Mental Models That Will Improve the Quality of Your Life

Photo by JJ Ying on Unsplash

When making decisions, our brains use predictions mainly based on past events, and sometimes on anticipated future events. But this way of decision making (baseless guesswork) is erroneous.

Mental metals are systems of decision making formed basing on tested past experiences, and knowledge attained from others (mentors & books). These are like a mental checklist through which you run your ideas and decisions to ensure that you arrive at the best decision possible.

The reason is that doing something according to pre-established check-lists and filters or established rules is more sensible than doing something out of pure emotions.

You need thinking tools, a ‘latticework of mental models’ that you can use to understand life, make decisions, and solve problems. Learning a new mental model gives you a new way to see the world.

Here are some of the best:

Inversion

This is my favorite! Inversion is an excellent tool to help you remove obstacles to success. It’s approach is to attempt to solve a problem from the opposite end of its natural progression. You flip the situation around and think backwards to forward. (1)

Sometimes we are unable to determine what’s going to work but we can try to eliminate what’s not going to work. The hack is to eradicate as many mistakes as possible and then see what’s left.

Compound Interest

This is useful in almost any context, but mostly in finance.

Example — If you’re earning 10 percent a year on your $1. The first year, you make 10 percent, and you end up with $1.10. The next year, you end up with $1.21, and the next year $1.33. It keeps adding onto itself. If you’re compounding at 30 percent per year for thirty years, you don’t just end up with ten or twenty times your money — you end up with thousands of times your money. (2)

If you’re growing a social media business and the percentage growth of your users is compounding at 10% per month, you’ll accumulate millions of users in a very short time.

Black Swans

This is usually applied to probability statistics and was coined by Nassim Taleb in his book Fooled by Randomness. A black swan is an extremely negative or positive event or occurrence that is impossibly difficult to predict.

An example is the 2008 Global Financial Crisis which caused Lehman Brothers to file for bankruptcy, the largest in US history. Over 25,000 Lehman employees went jobless and more than $46 billion of Lehman’s market value was wiped out. In total, over $10 trillion was eventually wiped out in the global equity markets.

Falsifiability

The idea here is that if you can’t prove something wrong, you can’t prove it right either. The hallmark of any scientific prediction is its falsifiability. If a concept doesn’t make falsifiable predictions, it’s not science.

If you can’t decide, the answer is no.

While faced with a difficult choice — in a world full of options, and you’re unable to choose one, then just don’t.

The most important decisions such as which business to start, which person to marry or which city to stay in are usually long-term decisions. It’s very important to only say yes when you’re pretty certain that’s how you want to spend a large portion of your life. (3)

Naval’s Compass

This is also the Run Uphill framework, and is related to hyperbolic discounting.

The heuristic is: if you’re evenly split on a difficult decision, take the path more painful in the short term. (3)

Our brains subconsciously overvalue immediate (and short-term) happiness but instead we should optimize for decisions that have short-term pain. Applying the law of compound interest, the later decisions tend to produce long-term benefits.

Circle of Competence

As much as we have tidbits of information about a broad range of topics, we are often lacking when it comes to topics that demand very specialized knowledge.

Usually, our ego gets the better of us and we are tempted to tackle a topic of which we know just the obvious facts, but don’t really know how those facts are arrived at.
The source of wisdom is to understand our limits, to know our weaknesses and strengths.

Knowing your circle of competence keeps you out of harm’s way and helps you identify and fill in those knowledge gaps.

I never allow myself to have an opinion on anything that I don’t know the other side’s argument better than they do. — Charlie Munger.

Second-Order Thinking

It’s easy to tell the immediate result of our actions. But we often don’t go further to see the consequences of that result. This is typical first-order thinking.

When we explore the effects of the effects of our actions we rarely leave the problem half-solved, as usually is the case when we don’t. We usually make a decision that we think will have a good outcome but more often than not things go awry and we end up with a worse problem to solve.

Warren Buffett used a very apt metaphor once to describe how the second-order problem is best described by a crowd at a parade: 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. (4)

The second-order consequences of your actions and using them to guide your decision making may not pay off in the short term, but it can have very big benefits over the long term.
It is however important to not get paralyzed from taking action (analysis paralysis), because even when we consider second and subsequent effects, we can only go so far.

Occam’s Razor

The idea is that simpler explanations are more likely to be true than complicated ones. This is one of the best logical framework for solving problems.

Instead of wasting your time trying to disprove complex scenarios, you can make decisions more confidently by basing them on the explanation that has the fewest moving parts. (4)

The duck test is a subset of Occam’s razor: If it looks like a duck, if it walks like a duck, if it quacks like a duck, it is probably a duck.

Occam’s Razor helps you to avoid unnecessary complexity by helping you identify and commit to the simplest explanation possible. Without the filter of Occam’s Razor, we are stuck chasing down dead ends. We waste time, resources, and energy. (4)

First Principles Thinking

A first principle is the first basis from which a thing is known.

First principles thinking is an effective strategy for breaking down complicated problems and generating original solutions. Over the years, many great thinkers and entrepreneurs are known to largely employ first principles thinking over analogy because it is a better way to go past inaccurate assumptions.

Thinking from first principles is a process of deconstructing something, testing our assumptions about it and reconstructing it again. You break down a situation into core components and put them all back together in a more effective way.

First principles is useful in innovation and creativity, because after understanding the basic facts, you can improve the components of a system — a piece at time, to serve you in a greater, much better way.

Conclusion

Mental models are imperfect, but ultimately useful. They guide our perception and behavior, ensuring that we arrive faster at the best solution or answer.

“The best mental models are the ideas with the most utility. They are broadly useful in daily life. Understanding these concepts will help you make wiser choices and take better actions. This is why developing a broad base of mental models is critical for anyone interested in thinking clearly, rationally, and effectively.” — James clear

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Stephen Mwesigye

Stephen Mwesigye

Sharing insights on personal growth, intentional living, and kaizen. I’m contributing to make the world better; I think writing is a fun way to do it. 😊