Tina Sellig, executive director of the Stanford Technology Ventures Program, wrote a stimulating and useful book- What I wish I knew when I was 20.
In this book, she describes how she put the following problem to her students at Stanford:
“What would you do to earn money if all you had was five dollars and two hours?”
If you don’t have time to read the whole thing, just skim and read the words in bold.
The Rules of the Assignment
14 teams were given a sealed envelope. In each envelope was five dollars of “seed funding”. The teams could spend as much time as they wanted planning, but once they opened it, they had only 2 hours to generate as much money as possible.
The teams were given from Wednesday afternoon until Sunday evening to complete the assignment.
On Sunday evening, each team had to send Tina one slide describing what they had done, and on Monday afternoon each team had three minutes to present their money-making scheme to the class.
All teams were encouraged to be entrepreneurial by:
- identifying opportunities
- challenging assumptions
- leveraging limited resources
- being creative
What would you do if you were given this entrepreneurial challenge?
Here are some of the students answers. Let’s consider them in the light of IQ Mindware strategy tutorials for intelligent problem solving.
1. Gambling
Someone usually shouts out :“Go to Las Vegas,” or “Buy a lottery ticket.” This gets a big laugh.
In terms of the ‘expected utilities’ tutorial, these folks are attracted to a very small chance of a big reward – a gambler’s mentality. But this risk is unacceptable in terms of realistic outcomes. If there’s a 1 in a million chance of winning a million dollars this has an expected utility of just $1!
2. Safe but not smart
The next most common idea is to set up a lemonade stand or car wash, using the five dollars to purchase the materials.
This is an ok option for those interested in earning a few extra dollars of spending money in two hours.
But it’s not that smart.
It’s plodding. It doesn’t challenge the assumptions of automatic thinking. It doesn’t show any leveraging, identifying unique opportunities or creativity – all marks of intelligence.
But as Tina Sellig happily reports:
most of my students eventually found a way to move far beyond the standard responses. They took seriously the challenge to question traditional assumptions—exposing a wealth of possibilities—in order to create as much value as possible.
How did they do this?
Mindware strategy tip 1: Re-framing the problem
In the IQ Mindware tutorial on creative problem solving, we learn that effective problem solving often involves challenging automatic assumptions about how the problem should be framed.
The teams that made the most money didn’t use the five dollars at all. They realized that focusing on the money actually framed the problem too narrowly. This results in a kind of fixation on ‘what can we do with $5’, and leads to thoughts of plastic cups and lemonade, etc.
The better students understood that five dollars is essentially nothing. They decided to reinterpret the problem more broadly:
What can we do to make money if we start with absolutely nothing – ignoring the 5 dollars?
Mindware strategy tip 2: Identifying & formulating novel problems
The better students tapped their observation skills and talents, and unlocked their creativity, to identify problems in their midst—problems they might have seen before but had never thought to solve.
These problems were implicit in day to day life – but had not been explicitly formulated for a solution. By identifying and working to solve these novel problems – requiring the exercise of the student’s fluid intelligence (Gf) – the winning teams brought in over $600.
The average return on the nominal $5 investment from the instructor was 4000%!
So what did they do? How did they apply their fluid intelligence and problem solving strategies?
The waiting in lines problem
One group identified a problem common in a lot of college towns—the frustratingly long lines at popular restaurants on Saturday night.
The team decided to help those people who didn’t want to wait in line. They paired off and booked reservations at several restaurants. As the times for their reservations approached, they sold each reservation for up to twenty dollars to customers who were happy to avoid a long wait. That was their novel solution to a problem that no one had explicitly formulated before.
Mindware strategy tip 3: Continual improvement via observation
This team made some interesting observations as the evening wore on that helped them maximize their returns. They engaged in a feedback loop, changing their tactics based on observations, and making more money in the process.
- They realized that the female students were better at selling the reservations than the male students. They adjusted their tactics to harness this fact. The male students ran around town making reservations at different restaurants while the female students sold those places in line.
- They also learned that their operation worked best at restaurants using vibrating pagers to alert customers when their table is ready. Customers were more comfortable handing over their money and pager in exchange for the new pager. Physically swapping pagers possibly made customers feel as if they were getting something concrete their money. So they focused on these restaurants.
The tire pressure problem
Another team took an even simpler approach. Campus was awash with cyclists, and cyclists are generally safety conscious and want to know they have the right tire pressure. So the team set up a stand in front of the student union where they offered to measure bicycle tire pressure for free. If the tires needed filling, they added air for $1.
The idea was experimental. At first they thought they were taking advantage of their fellow students, who could easily go to a nearby gas station to have their tires filled. But after their first few customers, it was clear that the cyclists were grateful for the convenience of the service. It didn’t have to work out this way, but it did!
Mindware strategy tip 4: Continual improvement via experimentation
Halfway through the two-hour period, the team stopped asking for a payment and asked for donations instead. Their income soared. They made much more when their customers were reciprocating for a free service than when asked to pay a fixed price.
Experimenting along the way paid off.
For both smart teams, changes were made in response to customer feedback, allowed them to optimize their strategy on the fly.
Each of these projects brought in a few hundred dollars.
The recruiting problem – Selling advertising space
The team that generated the greatest profit were the smartest – using the most insight in their problem solving strategy. The relevant IQ Mindware tutorial is the one on insight problem solving.
They looked at their resources and opportunities in completely different lenses, did a major reframing of the problem, and made $650.
These students determined that the most valuable asset they had was nothing to do with the $5. Nor was it to do with what they could accomplish in 2 hours to generate revenue. Both of these assumptions constrained the way the problem was to be framed, and they shook themselves free of these assumptions.
Instead, their insight was that their most precious resource was their three-minute presentation time on Monday. They decided to sell it to a company that wanted to recruit the students in the class. Stanford students are in high demand. This smart team reframed the problem in terms of selling advertising space.
The team created a three-minute pitch for that company and showed it to the students during the time they would have presented what they had done the prior week. This was ingenious!
These team – using insight problem solving – realized that they had a superb asset—that others didn’t even notice. It was just waiting to be mined by someone smart!
Relevant IQ Mindware tutorials
- Overcoming automatic responses
- Expected utilities in decision-making
- Representing problems
- Being fixated because of framing
- Insight problem solving
