Mental Model: “It’s a blueprint to draw your attention to the important elements of whatever you are facing, and it defines context, background, and direction. You gain understanding even if you lack actual knowledge or experience, and the ability to make optimal decisions.”

“…learn a wide range of mental models (or latticework, as Charlie Munger puts it) to prepare ourselves for whatever may come our way. We can’t learn ones for each individual scenario, but we can find widely applicable ones.”

Chapter 1: Decision-Making for Speed and Context

MM 1: Address Important; Ignore Urgent

“Use to separate true priorities from imposters.”

Mental Model: Eisenhower Decision Matrix

• An urgent task does not mean that it’s important
• You want to focus most of your time on tasks that truly are important
• The Four Types of Tasks
  • Important-Urgent: Do these as soon as possible
  • Important-Not-Urgent: Schedule them to be done
  • Not-Important-Urgent: Delegate for someone else to do if possible
  • Not-Important-Not-Urgent: Eliminate these tasks

MM 2: Visualize All the Dominoes

“Use to make decisions that are as informed as possible.”

Mental Model: Second-Order Thinking

• First-Order Thinking: When you don’t think about any of the consequences of actions. You only focus on what is right in front of you
• Question how actions will affect things in the future. What are the future ramifications?
• Gather information to be as informed as possible

MM 3: Make Reversible Decisions

“Use to strategically remove indecision whenever you can and have an action bias.”

Mental Model: Reversible Decisions

• A Reversible (Type 2) Decision is one that can be undone or easily fixed if it goes wrong
• An Irreversible (Type 1) Decisions is one that cannot be undone or easily fixed
• People make the mistake of spending too much time analyzing reversible decisions – it’s better to move fast and learn from your mistakes if it can be easily fixed later
• Don’t apply the same strict evaluation process for reversible and irreversible decisions
• Note: You still need to make the decision based on facts and logic – not only hopes and aspirations

MM 4: Seek “Satisfiction”

“Use to achieve your priorities and ignore what doesn’t matter.”

Mental Model: Satisfice; Temperance

• A Satisficer is someone who takes only what they need – not more or less
• A maximizer is someone who wants everything they can possibly get
• The enemy of good is perfection – aim for good enough and then move on
• Recognize that you can’t get everything you want in life. Decide what enough is.

MM 5: Stay Within 40-70%

“Use to balance information with action.”

Mental Model: The 40-70% Rule

• When doing things you should aim to land between 40-70%
• Below 40% means you’re sacrificing everything for speed. You will not have done it well enough yet to move on
• Above 70% means you’re trying to hard to reach perfection. Perfection doesn’t exist
• Ex: When learning information to make a decision you will be faster than they very “informed” people and you will be more “informed” than the fast people

MM 6: Minimize Regret

“Use to consult the future you on decisions.”

Mental Model: Regret Minimization Framework

• Make regret a main factor in your decision making
• Imagine yourself at 80 years old → Image looking back → Would you regret not taking the action? Would you regret taking the action?
• It brings clarity on what is important to you

Chapter 2: How to See More Clearly

MM 7: Ignore “Black Swans”

“Use to understand how outliers shouldn’t actually change your thinking.”

Mental Model: Black Swan Theory

• Black Swan: An unpredictable event that creates a massive impact
  • Three elements: It’s a big surprise, it has a major effect, and people try to rationalize it after it happens
• Life is full of risks and some of them are unpredictable (random) – Smart planning is thorough but realizes that some things can’t be planned for
• People try to rationalize the event
  • Gambler’s Fallacy: Rolling a die and thinking that the next roll should be a 7 because you haven’t seen one in a while
  • Trying to create order in something that is random
  • Apophenia: humans try to see patters in random points (seeing animals in clouds)

MM 8: Look for Equilibrium Points

“Use to find real patterns in data and not be fooled.”

Mental Model: Equilibrium

• Diminishing Returns: There are times where the more you put into something, the less you will get out of it. Your results are reaching an equilibrium point where they wont go up anymore

MM 9: Wait for the Regression to the Mean

“Use to find real patterns in data and not be fooled.”

Mental Model: Regression to the Mean

• The mean sort of represents the most common value you’ll see
• In a sequence of events if there are suddenly unusual events then it’s likely that the following events will go back to more ordinary ones (it’ll go back to the common value)

MM 10: What Would Bayes Do (WWBD)?

“Use to calculate probabilities and predict the future based on real events.”

Mental Model: Bayes’ Theorem

• Definition: “…a means for revising predictions in light of relevant evidence, also known as conditional probability or inverse probability.” – Encyclopedia Britannica
• The past information lets you make a prediction. As you learn more information, you should update your prediction.
• P(A|B) = ( P(A) x P(B|A) ) / P(B)
  • This formula uses probabilities from the past to calculate the new probability P(A|B)

MM 11: Do it Like Darwin

“Use to seek real, honest truth in a situation.”

Mental Model: Darwin’s Golden Rule

• The rule: Whenever you find information that is contrary to what you believe you should thoroughly try to understand it so you can know if you’re wrong
• When exposed to information that goes against their beliefs many people choose to ignore it or rationalize it away
• Confirmation Bias: People tend to focus on information that confirms their existing beliefs

MM 12: Think With System 2

“Use to think analytically versus emotionally.”

Mental Model: Thinking Fast vs Thinking Slow; System 1 vs System 2 Thinking

• System 1 (Thinking Fast): Thinking that is fast and saves us energy. It uses short cuts and makes assumptions.
• System 2 (Thinking Slow): Thinking that is slow and takes a lot of energy. It thoroughly analyzes situations.
• System 1 is more likely to succumb to cognitive biases. It uses heuristics to guide its decisions rather than thinking it through
• System 2 is preferred because it gives clearer thinking but you can’t do it all the time. System 1 should still be used for non-important matters

Chapter 3: Eye-Opening Problem-Solving

MM 13: Peer Review Your Perspectives

“Use to understand the consensus view and why you might differ.”

Mental Model: Consensus Opinion

• To help improve your work and decisions, you should have your peers review it and give feedback
• Get the consensus opinion. Triangulate on what others think.

MM 14: Find Your Own Flaws

“Use to scrutinize yourself before others can.”

Mental Models: Introspection; Feedback

• Kill Your Ego
• Find the Third Story: Get the objective opinion
• Don’t succumb to Confirmation Bias

MM 15: Separate Correlation from Causation

“Use to understand what truly needs to be addressed to solve a problem.”

Mental Model: Correlation does not imply Causation

• Correlation: They share the same trend
• Causation: One is the reason the other happened
• When two events that have a similar pattern or behavior, it does not mean that one caused the other
• Try to find the root cause of the situation (rather than proximate causes)

MM 16: Storytell in Reverse

“Use to determine causation more effectively.”

Mental Model: Working Backward

• Fishbone Diagram: A technique to analyze causes. Start with the result. Draw lines representing the categories for causes. Then draw lines for the specific causes on those category lines.
• Start at the end and systematically work backwards to determine reasons for why it happened

MM 17: SCAMPER It

“Use to methodically and creatively solve problems with force-fitting.”

Mental Model: SCAMPER Method

• Seven techniques to think of novel ideas and solutions
• Substitute: See if something else can perform certain parts of the product, process, or service
• Combine: Try to combine parts into one
• Adapt: Try adjusting a part of make it better
• Minimize/Magnify: Try minimizing or magnifying parts of it (ex: make it smaller/bigger, do it more/less, exaggerate/de-emphasize, etc.)
• Put to another use: See if the final product or a part can be used for something else
• Eliminate: Try imagining if a part didn’t exist. Try to do things to eliminate parts.
• Reverse: Try changing the order or the parts in the system

MM 18: Get Back to First Principles

“Use to break preconceptions and find your own solution.”

Mental Model: Arguing From First Principles

• First principles are the fundamental truths
• Many things that we know in life are based on assumptions of what other people have already figured out
• Thinking from first principles means getting rid of all the assumptions. Start from the basic building blocks.

Chapter 4: Anti-Mental Models: How Avoidance Breeds Success

MM 19: Avoid Direct Goals

“Use to find clarity in how to reach your overarching destination.”

Mental Model: Inversion

• This model gives you a change in perspective that can spark new ideas
• Instead for trying to do something, try to not do the opposite
• Ex: Instead of trying to appear intelligent, try to just avoid being stupid
• Ex: Instead of trying to beat your opponent, try to not make mistakes

MM 20: Avoid Thinking Like an Expert

“Use to strategically be able to see both the forest (big picture) and the trees (finer details).”

Mental Model: Goldovsky Error

• Goldovsky Error: Experts are have mastered the details so they tend to think high level. However, this can make them miss mistakes that are in the low level details
• Don’t miss the forrest for the trees. But also don’t miss the trees for the forrest.
• Humble yourself and think like a novice

MM 21: Avoid Your Non-Genius Zones

“Use to decide what you must focus your resources and time on.”

Mental Model: Circle of Competence

• Everyone can learn new skills. However, there are certain areas that you will be better at learning. Focus on those things.
• Know your limitations. Play to your strengths.

MM 22: Avoid To-Do Lists

“Use to direct your attention only to what matters at the moment.”

Mental Model: Analysis Paralysis

• We have so many things on our To-Do Lists that we can overanalyze or not know where to start. We find it difficult to prioritize.
• Try creating a Don’t-Do List – this is where you put items that you’re not going to do ever or maybe just not do now
• Use the Eisenhower Decision Matrix

MM 23: Avoid the Path of Least Resistance

“Use to exercise more self-discipline and willpower.”

Mental Model: Path of Least Resistance

• Important things are usually hard and take effort
• If something is easy be careful that you’re not just taking the path of least resistance and avoiding important work

Chapter 5: Oldies but Goodies: They’re Still Around for a Reason!

MM 24: Murphy’s Law

“Use to make sure matters are not left to chance.”

Mental Model: Murphy’s Law

• “Anything that can go wrong will go wrong.”
• Make sure you plan and create contingency plans

MM 25: Occam’s Razor

“Use to determine the likelihood of anything.”

Mental Model: Occam’s Razor

• “The simplest explanation is usually the correct one.”
• The more factors involved the less probability there is that it’s correct
• Don’t overcomplicate problem solving
• Sometimes situations are complex… but you should start with the simplest explanation and work your way up from there

MM 26: Hanlon’s Razor

“Use to explain actions by giving others the benefit of the doubt.”

Mental Model: Hanlon’s Razor

• “Never attribute to malice that which can be adequately explained by [neglect/incompetence]”
• Don’t make assumptions about someone’s intentions and motivations are. You don’t know what is going on in their head
• Caveat: Don’t be naive and lower your guard. There is evil in the world.

MM 27: The Pareto Principle

“Use to find where your time and resources will create the biggest impact.”

Mental Model: The Pareto Principle

• 20% of the input will account for 80% of the results
• Ex: 20% of your tasks will create 80% of the profit
• Focus on the 20% – they are the most critical

MM 28: Sturgeon’s Law

“Use to be more discerning and protective of your mental resources.”

Mental Model: Sturgeon’s Law

• “90% of everything is crap”
• The mast majority of stuff is low quality – 90% of your thoughts in a day are meaningless. 90% of the information you read is low quality
• Focus on the 10%

MM 29: Parkinson’s Law of Triviality

“Use to stop procrastination and get more done in less time.”

Mental Model: Parkinson’s Law of Triviality; Bikeshedding

• People tend to overanalyze things that don’t matter because it’s easier than actually analyzing the important things that are usually hard to analyze
• Sometimes people procrastinate. Sometimes people don’t have the expertise necessary to discuss the difficult topic.

MM 30: Parkinson’s Law

“Use to stop procrastination and get more done in less time.”

Mental Model: Parkinson’s Law

• “Work expands so as to fill the time available for its completion.”
• When given a simple task and a long time to do it, people will procrastinate and make the task more complex so that it fills the entire time
• When given a simple task and a very short time to do it, people will do just what is necessary without wasting more time
• Set aggressive artificial deadlines on yourself