Notes from The Great Mental Models Volume 1

Jan. 13, 2021 · Matt

A list of notes from the TGMMV1 by Shane Parish.

On acquiring wisdom.

  • I believe in the discipline of mastering the best of what other people have figured out. ~ Charlie Munger

I don’t want to be a great problem solver. I want to avoid problems—prevent them from happening and doing it right from the beginning. ~ Peter Bevelin

  • They are how we infer causality, match patterns, and draw analogies. They are how we think and reason. (Mental Models)
  • In order to see a problem for what it is, we must first break it down into its substantive parts so the interconnections can reveal themselves. This bottom-up perspective allows us to expose what we believe to be the causal relationships and how they will govern the situation both now and in the future. Being able to accurately describe the full scope of a situation is the first step to understanding it.
  • The biggest barrier to learning from contact with reality is ourselves. It’s hard to understand a system that we are part of because we have blind spots, where we can’t see what we aren’t looking for, and don’t notice what we don’t notice.
  • Our failures to update from interacting with reality spring primarily from three things: not having the right perspective or vantage point, ego-induced denial, and distance from the consequences of our decisions.
  • At a high or macro level we are removed from the immediacy of the situation, and our ego steps in to create a narrative that suits what we want to believe, instead of what really happened.

A man who has committed a mistake and doesn’t correct it, is committing another mistake. ~ Confucius

  • We also tend to undervalue the elementary ideas and overvalue the complicated ones.
  • What you need is to understand the principles, so that when the details change you are still able to identify what is really going on.
  • Most geniuses—especially those who lead others—prosper not by deconstructing intricate complexities but by exploiting unrecognized simplicities. ~ Andy Benoit
  • In the real world you will either understand and adapt to find success or you will fail.
  • Understanding reality is the name of the game.
  • We compound the problem of flawed models when we fail to update our models when evidence indicates they are wrong.
  • Not every problem is a nail. The world is full of complications and interconnections that can only be explained through understanding of multiple models.
  • Removing blind spots means thinking through the problem using different lenses or models.
  • The chief enemy of good decisions is a lack of sufficient perspectives on a problem. ~ Alain de Botton

80 or 90 important models will carry about 90 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

I think it is undeniably true that the human brain must work in models. The trick is to have your brain work better than the other person’s brain because it understands the most fundamental models: ones that will do most work per unit. If you get into the mental habit of relating what you’re reading to the basic structure of the underlying ideas being demonstrated, you gradually accumulate some wisdom. ~ Charlie Munger

  • So keep a journal. Write your experiences down. When you identify a model at work in the world, write that down too.
  • At the beginning the process is more important than the outcome.

The map is not the territory

  • Even the best maps are imperfect. That’s because they are reductions of what they represent.
  • In other words, the description of the thing is not the thing itself. The model is not reality. The abstraction is not the abstracted.
  • We run into problems when our knowledge becomes of the map, rather than the actual underlying territory it describes.
  • Reality is messy and complicated, so our tendency to simplify it is understandable. However, if the aim becomes simplification rather than understanding we start to make bad decisions.
  • But what physicists do so well, and most of us do so poorly, is that they carefully delimit what Newtonian and Einsteinian physics are able to explain. They know down to many decimal places where those maps are useful guides to reality, and where they aren’t.
  • The Tragedy of the Commons
  • Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.
  • Having a general map, we may assume that if a territory matches the map in a couple of respects it matches the map in all respects.

Remember that all models are wrong; the practical question is how wrong do they have to be to not be useful. ~ George Box

  • In order to use a map or model as accurately as possible, we should take three important considerations into account: Reality is the ultimate update. Consider the cartographer. Maps can influence territories.
  • Models, then, are most useful when we consider them in the context they were created. What was the cartographer trying to achieve? How does this influence what is depicted in the map?

Circle of Competence

  • If you know what you understand, you know where you have an edge over others. When you are honest about where your knowledge is lacking you know where you are vulnerable and where you can improve.
  • The difference between the detailed web of knowledge in the Lifer’s head and the surface knowledge in the Stranger’s head is the difference between being inside a circle of competence and being outside the perimeter.
  • Having this deep knowledge gives him flexibility in responding to challenges, because he will likely have more than one solution to every problem.
  • If you don’t have at least a few years and a few failures under your belt, you cannot consider yourself competent in a circle.

A little learning is a dangerous thing;

Drink deep, or taste not the Pierian spring:

There shallow draughts intoxicate the brain,

And drinking largely sobers us again.

  • There is no shortcut to understanding. Building a circle of competence takes years of experience, of making mistakes, and of actively seeking out better methods of practice and thought.
  • There are three key practices needed in order to build and maintain a circle of competence: curiosity and a desire to learn, monitoring, and feedback.
  • You can learn from your own experiences. Or you can learn from the experience of others, through books, articles, and conversations.
  • Learn from the mistakes of others. You can’t live long enough to make them all yourself.
  • Keeping a journal of your own performance is the easiest and most private way to give self-feedback.
  • Solicit external feedback. This helps build a circle, but is also critical for maintaining one.
  • How do you operate outside a circle of competence?
    • Learn at least the basics of the realm you’re operating in, while acknowledging that you’re a Stranger, not a Lifer.
    • Talk to someone whose circle of competence in the area is strong.
    • Use a broad understanding of the basic mental models of the world to augment your limited understanding of the field in which you find yourself a Stranger.
  • Whenever we are getting advice, it is from a person whose set of incentives is not the same as ours. It is not being cynical to know that this is the case, and to then act accordingly.

I mean to direct all my actions by good advice and counsel. ~ Queen Elizabeth

  • Each individual stick to their area of special competence, and be very reluctant to stray. (Warren Buffet)
  • On falsifiability: if you can’t prove something wrong, you can’t really prove it right either.
  • We tend to assume that the worst that has happened is the worst that can happen, and then prepare for that. We forget that “the worst” smashed a previous understanding of what was the worst.
  • Applying the filter of falsifiability helps us sort through which theories are more robust. If they can’t ever be proven false because we have no way of testing them, then the best we can do is try to determine their probability of being true.

First Principles Thinking

the only thing I know is that I know nothing ~ Socrates

  • First principles thinking: it’s a tool to help clarify complicated problems by separating the underlying ideas or facts from any assumptions based on them.
  • The foundational knowledge that would not change and that we could build everything else on, from our ethical systems to our social structures. (what to seek)
  • The scientific method has demonstrated that knowledge can only be built when we are actively trying to falsify it.
  • First principles thinking identifies the elements that are, in the context of any given situation, non-reducible.
  • When it comes down to it, everything that is not a law of nature is just a shared belief. Money is a shared belief. So is a border. So are bitcoin. So is love. The list goes on.
  • If we want to identify the principles in a situation to cut through the dogma and the shared belief, there are two techniques we can use: Socratic questioning and the Five Whys.
  • This is a disciplined questioning process, used to establish truths, reveal underlying assumptions, and separate knowledge from ignorance.
  • Socratic questioning generally follows this process:
    • Clarifying your thinking and explaining the origins of your ideas. (Why do I think this? What exactly do I think?)
    • Challenging assumptions. (How do I know this is true? What if I thought the opposite?)
    • Looking for evidence. (How can I back this up? What are the sources?)
    • Considering alternative perspectives. (What might others think? How do I know I am correct?)
    • Examining consequences and implications. (What if I am wrong? What are the consequences if I am?)
    • Questioning the original questions. (Why did I think that? Was I correct? What conclusions can I draw from the reasoning process?)
  • The Five Whys: repeatedly asking “why?”
  • It is about systematically delving further into a statement or concept so that you can separate reliable knowledge from assumption. If your “whys” result in a statement of falsifiable fact, you have hit a first principle. If they end up with a “because I said so” or ”it just is”, you know you have landed on an assumption that may be based on popular opinion, cultural myth, or dogma.
  • First principles thinking helps us avoid the problem of relying on someone else’s tactics without understanding the rationale behind them.
  • You can change the tactics if you know the principles.
  • Reasoning from first principles allows us to step outside of history and conventional wisdom and see what is possible.

Thought Experiment

“devices of the imagination used to investigate the nature of things.”

  • Its chief value is that it lets us do things in our heads we cannot do in real life, and so explore situations from more angles than we can physically examine and test for.
  • A thought experiment generally has the following steps:
    • Ask a question
    • Conduct background research
    • Construct hypothesis
    • Test with (thought) experiments
    • Analyze outcomes and draw conclusions
    • Compare to hypothesis and adjust accordingly (new question, etc.)
  • Few areas in which thought experiments are tremendously useful.
    • Imagining physical impossibilities
    • Re-imagining history
    • Intuiting the non-intuitive
  • When we say “if money were no object” or “if you had all the time in the world,” we are asking someone to conduct a thought experiment because actually removing that variable (money or time) is physically impossible.
  • The Trolley Experiment
  • Intuiting the non-intuitive: One of the uses of thought experiments is to improve our ability to intuit the non-intuitive. In other words, a thought experiment allows us to verify if our natural intuition is correct by running experiments in our deliberate, conscious minds that make a point clear.
  • Reduce the Role of Chance
  • Thought experiments tell you about the limits of what you know and the limits of what you should attempt.
  • We often make the mistake of assuming that having some necessary conditions in place means that we have all of the sufficient conditions in place for our desired event or effect to occur. The gap between the two is the difference between becoming a published author and becoming J.K. Rowling.
  • What’s not obvious is that the gap between what is necessary to succeed and what is sufficient is often luck, chance, or some other factor beyond your direct control.
  • The set of conditions necessary to become successful is a part of the set that is sufficient to become successful. But the sufficient set itself is far larger than the necessary set. Without that distinction, it’s too easy for us to be misled by the wrong stories.

Second-Order Thinking

  • Very often, the second level of effects is not considered until it’s too late. This concept is often referred to as the “Law of Unintended Consequences” for this very reason.
  • Second-order thinking teaches us two important concepts that underlie the use of this model. If we’re interested in understanding how the world really works, we must include second and subsequent effects. We must be as observant and honest as we can about the web of connections we are operating in. How often is short-term gain worth protracted long-term pain?
  • Second-Order Problem: Once a few people decide to stand on their tip-toes, everyone has to stand on their tip-toes. No one can see any better, but they’re all worse off.
  • Two areas where second-order thinking can be used to great benefit:
    • Prioritizing long-term interests over immediate gains
    • Constructing effective arguments
  • Being aware of second-order consequences and using them to guide your decision-making may mean the short term is less spectacular, but the payoffs for the long term can be enormous.
  • Arguments are more effective when we demonstrate that we have considered the second-order effects and put effort into verifying that these are desirable as well.
  • Second-order thinking, as valuable as it is, must be tempered in one important way: You can’t let it lead to the paralysis of the Slippery Slope Effect, the idea that if we start with action A, everything after is a slippery slope down to hell, with a chain of consequences B, C, D, E, and F.
  • Thus we need to avoid the slippery slope and the analysis paralysis it can lead to. Second-order thinking needs to evaluate the most likely effects and their most likely consequences, checking our understanding of what the typical results of our actions will be.

Probabilistic Thinking

The theory of probability is the only mathematical tool available to help map the unknown and the uncontrollable. ~ Benoit Mandelbrot

  • Probabilistic thinking is essentially trying to estimate, using some tools of math and logic, the likelihood of any specific outcome coming to pass.

  • Three important aspects:

    • Bayesian thinking
    • Fat-tailed curves
    • Asymmetries
  • The core of bayesian thinking: given that we have limited but useful information about the world, and are constantly encountering new information, we should probably take into account what we already know when we learn something new. As much of it as possible.

  • When making uncertain decisions, it’s nearly always a mistake not to ask: What are the relevant priors? What might I already know that I can use to better understand the reality of the situation?

  • Conditional Probability

  • In a curve with fat tails, like wealth, the central tendency does not work the same way. You may regularly meet people who are ten, 100, or 10,000 times wealthier than the average person.

  • Asymmetries: Finally, you need to think about something we might call “metaprobability”—the probability that your probability estimates themselves are any good.

  • How do we benefit from the uncertainty of a world we don’t understand, one dominated by “fat tails”?

  • We can think about three categories of objects: Ones that are harmed by volatility and unpredictability, ones that are neutral to volatility and unpredictability, and finally, ones that benefit from it.

  • For the rare and impactful events in our world, predicting is impossible! It’s more efficient to prepare.

  • Upside optionality: seeking out situations that we expect have good odds of offering us opportunities.

  • Learn how to fail properly:

    • never take a risk that will do you in completely. (Never get taken out of the game completely.)
    • develop the personal resilience to learn from your failures and start again.
    • No one likes to fail. It hurts. But failure carries with it one huge antifragile gift: learning.
  • Causation vs. Correlation

  • We notice two things happening at the same time (correlation) and mistakenly conclude that one causes the other (causation).

  • Trying to invert the relationship can help you sort through claims to determine if you are dealing with true causation or just correlation.

  • We often mistakenly attribute a specific policy or treatment as the cause of an effect, when the change in the extreme groups would have happened anyway.


The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function. ~ F. Scott Fitzgerald

  • The root of inversion is “invert,” which means to upend or turn upside down. As a thinking tool it means approaching a situation from the opposite end of the natural starting point.
  • Think of it this way: Avoiding stupidity is easier than seeking brilliance. Combining the ability to think forward and backward allows you to see reality from multiple angles.
  • There are two approaches to applying inversion in your life.
    • Start by assuming that what you’re trying to prove is either true or false, then show what else would have to be true.
    • Instead of aiming directly for your goal, think deeply about what you want to avoid and then see what options are left over.
  • Instead of thinking through the achievement of a positive outcome, we could ask ourselves how we might achieve a terrible outcome, and let that guide our decision-making.
  • Instead, we can try inverting the goal. It becomes, not getting rich, but avoiding being poor. Instead of trying to divine the decisions that will bring wealth, we first try to eliminate those behaviors that are guaranteed to erode it.
  • Force field analysis:
    • Identify the problem
    • Define your objective
    • Identify the forces that support change towards your objective
    • Identify the forces that impede change towards the objective
    • Strategize a solution!
  • Think about not only what you could do to solve a problem, but what you could do to make it worse—and then avoid doing that, or eliminate the conditions that perpetuate it.
  • It became not so much “how do we fix this problem,” but “how do we stop it from happening in the first place.”
  • Simply invert, always invert, when you are stuck.

Occam's Razor

Anybody can make the simple complicated. Creativity is making the complicated simple. ~ Charles Mingus

  • Simpler explanations are more likely to be true than complicated ones.
  • We get caught up in assuming vast icebergs of meaning beyond the tips that we observe.
  • We should prefer the simplest explanation with the fewest moving parts. They are easier to falsify, easier to understand, and generally more likely to be correct.
  • The simpler explanation is more robust in the face of uncertainty.

When you hear hoofbeats, think horses, not zebras.

  • One important counter to Occam’s Razor is the difficult truth that some things are simply not that simple.
  • An explanation can be simplified only to the extent that it can still provide an accurate understanding.

Hanlon's Razor

I need to listen well so that I hear what is not said. ~ Thuli Madonsela

  • We should not attribute to malice that which is more easily explained by stupidity.
  • The famous Linda problem
  • Thus, Kahneman and Tversky showed that students would, with enough vivid wording, assume it more likely that a liberal-leaning woman was both a feminist and a bank teller rather than simply a bank teller. They called it the “Fallacy of Conjunction.”
  • We’re deeply affected by vivid, available evidence, to such a degree that we’re willing to make judgments that violate simple logic. We over-conclude based on the available information.
  • On October 27, 1962, Vasili Arkhipov stayed calm, didn’t assume malice, and saved the world.
  • The Devil Fallacy: You have attributed conditions to villainy that simply result from stupidity….