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Mental Model

How to Use Occam’s Razor Without Getting Cut

Occam’s razor is one of the most useful, (yet misunderstood,) models in your mental toolbox to solve problems more quickly and efficiently. Here’s how to use it. *** Occam’s razor (also known as the …

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Reciprocation Bias

“There are slavish souls who carry their appreciation for favors done them so far that they strangle themselves with the rope of gratitude.” —Friedrich Nietzsche *** If you are like me, whenever …

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Bias from Association: Why We Shoot the Messenger

We automatically connect a stimulus (thing/person) with pain (fear) or pleasure (hope). As pleasure seeking animals, we seek out positive associations and attempt to remove negative ones. This happens …

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Mental Model: Misconceptions of Chance

We expect the immediate outcome of events to represent the broader outcomes expected from a large number of trials. We believe that chance events will immediately self-correct and that small sample …

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Bias from Overconfidence: A Mental Model

“What a Man wishes, he will also believe” – Demosthenes Bias from overconfidence is a natural human state. All of us believe good things about ourselves and our skills. As Peter Bevelin writes …

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An Introduction to Complex Adaptive Systems

Let’s explore the concept of the Complex Adaptive Systems and see how this model might apply in various walks of life. To illustrate what a complex adaptive system is, and just as importantly, what it …

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The Minimum Effective Dose: Why Less is More

“Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.” — Antoine de Saint-Exupéry *** In pharmacology, the effective dose is the …

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Margin of Safety: An Introduction to the Mental Model

Previously on Farnam Street, we covered the idea of Redundancy — a central concept in both the world of engineering and in practical life. Today we’re going to explore a related concept: Margin of …

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Understanding your Circle of Competence: How Warren Buffett Avoids Problems

The Great Mental Models Volumes One and Two are out. Learn more about the project here. Understanding your circle of competence helps you avoid problems, identify opportunities for improvement, and …

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The Timeless Parable of Mr. Market

There is no one better to explain the concept of Mr. Market than Warren Buffett, who has used to to make billions of dollars and remain calm when all around him were losing their heads. In the 1987 …

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Mental Model: Bias from Insensitivity to Sample Size

The widespread misunderstanding of randomness causes a lot of problems. Today we’re going to explore a concept that causes a lot of human misjudgment. It’s called the bias from insensitivity to …

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The Nature of Explanation

We unconsciously construct mental models of the world and these models help aid our thinking. This idea is not new. In fact, in 1943 Kenneth Craik proposed that thinking is the manipulation of …

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Mental Model: Equilibrium

There are many ways in which you can visualize the concept of equilibrium, but one of the simplest comes from Boombustology where a ball sits on a simple curved shape. A situation in which equilibrium …

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Metaphors

For most people a metaphor is a matter of extraordinary rather than ordinary language. “For this reason,” write Mark Johnson and George Lakoff in their book Metaphors We Live By, “most people think …

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Insensitivity To Base Rates: An Introduction

In statistics, a base rate refers to the percentage of a population (e.g. grasshoppers, people who live in New York, newborn babies) which have a characteristic. Given a random individual and no …

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Mental Model: Game Theory

From Game Theory, by Morton Davis: The theory of games is a theory of decision making. It considers how one should make decisions and to a lesser extent, how one does make them. You make a number of …

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