How To Think More Clearly: Mental Models 101

4 Mental Models Explained.

A Long Thread ⬇ 👇

Inspiration -- @wealth_director
Mental models are psychological explanations of how things work.

They provide us with a new way to see the world, and as a result, help us to make sense of reality.
Mental models also improve how we think, helping us to simplify complexity and better understand life.
For example, supply and demand is a mental model that helps us to understand the workings of our economy.

Occam’s Razor is a mental model that helps us to seek the simplest solutions to our problems.
Because the world is far too complex to keep all of the details in our brains, so we use mental models to simplify this complexity into bite-sized chunks that are easier to understand.
The quality of our thinking is proportional to the models at our disposal.

Why?

Because the more models you have, the more likely you are to use the right ones to help you to see reality.
Cultivating a broad base of mental models is therefore critical if you want to make better decisions and think more effectively.
However, most people don’t have a broad base of mental models.
Instead, they take the one or two models they do have and look for problems to stick them into.
This is best explained by the old adage, “To the man with a hammer, everything looks like a nail.”
As many people know, the majority of projects require more than a hammer.

That’s why you need a variety of tools at your disposal.

Only then will you be able to get the job done right.
The same is true for thinking.

The quality of our decisions depends on the mental models in our heads.

The problem is, most people are stumbling through life with little more than a hammer.
“When you don’t use mental models, strategic thinking is like using addition when multiplication is available to you.” —
Gabriel Weinberg
Having a variety of mental models at our disposal is particularly important when facing complex problems, as it provides us with an ability to see the world through multiple lenses.
Mental Models: 4 of the best to get you started
1. Inversion--

Inversion is one of the most powerful mental models.
Its origins can be found in the word “invert,” which simply means, turn upside down.

As a thinking tool, it helps to identify and eliminate obstacles to success by tackling them from the opposite end of the natural starting point.
For example, say you were going on a date and you wanted to make a good impression.

Instead of asking yourself, “What three things will make me look good?” ask yourself, “What five things will make me look like an idiot?”
The idea is, rather than thinking about what you want, consider what you’d like to avoid.

Or as Charlie Munger once said, “All I want to know is where I’m going to die, so I’ll never go there.”
Inversion won’t give you the answer to every problem, but it will always improve how you think about it.
2. First principles --

First principles thinking is one of the best ways to reverse-engineer complex problems.

Often called reasoning from first principles, it is the act of boiling things down to their most fundamental truths.
This is done by separating the underlying ideas from any assumptions they might be based on.

A first principle, therefore, is a basic assumption that cannot be deduced any further.
An excellent example of first principles thinking comes via entrepreneur Elon Musk.

In an interview with Kevin Rose, Musk expertly explained how Space X used first principles to innovate at low prices.
In the early days of Space X, Musk was told that “battery packs are really expensive and that’s just the way they will always be.”

Instead of settling for this answer, however, he broke the problem down into its fundamental parts.
First, he identified the material constituents of the batteries.

Then he priced the materials on the London metal exchange and calculated the construction costs.
As it turned out, the cost of building a battery from the bottom-up was only 13.3% of the original price.

By reasoning from first principles, Musk was able to cut through the fog of pre-existing beliefs to see opportunities others had missed.
3. Second-order thinking --

Every action has a consequence, and each of these consequences has further consequences.

These are called second-order effects.
Second-order thinking means thinking about these second-order effects.

In other words, it means thinking about the effects of the effects.
This is a powerful thinking tool because things are not always as they appear.

When we solve one problem, it’s often the case that we inadvertently create another one that’s even worse.
Second-order thinking, however, allows us to examine the long-term consequences of our decisions before we potentially make a bad call.
4. Pareto Principle --

Named after Italian polymath Vilfredo Pareto, who noticed that 80% of Italy’s land was owned by about 20% of its population, the Pareto Principle states that, for many events, roughly 80% of the effects come from 20% of the causes.
For example:

20% of your effort produces 80% of your gains.

20% of your customers produce 80% of your profits.

20% of your sources produce 80% of your happiness.
The point is to recognize that most things in life are not evenly distributed.

As such, to get better results, you should focus on the 20% that provides the greatest gains. In other words, focus on what works and do it better.
It should also be noted that mental models are not evenly distributed.

There are thousands of mental models — some more useful than others — so you can implement the Pareto principle and use the 20% that work best for you.
I promise you this, however, once you start implementing mental models on a daily basis, the process will become more automated, internalized even.

When that happens, it’s a complete game changer, and you can use mental models for everything.
1) Form an opinion

2) Argue against your own theory

3) Repeat #2 Eventually, your mental models will improve.

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