10 Mental Models that will help you to make better decisions
1. First Principle Thinking
Rethink problems from the ground up by separating underlying facts from assumptions.
1. First Principle Thinking
Rethink problems from the ground up by separating underlying facts from assumptions.
2. Second-Order Thinking
Consider second-level consequences instead of just immediate ones.
Consider second-level consequences instead of just immediate ones.
3. Niches
Specialize in a niche to achieve success, becoming an expert in that area.
Specialize in a niche to achieve success, becoming an expert in that area.
4. Inversion
Look at problems from the endpoint rather than the starting point. Ask what to avoid, not just what to do.
Look at problems from the endpoint rather than the starting point. Ask what to avoid, not just what to do.
5. Leverage
Utilize leverage to magnify impact, as famously stated by Archimedes, "Give me a lever long enough and I shall move the world."
Utilize leverage to magnify impact, as famously stated by Archimedes, "Give me a lever long enough and I shall move the world."
6. Opportunity costs
Think about the costs incurred by choosing one option over all others.
Think about the costs incurred by choosing one option over all others.
7. Margin of Safety
Plan with a safety margin, assuming that assumptions can be wrong.
Plan with a safety margin, assuming that assumptions can be wrong.
8. Occam's Razor
Begin with the simplest explanation based on the fewest assumptions, then explore other explanations if necessary.
Begin with the simplest explanation based on the fewest assumptions, then explore other explanations if necessary.
9. Law of Diminishing Returns
Understand that initially, additional units provide more value, but there's a turning point where added units offer less value and costs rise.
Understand that initially, additional units provide more value, but there's a turning point where added units offer less value and costs rise.
10. Randomness
Acknowledge that not all outcomes have clear cause-and-effect relationships.
Acknowledge that not all outcomes have clear cause-and-effect relationships.
That's it for today.
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If you liked this, you'll love The Psychology of Human Misjudgement.
It's the best Behavioral Finance speech ever.
Grab it here: compounding-quality.ck.page
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