Mental models

This is not an exhaustive list of all mental models. For that you should read the Farnam Street Great Mental Models books. These are the ones I’ve encountered and find useful.

Reversible decisions quickly, irreversible decisions slowly.

Barbell approach

The best way to strike a balance between reward and risk is to invest in the two extremes of high-risk and no-risk assets while avoiding middle-of-the-road choices.

Nothing is black and white, only shades of grey. There are no joints, only overlaps.

Context is that which is scarce. At the margin, we should get more context rather than new ideas.

Texas sharpshooter fallacy

Shooting randomly at the side of a barn, then painting the target around the tightest cluster.

Sunk Cost Fallacy: Investments of time or money to date don’t matter. Only future benefits or costs count.

Clustering illusion: Our brains are pattern and meaning recognizing machines. First regard patterns as pure chance. If there seems to be more, test it statistically.

Story bias: We tend to interpret things with meaning, especially things that seem connected. Stories are more interesting than details. Our lives are mostly series of unconnected, unplanned events and experiences. Looking at these ex post facto and making up an overarching narrative is disingenuous. The problem with stories is that they give us a false sense of understanding, which leads us to take bigger risks and urges us to take a stroll on thin ice. Whenever you hear a story, ask: Who is the sender, what are his intentions, and what does this story leave out or gloss over?

Anchoring: Initial benchmarks affect decision making about later figures. Question benchmarks and examine them from different angles.

The map is not the territory. The map is a pretty picture, but rarely matches the actual location. Similarly, reports of what is happening don’t always match what is happening. Dive in and examine for yourself.

Ladder of inference

Data > Selected Data > Cultural and personal interpretations > generalizations/stereotypes > belief structures/mental models/worldview > actions

Belief structures limit the data we select

Recursion