. As Mason refused to step down, the board fired him.

Mason’s mental model was a site for public action. It did not work, yet what emerged from it was a spectacular success. But Andrew was conflicted about the business as it emerged, because it did not conform to his mental model. With this fixed idea in mind, he lost grip of the business.

Kai’s world

When Kai was just a few days old, his eyes permanently followed sounds around him. When he was two years old, he had a stroll with his dad in the park. He saw a couple of elderly people who sat on park benches to enjoy the first rays of the sun. He ran to them and hugged their legs. He said nothing, but he smiled. The elderly people on the bench first looked disturbed. As they saw his smile, they laughed and smiled back.

At the age of three, Kai still did not speak. He was hyperactive. In certain places he went berserk. His father consulted the best doctors. They diagnosed Asperger’s syndrome, a form of Autism.

Conventional medical science explained it like this: Autists retreat from the world and appear unmoved, so they have no empathy and cannot understand how others feel. Lack of empathy is a negative trait linked to psychopathy and unsocial behaviour. The recommended treatment: stimulate the brain.

During a vacation with his parents, Kai approached the cobra of a snake charmer and petted it. Kai’s father, brain scientist Henry Markram, was shocked and thought that the problem was perhaps the brain cells which normally inhibit nerve signals. The human brain should inhibit the impulse to pet a snake.

Together with his wife and assistant Tania Rinaldi, Henry Markram conducted experiments with the signal- inhibiting cells of autistic rats. They found nothing. Then Rinaldi had an idea and tried the opposite: she tested the brain cells which amplify nerve signals.

That was it. Signal-amplifying brain cells are high-performance brain cells with a special ability to learn. The brains of autistic kids process 42 percent more input than other kids. Austistic kids do not detach because they do not feel enough, but because they feel too much.

The mental model of Autism was wrong. The recommended treatment for autistic kids was exactly the opposite of what it should have been. Instead of more stimulation, as conventional medicine said, autistic kids need less stimulation: Less television, less computers, less bold colors.

Kai is doing a lot better now.