In my quest to maximize my life and help others achieve the same, I’ve found two skills that offer the strongest foundation. It pays to improve these every chance you get.
- Asking better questions
- Making better decisions
This guide focuses on helping you achieve the latter: make better decisions. This leads to fewer mistakes and better results in life and in business.
How?
By exploring everything you need to know about mental models.
On this page you’ll learn:
Table of Contents
What Are Mental Models?
Mental models are how we understand the world. They’re representations that help explain “why” and predict “how” people are likely to behave in certain situations. Mental models are frameworks that simplify complexity, shape the connections and opportunities we see, and why we consider some things more important than others.
A mental model serves as a shortcut for reasoning, based on experience and patterns in reality that show up again and again.
Why Are Mental Models Important?
“The chief enemy of good decisions is a lack of sufficient perspectives on a problem.” – Alain de Botton
“If all you have is a hammer, everything looks like a nail.” – Abraham Maslow
Regardless of your job, the more tools you have at your disposal, the more likely – and more easily – you can solve any problem that comes your way.
Doing handiwork, would you rather have (1) a hammer or (2) a toolbox with hammers, screwdrivers, pliers, hex keys, tape measure and a utility knife?
To improve your athletic ability, would you rather (1) do squats exclusively or (2) do a combination of strength exercises targeting different muscle groups, cardio training, speed and agility drills, and mobility and flexibility exercises?
Would you rather (1) have a TV or radio with one channel or (2) a streaming service that allows you to watch whatever you want, whenever you want?
Would you rather (1) have an old cellphone or (2) a smartphone that allows you to call, text, browse the internet, take pictures, videos, notes, measure your heart rate, and serve as a calculator, alarm and stopwatch?
The same applies to our thinking.
If we only have one perspective through which we view the world, we severely limit our ability to make good decisions. Like the person with only a hammer, who only does squats, who only has 1 TV channel or who only has an old cellphone: they can deal with any problem in only one way. This often leads to one of two things: getting stuck or making a mistake.
The secret to great thinking, then, is simple: master more mental models.
Do that and you’ll have a bigger toolbox, access to a larger variety of perspectives and the ability to deal with anything life throws at you successfully.
The result?
Better decisions, fewer mistakes, more problems solved, and better able to understand life.
The good thing?
It’s a skill that can be learnt, and improved, by mastering more mental models.
Master them and you’ll be one step closer – on a mental level – to the following greats:
- Greek philosopher Aristotle
- Italian artist (among many other things) Leonardo da Vinci
- English playwright William Shakespeare
- Founding Father Benjamin Franklin
- Nobel laureate and physicist Richard Feynman
- Nobel laureate and pioneer in computer science Herbert Simon
- Billionaire investors Warren Buffett and Charlie Munger
- Amazon founder Jeff Bezos
- Tesla and SpaceX CEO Elon Musk
- Famous entrepreneur and investor Naval Ravikant
Like them, it pays to be a fox, not a hedgehog.
Be a generalist, not a specialist. Or be a specialist with the ability to think like a generalist. Have an open mind rather than a closed mind. Have practical wisdom.
Building a Latticework of Mental Models to Think Better
“What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ‘em back. 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. And you’ve got to array your experience – both vicarious and direct – on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and fail in life. You’ve got to hang experience on a latticework of models in your head.” – Charlie Munger
“The models have to come from multiple disciplines – because all the wisdom of the world is not to be found in one little academic department. But, fortunately, it isn’t that tough – because eighty or ninety important models will carry about ninety percent of the freight in making you a worldly-wise person. And, of those, only a mere handful really carry very heavy freight.” – Charlie Munger
In my pursuit to make better decisions, I’ve spent hundreds, if not thousands, of hours studying, reading, experimenting with and applying mental models throughout my life to find the few dozen that matter.
To help you make better decisions and build your own latticework of mental models, I’ve collected and summarized the ones I’ve found most useful.
Remember: building your latticework is a lifelong project of learning and experimentation. Stick with it, and you’ll find that your ability to understand reality, make consistently good decisions, and help those you love will always be improving.
The Core Mental Models
1. Inversion
The process of looking at a problem backwards. For example, instead of brainstorming forward ideas, imagine everything that could make your project go terribly wrong.
4. Probabilistic Thinking (incl. Decision Tree, Expected Value, Risk Aversion, Monty Hall Problem, Bayes’ Theorem)
5. Circle of Competence (in management: Core Competency)
6. Compounding
8. Pareto Principle and Power Laws
An extension: Regret Minimization
10. Occam’s Razor
If we face two possible explanations which make the same predictions, the one based on the least number of unproven assumptions is preferable until more evidence comes along.
11. Hanlon’s Razor
The Mental Models of Psychology and Human Nature
1. Bias from Incentives (see Biology – Incentive)
2. Classical Conditioning / Pavlovian Association
You’ve probably heard about Pavlov’s dog. Classical conditioning is a learning method in which a biologically potent stimulus—such as food—is paired with a previously neutral stimulus—let’s say a bell. The neutral stimulus comes to create a response (salivation) that is usually similar to the one created by the potent stimulus (in this case, food).
3. Operant conditioning (Skinner)
A learning process where the strength of a behaviour is modified by reinforcement or punishment.
4. Influence of Stress (see Systems – Break Points)
5. Loss Aversion
People’s tendency to prefer avoiding losses to acquiring equivalent gains. We are basically more upset about losing $10 than we are happy about finding $10.
6. Hyperbolic Discounting
A model which states that, given two similar rewards, people show a preference for one that arrives sooner rather than later.
- Anchoring / Framing
- a cognitive bias where an individual relies too heavily on an initial piece of information—the “anchor”—when making decisions
- Survivorship Bias
- the logical error of concentrating on the people that made it past some selection process and overlooking those that did not, typically because of their lack of visibility. Happens often in entrepreneurship.
8. First-Conclusion Bias
9. Tendency to Overgeneralize from Small Samples
10. Representativeness Heuristic
- Failure to Account for Base Rates
- Tendency to Stereotype
- Failure to See False Conjunctions
11. Illusion of control (see Mathematics – Randomness)
The tendency for people to overestimate their ability to control events.
12. Tendency to Want to Do Something (Fight/Flight, Intervention, Demonstration of Value)
13. Social Proof and Conformity (Safety in Numbers; Bandwagon; Tribalism)
A way of thinking in which people are loyal to their social group above all else.
15. Commitment & Consistency Bias
The desire to be and appear consistent with what we have already done.
16. Tendency to Overestimate Consistency of Behaviour
17. Denial
18. Sensitivity to Fairness
19. Tendency to Feel Envy & Jealousy + Relative Satisfaction / Misery Tendencies (incl. FOMO)
20. Tendency to Distort Due to Liking/Loving or Disliking/Hating
A psychological phenomenon by which people tend to develop a preference for things merely because they are familiar with them.
21. Narrative Instinct
22. Curiosity Instinct
23. Hindsight Bias
24. Falsification / Confirmation Bias
25. Hierarchy of needs
A five-tier model of human needs, often depicted as a pyramid, in which needs lower down in the hierarchy must be satisfied before people can attend to needs higher up. In order, the needs are physiological needs, safety needs, love and belonging, esteem, and self-actualisation.
There are many, many more biases and tendencies that affect our decision-making. The above are a select few that I consider essential to know.
The Mental Models of Physics and Chemistry
1. Relativity
2. Reciprocity (also applies to our Psychology)
3. Thermodynamics & Entropy
Entropy: Measures how much energy is spread out in a process, or how widely spread out it becomes – at a specific temperature
4. Leverage (One Level Higher)
Also called the law of the lever, it’s a measure of how much your strength is amplified by using a tool or mechanical device.
5. Inertia (incl. Psychology – Status Quo Bias)
A preference for the current state of affairs, where the current baseline is taken as a reference point, and any change from that baseline is perceived as a loss.
7. Catalysts & Autocatalysis
A substance that facilitates a chemical reaction but is not itself affected by it. Catalysts are like jaywalking pedestrians who cause car accidents but walk away from them without being affected. But unlike the disruptive pedestrians, catalysts are essential to the smooth functioning of thousands of chemical processes. (The Wizard and the Prophet)
Autocatalysis: A process in chemistry whereby once something gets going, it speeds up and keeps going on its own. This can’t go on forever, but it’s a useful model for finding ways where doing A can also get you B and C for a while.
9. Velocity
10. Alloying
11. The Scientific Method (Induction and Deduction)
12. Atomic Theory
The Mental Models of Biology
1. Evolution – Natural selection, variation and extinction
2. Evolution – adaptation and The Red Queen Effect
3. Ecosystems
4. Niches
5. Self-preservation (survival instinct)
6. Replication and Heredity
7. Cooperation
9. Tendency to Minimize Energy Output (mental & physical)
10. Incentives
Something that motivates or encourages someone to do something.
11. Signalling
The science of determining whether people with conflicting interests should be expected to provide honest signals rather than cheating.
12. Carrying Capacity
The weight or volume of material that can be transported by some type of vehicle. (The Wizard and the Prophet)
13. Neuroplasticity
The Mental Models of Systems Thinking and Engineering
1. Feedback loops (positive – domino or snowball effect, negative – cascading failure, runaway feedback loop = autocatalysis)
3. Emergence
5. Break Points (see Psychology – Stress)
7. Redundancy
The duplication of critical components of a system with the intention of increasing its reliability. For example, a backup or a fail-safe.
8. Bottlenecks (Theory of Constraints)
9. Proximate vs Root Cause (5 Whys; False Cause; correlation does not imply causation)
10. Scale
The cost advantages that businesses obtain due to their scale of operation. The larger the scale, the smaller the cost per unit.
11. Critical mass
12. Law of Diminishing Returns
13. Churn
14. Algorithms (If-Then)
15. Technical Debt
The Mental Models of Mathematics and Numeracy
1. Distributions
A theory which states that averages of samples of observations of random variables become normally distributed when the number of observations is sufficiently large.
Contrast with Power Laws – exponential distribution.
2. Sampling
3. Randomness (see Psychology – Illusion of Control)
6. Multiplying by Zero
7. Equivalence | Permutations and Computations
8. Surface Area
9. False Positives and False Negatives
10. Inflection Point (incl. Technology Adoption Lifecycle, see Systems Thinking – Critical Mass)
The Mental Models of Business and Economics
3. Trademarks, Patents and Copyrights
4. Comparative Advantage
The ability to carry out a particular economic activity – such as making a specific product – more efficiently than another activity.
5. Specialization (Pin Factory)
6. Seizing the Middle
7. Utility (Marginal, Diminishing, Increasing)
8. Principal-Agent Problem / Bribery
10. Arbitrage
11. Supply and Demand (and break-even analysis)
An economic model which postulates that, in a competitive market, the unit price for a particular good or service will vary until it settles at a point where the quantity demanded will equal the quantity supplied, resulting in an equilibrium for price and quantity transacted.
12. Scarcity
The limited availability of a commodity, which may be in demand in the market. Basically, when something is in short supply.
13. Game Theory (see Biology – Cooperation)
An umbrella term for the science of logical decision-making in humans, animals, and computers.
- Nash Equilibrium
- Prisoner’s Dilemma
14. Sunk Cost
15. Reversible vs Irreversible Decisions
16. Efficient Market Hypothesis vs Mr. Market
Efficient market hypothesis: a theory that states that prices fully reflect all available information. The hypothesis implies that is should be impossible to consistently beat the market, since market prices should only react to new information.
17. Diversification
The process of allocating your resources in a way that reduces the exposure to any one particular risk.
18. Surfing or ‘riding the wave’
19. Minimum Viable Product (MVP) (MLP)
The Mental Models of Military and War
1. Seeing The Front / Map/Territory model
5. Mutually Assured Destruction
6. Attrition (see Systems Thinking – Churn)
How to Use Mental Models
Building your latticework of mental models is a lifelong project.
To continue your studies:
- Study the fundamentals of seemingly unrelated fields.
- Read the stories of great people – Feynman, Simon, Da Vinci, Franklin
- Read great books. Below you’ll find a list to get you started.
Then apply what you’ve learnt:
- Run your life, systems and decisions through your mental models as if you’re assessing somebody else’s life.
- Ask yourself provoking questions, particularly “what if” questions.
- Gather contrarian information to test your thinking with facts – like Charles Darwin.
- Inquire into other’s thinking and challenge their views.
- Resist jumping to conclusions and suspend assumptions.
- Look for recurring thought patterns and unlearn them.
These help you find areas for improvement: how to further your learning or which areas to avoid.
“All I want to know is where I’m going to die so I’ll never go there.” – Charlie Munger
7 Best Mental Models Books
- Seeking Wisdom by Peter Bevelin
- Poor Charlie’s Almanack by Charles Munger (including the excellent Psychology of Human Misjudgment)
- Influence: The Psychology of Persuasion by Robert Cialdini
- Thinking, Fast and Slow by Daniel Kahneman
- The Personal MBA by Josh Kaufman
- Models Of My Life by Herbert Simon
- The Effective Executive by Peter Drucker
Want more? Browse my full list of the best books.
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