A ‘mental model’ is a abstract representation, construct, or framework that aids in clearer thinking and better understanding of how the world works. It helps simplify broad, complex topics into more easily graspable concepts to guide problem solving. By stripping away the details to focus on the essential concepts, mental models are necessarily reductionistic, and therefore does not represent the subject matter exactly. Although imperfect, models lead to increased acumen, more effective action-taking, and wiser decision-making. They helps us refine our reasoning, make connections in our thinking, and are important tools of the mind. They also aid us in conveying complex thoughts and strategies to others more easily.
The use of mental models is strongly endorsed by modern thought leaders, including Charlie Munger, Elon Musk, and Ray Dalio. The following are some of the ones I believe are most important and I frequently rely upon.
Economics
- Supply and demand
- Economies of scale
- Comparative advantage
- Game Theory
- Opportunity cost/ trade-off’s
- Local/ global optimum
- Scarcity
- Wisdom of the crowd (crowd-sourcing)
- Prisoner’s Dilemma
Decision-Making/ Decision Science
- Cost benefit analysis
- Unintended Consequences: with complex problems, make sure you first do no harm
- Investing/ Risk
- Efficient Market Hypothesis
- Black Swan
- Optionality
- Short-termism
Thinking/ Psychology
- Cognitive biases
- Logical fallacies
- Straw man/ ad-hominem
- False cause
- Appeal to emotion
- Anecdotal
- Slippery slope
- Maslow’s Hierarchy of Needs
- Introversion/ extroversion
- Second-order thinking
- Inversion
- Conditioning (Pavlov response)
- Occam’s Razor
- Hanlon’s Razor: don’t automatically attribute to malice that which can more easily explained by stupidity
- Intelligence
- Metacognition
- Emotional quotient
Engineering
- Leverage
- Break points
- Margin of safety
- Redundancy
- Systems thinking
- Cause and effect
- Feedback loop
- Unintended consequences
- Path dependence
Mathematics
- Normal distribution (bell curve)
- Regression to the mean
- Probability
- Bayes’ Theorem
- Confidence interval
- Power laws
- Levels of abstraction/ performance
- Diminishing returns
- Order of magnitude
- Compounding
- Simulation
- Zero-sum
Science
- Scientific method
- Trial and error
- Controlled experiments
- Observer effect (Schrodinger’s cat)
- False positive/ negative
- Homeostasis (equilibrium)
- Natural selection evolution
- Heredity
- Entropy
- Signalling
- Critical mass/ tipping point
- Catalyst
- Activation energy
- Inertia
- Half life
Management
- Reward and punishment (incentives)
- Scenario analysis
- Diffusion of responsibility/ Directly Responsible Individual
- Impartial observer
- Devil’s advocate
- Dispute resolution
Productivity
- Goal setting
- Pareto Principle (80/ 20 Rule)
My Own Constructions
- Degrees of Probability: conveniently converting quantitative quantiles to colloquial English