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Decision Making

Poker, Speeding Tickets, and Expected Value: Making Decisions in an Uncertain World

You can train your brain to think like CEOs, professional poker players, investors, and others who make tricky decisions in an uncertain world by weighing probabilities. All decisions involve …

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All Models Are Wrong

How is your journey towards understanding Farnam Street’s latticework of mental models going? Is it proving useful? Changing your view of the world? If the answer is that it’s going well that’s good. …

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Get Smart: Three Ways of Thinking to Make Better Decisions and Achieve Results

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” — Abraham Lincoln *** Your ability to think clearly determines the decisions you make and the …

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Do Algorithms Beat Us at Complex Decision Making?

Decision-making algorithms are undoubtedly controversial. If a decision is being made that will have a major influence on your life, most people would prefer a human make it. But what if algorithms …

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The Probability Distribution of the Future

The best colloquial definition of risk may be the following: “Risk means more things can happen than will happen.” We found it through the inimitable Howard Marks, but it’s a quote …

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Moving the Finish Line: The Goal Gradient Hypothesis

Imagine a sprinter running an Olympic race. He’s competing in the 1600 meter run. The first two laps he runs at a steady but hard pace, trying to keep himself consistently near the head, or at least …

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Peter Bevelin on Seeking Wisdom, Mental Models, Learning, and a Lot More

Swedish investor Peter Bevelin wrote two excellent books, Seeking Wisdom: From Darwin to Munger and All I Want to Know Is Where I’m Going to Die. Both are full of multidisciplinary wisdom with …

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Why Fiddling With Prices Doesn’t Work

“The fact is, if you don’t find it reasonable that prices should reflect relative scarcity, then fundamentally you don’t accept the market economy, because this is about as close to …

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How (Supposedly) Rational People Make Decisions

There are four principles that Gregory Mankiw outlines in his multi-disciplinary economics textbook Principles of Economics. I got the idea for reading an Economics textbook from Charlie Munger, the …

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Biases and Blunders

You would be hard pressed to come across a reading list on behavioral economics that doesn’t mention Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard Thaler and Cass Sunstein. …

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How Analogies Reveal Connections, Spark Innovation, and Sell Our Greatest Ideas

Analogies are a means of drawing a parallel between two different things which we often use to convey complex ideas and to communicate effectively. We often use analogies to aid our reasoning. In this …

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The Map Is Not the Territory

The following is an edited excerpt from The Great Mental Models Volume 1: General Thinking Tools The map of reality is not reality. Even the best maps are imperfect. That’s because maps are reductions …

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Why Early Decisions Have the Greatest Impact and Why Growing too Much is a Bad Thing

I never went to Engineering school. My undergrad is Computer Science. Despite that I’ve always wanted to learn more about Engineering. John Kuprenas and Matthew Frederick have put together a …

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Bias from Self-Interest — Self Deception and Denial to Reduce Pain or Increase Pleasure

Our desire to feel good about ourselves permeates everything we do. Wanting to maintain a positive self-image often leads us to adopt a biased image of the world. If we want to learn to align …

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The Four States of Mind

We’re busier than ever. We’re often on autopilot. We “go through the motions” without really paying attention to the decisions we’re making or the implications. This is …

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The Psychology of Risk and Reward

An excerpt from The Aspirational Investor: Taming the Markets to Achieve Your Life’s Goals that I think you’d enjoy. Most of us have a healthy understanding of risk in the short term. When …

Continue readingThe Psychology of Risk and Reward
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