Many models, not one

Their wordsyou can’t really know anything if you just remember isolated facts and try and bang ’em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.

Their wordsAround 2003 I came across Charlie Munger’s 1995 speech, The Psychology of Human Misjudgment, which introduced me to how behavioral economics can be applied in business and investing. More profoundly, though, it opened my mind to the power of seeking out and applying mental models across a wide array of disciplines.

Their wordsThe 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.

Their wordsMost of the mental models on this list are here because they are useful outside of their specific discipline. For example, use of the mental model “peak oil” isn’t restricted to an energy context.

Their wordsThe best ideas often arise when going cross-dicipline.

Their wordsOf all the mental models humankind has generated throughout history, there are just a few dozen that you need to master to have a firm grasp of how the world works.

Their wordsThere are thousands of mental models, but the best ones apply broadly to life and are useful in a wide range of situations.

Their wordsThere is a much smaller set of concepts, however, that come up repeatedly in day-to-day decision making, problem solving, and truth seeking.

Their wordsI find mental models are useful to try to make sense of things and to help generate ideas. To actually be useful, however, you have to apply them in the right context at the right time. And for that to happen naturally, you have to know them well and practice using them.

Their wordsMental models are imperfect, but useful. There is no single mental model from physics or engineering, for example, that provides a flawless explanation of the entire universe, but the best mental models from those disciplines have allowed us to build bridges and roads, develop new technologies, and even travel to outer space.

Their wordsYou go to Farnam Street, you go to Poor Charlie’s Almanack, and you can learn all the different mental models. But which ones matter more? Which ones do you apply more often? Which ones matter in which circumstances? That’s actually the hard part.

Their wordsI think mental models are interesting, but I don’t think explicitly in terms of mental-model checklists. I know Charlie Munger does, but that’s just not how I think. Instead, I tend to focus on the few lessons I’ve learned over and over in life that I think are incredibly important and seem to apply almost universally.

Their wordsyou’ve got to have multiple models—because if you just have one or two that you’re using, the nature of human psychology is such that you’ll torture reality so that it fits your models, or at least you’ll think it does.

Their wordsIt’s like the old saying, “To the man with only a hammer, every problem looks like a nail.” And of course, that’s the way the chiropractor goes about practicing medicine. But that’s a perfectly disastrous way to think and a perfectly disastrous way to operate in the world. So you’ve got to have multiple models.

Their words80 or 90 important models will carry about 90% of the freight in making you a worldly-wise person. And, of those, only a mere handful really carry very heavy freight.

Their wordsMan-with-a-hammer tendency does not exempt smart people like Blanchard and Skinner. And it won’t exempt you if you don’t watch out.

Their wordsIf he reduces the number of skills he practices and, therefore, the number of skills he retains, he will naturally drift into error from man with a hammer tendency. His learning capacity will also shrink as he creates gaps in the latticework of theory he needs as a framework for understanding new experience.

Their wordsIn general, learning is most easily assimilated and used when, life long, people consistently hang their experience, actual and vicarious, on a lattice- work of theory answering the question: Why?

Their wordsAnd it doesn’t help you just to know them enough just so you can prattle them back on an exam and get an A. You have to learn these things in such a way that they’re in a mental latticework in your head and you automatically use them for the rest of your life.

Their wordsI think you can learn more about money by reading about politics military history biology sociology than you will by reading a finance book because you're just trying to figure out how do people make decisions how do you make decisions and how do other people make decisions and by and large you're not going to learn that in an economics textbook but you will learn about it by reading all of these other fields that have nothing to do with money

Their wordsThe work of Philip Tetlock, PhD and others has shown that people who have one big idea to explain everything (“hedgehogs” or ideologues) are very bad at accurately modeling the world, predicting outcomes, and recommending effective actions.