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Source: Farnam Street
Published: 2019

Mental Models

Circulated: August 5, 2019

Mental models give you a frame of mind with which to view the world. We use models to break a problem into understandable and organizable pieces.

“You can’t really know anything if you just remember isolated facts. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form. You’ve got to have models in your head.” — Charlie Munger, Vice Chairman of Berkshire Hathaway

Mental models you can use:

  • First principles thinking: separating the underlying facts from any assumptions based on them.
  • Second-order thinking: considering our actions, their immediate consequences, and the subsequent effects of those actions.
  • Probabilistic thinking: Estimating the likelihood of any specific outcome coming to pass.
  • Inversion: approaching a situation from the opposite end of the natural starting point and thinking backwards.
  • Occam’s Razor: base your decisions on the explanation that has the fewest moving parts; simpler explanations are more likely to be true.
  • Pareto Principle: a small amount (20%) of some phenomenon causes a disproportionally large effect (80%).

  • Tragedy of the Commons: in a system where a common resource is shared, with no individual responsible for the wellbeing of the resource, it will tend to be depleted over time.

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