Order of magnitude
Reason in powers of ten. Avoid false precision.
Enrico Fermi's tool. Most important questions in business and life don't need a precise answer. They need an answer that's right within an order of magnitude. Is the cost $1k, $10k, $100k or $1M? Is the market 100 customers, 10,000, or 1 million? The factor-of-10 answer is usually all you need to decide.
The discipline is to actively work in orders of magnitude rather than chasing false precision. "It's somewhere between $50k and $500k" is usually a more useful answer than "$237k." The first answer is honest about uncertainty. The second pretends to know more than it does and is usually wrong anyway.
Fermi problems (estimate the number of piano tuners in Chicago, the volume of all the human breath ever taken) are training for this. Most operators get much better at decision-making by practising Fermi estimation regularly.
Examples in the wild
Annual budget conversations often anchor on "how much exactly" when the right level of detail is "which order of magnitude." The wasted hours on precision in unstable forecasts add up.
Valuation disagreements between bull and bear often span an order of magnitude. Whose order of magnitude is right matters more than the second decimal place.
Salary negotiations: knowing the right order of magnitude for your role in your market matters more than haggling over single percent.
Order of magnitude is one of the mental models we apply through real cases inside the Pareto MBA — a part-time program for professionals who want to think clearly about business.