THREAD: 5 powerful mental models to help you win in a competitive world.

In investing, business, startups, writing, or life...
First Principles Thinking

“The first basis from which a thing is known.”

Establish foundational truths. Build from there.

In a world of unimaginative, copycat solutions, leveraging first principles thinking is key to achieving non-linear outcomes.
Second-Order Thinking

“And then what?”

Look past the first-order effects of a decision. Deeply examine the second, third, and N-th order effects.

It will lead to asymmetric opportunities and non-linear outcomes.
Circle of Competence

Know what you know and what you don’t.

Identify your circle and its boundaries. Be ruthless in protecting it.

Hint: it’s usually smaller than you think.
Occam’s Razor

Simple is beautiful.

When weighing alternative hypotheses, the one with the fewest necessary assumptions should be chosen.

The Eighth Wonder of the World.

All of the greatest gifts in life are a direct result of compound interest.

Get it started. Do not interrupt it. Reap the rewards.
If you enjoyed this, follow me for more educational threads on business, money, finance, and economics. You can find all of my threads in the meta-thread below.

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More from @SahilBloom

15 Jan
Dunning-Kruger Effect 101

In a year when the markets have minted many new self-proclaimed geniuses, it is worth remembering the Dunning-Kruger Effect.

But what is the Dunning-Kruger Effect and how does it work?

Here's Dunning-Kruger Effect 101!

👇👇👇 Visualization Credit: @JackButcher @VisualizeValue @Value
1/ First, a few definitions.

The Dunning-Kruger Effect is a cognitive bias in which people with low ability at a given task are prone to overestimate their ability at that task.

Put simply, humans are notoriously incapable of objective evaluation of their competency levels.
2/ The cognitive bias was first identified by psychologists David Dunning and Justin Kruger in a 1999 study.

Their paper, entitled Unskilled and Unaware of It, summarized, "People tend to hold overly favorable views of their abilities in many social and intellectual domains."
Read 17 tweets
6 Jan
Circle of Competence 101

Warren Buffett and Charlie Munger often reference the importance of knowing the boundaries of your circle of competence.

But what is a Circle of Competence and how does it work?

Here's Circle of Competence 101! Image
1/ First, a few definitions.

A Circle of Competence is the set of topic areas that align with a person's expertise.

If the entire world of information were to be expressed in a circle, an individual's Circle of Competence is the small sub-circle that represents their expertise. Photo Credit: @hnshah
2/ The idea surfaced in the 1996 BH annual letter.

"You don’t have to be an expert on every only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital." Image
Read 16 tweets
2 Jan
Robert Smalls was born into slavery but would go on to become a hero of the Civil War, a successful entrepreneur, and a U.S. congressman.

His journey is one you have to read to believe.

Who's up for a story?

1/ Robert Smalls was born on April 5, 1839 in Beaufort, South Carolina.

His mother, Lydia Polite, was a house worker enslaved by a man named Henry McKee.

It is widely believed that McKee was Robert's father, which afforded him preferential treatment in his early years.
2/ While she had worked in the McKee household as an adult, Robert's mother had grown up working in the fields.

Not wanting her son to be blind to the plight of the other slaves, Lydia Polite requested that he be exposed to this work.

This experience was formative for Robert.
Read 18 tweets
31 Dec 20
In 2020, in addition to my educational threads, I shared a number of story threads on history, business, and entrepreneurs.

Why? I believe storytelling has the power to educate, amaze, and inspire.

Here are my five favorites. Tag a friend to share! Who’s up for a story?

Read 8 tweets
29 Dec 20
If you could spend a day with one person from history, who would it be and why?
Some amazing replies here. To clarify, the person can definitely still be alive!
Most frequent responses so far:

Business - Steve Jobs
World Leaders - Benjamin Franklin, Mandela, Napoleon
Religion - Jesus, Prophet Muhammad, Moses
Science/Math - Leonardo da Vinci, Tesla, Einstein
Sports/Culture - Muhammad Ali
Read 4 tweets
25 Dec 20
This year, I shared 70+ educational threads on business and finance.

It was all free. I believe education is a fundamental human right and this was my way of giving back.

Here are my 5 favorite threads. Tag a loved one to regift and share the wealth! Merry Christmas!

Read 7 tweets

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