10 More Mental Models Worth Knowing
What are ‘Mental Models’?
‘Mental models’ are frameworks that you can use to improve your thinking, problem-solving and decision making.
They do this by removing blind spots in your thinking and making you more aware of your cognitive biases.
They also allow you to examine problems from multiple viewpoints, giving you an advantage in an increasingly complex world.
The investing guru Charlie Munger first used the term in his famous commencement speech at USC Business School in 1994.
Mental models come from various disciplines, including psychology, chemistry, biology and maths.
And you can also create your own.
In a previous post, we introduced ten mental models worth knowing, including the ‘Pareto Principle’, ‘Reversible vs Irreversible’ decisions and ‘Via Negativa’.
Now we’re back with another ten mental models, so without further ado, let’s dive in.
1. Inversion
“Invert. Always invert.”
What does ‘Inversion’ mean?
This model comes from the mathematician Carl Gustav Jacob Jacobi, who used this principle to solve complex equations.
He realised that certain mathematical problems were easier to solve once you turned them upside down.
Why is ‘Inversion’ useful?
Hard problems are hard because they are resistant to straightforward solutions.
Inverting a problem forces you to look at it differently, in order to unlock new solutions.
For example, instead of trying to become happier, think about the things that make you unhappy and stop doing them.
Or, if you’re running a business, instead of trying to acquire new customers think about how you can avoid losing current ones.
As Rory Sutherland says, “The opposite of a good idea can be another good idea”.
Where can you read more about ‘Inversion’?
This article on inversion from Farnam Street is well worth reading.
2. Thinking from First Principles
“First principles is a physics way of looking at the world. You boil things down to the most fundamental truths and then reason up from there.”
What does ‘Thinking from First Principles’ mean?
Thinking from first principles is the act of breaking something down into its individual components and questioning why things are the way they are.
Why is ‘Thinking from First Principles’ useful?
Often you accept something without questioning whether there’s a better way of doing it.
By thinking from first principles, you may discover a superior approach.
Elon Musk is a big believer in this mental model and has used it to drastically reduce the cost of space travel with his company SpaceX.
Where can you read more about ‘Thinking from First Principles’?
This post covers more on how Elon has used this mental model to create three multi-billion dollar companies.
3. Margin of Safety
“The three most important words in investing...Margin of Safety.”
What does ‘Margin of Safety’ mean?
‘Margin of Safety’ is an investing term that refers to ‘the difference between the intrinsic value of a stock and its market price’.
The idea is that you should only invest in a stock when the market price (i.e. what you can buy it for) is less than what the stock is essentially worth (i.e. its true value)
Why is it helpful to have a ‘Margin of Safety’?
A margin of safety allows you ‘room for error’.
Allowing room for error is helpful in life because nothing ever goes exactly according to plan.
Projects at work, home renovations and building a business always take longer than you expect.
It’s also why having a rainy day fund is smart so that you have money set aside for when life throws up unexpected obstacles.
Where can you read more about ‘Margin of Safety’?
This article is a helpful explainer on the topic in the context of investing.
4. Forcing Function
“Plans act as a forcing function against all kinds of stupidity because they demand that important issues be resolved while there is time to consider other options.”
What is a ‘Forcing Function’?
A ‘forcing function’ is a mathematical term referring to differential equations.
As a mental model, it describes anything that ‘forces’ a particular behaviour.
For example, setting up an automatic monthly deposit to a savings account.
Or a hotel key card that turns off the lights when you leave the room.
Why is it helpful to know about ‘Forcing Functions’?
Part of the challenge of being human is that you don’t always make choices in your best interests.
You tend to prioritise the short-term over the long-term.
In the example above, saving money is in your future best interest, so by automating the process, you avoid any short-term temptation to squander the money.
You can use forcing functions to drive positive behaviour or to prevent mistakes.
Where can you read more about ‘Forcing Functions’?
This post on applying forcing functions to executive coaching is an interesting read.
5. Critical Mass
“When an idea reaches critical mass there is no stopping the shift its presence will induce.”
What is ‘Critical Mass’?
Critical mass is a scientific term that refers to the amount of fissile material required to sustain nuclear fission.
In other words, below a certain threshold, a nuclear chain reaction won’t occur.
Another way of saying it is that there is a minimum amount required of something to get it started, after which the thing becomes self-sustaining.
Why is it helpful to know about ‘Critical Mass’?
Critical mass is helpful to know about, even if you’re not building nuclear reactors.
It helps you understand why when you start something new, it always takes time before you begin seeing results.
Until you reach critical mass, you will feel like you’re doing a lot of hard work for little reward.
Where can I read more about ‘Critical Mass?
This article on critical mass in a business context is worth a read.
6. Map vs Territory
“A map is not the territory it represents, but, if correct, it has a similar structure to the territory, which accounts for its usefulness.”
What is meant by ‘Map vs Territory’?
Map versus territory is an analogy to explain the difference between our perception or model of something and reality.
For example, what you see on a two-dimensional map is very different from seeing the place in three-dimensional reality.
Another way of thinking about it is that there’s always a difference between theory and practice.
Or, as Albert Einstein put it, “In theory, theory and practice are the same. In practice, they are not.”
Why is it helpful to understand the difference between ‘Map vs Territory’?
Theory has its limitations.
The real world is complicated and messy, and no matter how much you learn about a topic beforehand, you will always be surprised when you put theory to the test.
In other words, the most effective way to understand something is to experience it.
Where can I read more about ‘Map vs. Territory’?
This post from the ever-brilliant Farnam Street is informative reading.
7. The Lindy Effect
“So I follow the Lindy effect as a guide in selecting what to read: books that have been around for ten years will be around for ten more; books that have been around for two millennia should be around for quite a bit of time, and so forth.”
What is the ‘Lindy Effect’?
The ‘Lindy effect’ (also referred to as ‘Lindy’s law’) states that ‘the future life expectancy of any non-perishable thing (e.g. a technology, idea) is directly proportional to its current age.’
In other words, if something has been around for a long time already, it increases the chance of it being around for much longer.
Why is it helpful to know about the ‘Lindy Effect’?
Things that stand the test of time do so for a reason.
You can use the Lindy effect as a tool for decision making.
For example, a book that has been around for a long time is almost always a better choice than a newly printed one.
It also means that something that’s a recent invention is more likely than not to be a fad.
In short, it’s better to rely on things that have stood the test of time.
Where can I read more about the ‘Lindy Effect’?
This well-written article goes into more depth on this particular mental model.
8. Reverse Engineering
“Copying is about reverse-engineering.”
What is ‘Reverse Engineering’?
To create something, you usually start with an idea on a piece of paper from which you develop prototypes to test.
Then through a series of experiments, you begin a process of refinement which eventually results in a finished product.
This is great, but it takes time and resources.
A faster way that involves less risk is to reverse engineer an existing product.
For example, during World War Two, the Allies discovered that the Germans had a very effective method for transporting fuel.
Rather than try and engineer their own version from scratch, they instead got hold of one, took it apart and then worked out how the Germans made it.
Their copy they called the Jerry can because ‘Jerry’ was wartime slang for German.
Why is it helpful to know about ‘Reverse Engineering’?
Figuring out how something works and then copying it saves resources.
For example, if you want to become a successful blogger or social media influencer, you can simply reverse engineer the behaviour of a few top performers.
You can apply their successful principles by observing what gets results and figuring out how they’ve done it.
Think of it as ‘intelligent cloning’.
Where can you read more about ‘Reverse Engineering‘?
Start at the End: How Reverse-Engineering Can Lead to Success by Dan Bigham is a light read with an interesting story about how an amateur cycling team beat the professionals at their own game.
9. Skin in the Game
“Avoid taking advice from someone who gives advice for a living unless there is a penalty for their advice.”
What is ‘Skin in the Game’?
‘Skin in the Game’ is an aphorism that refers to someone having a personal stake (e.g. money, reputation etc.) in the outcome of something.
In other words, they risk losing something if it doesn’t go their way.
For example, a financial adviser can be said to have ‘skin in the game’ if they sell you a product that makes them commission.
If you don’t buy their pitch, they won’t make any money.
Why is it helpful to know about ‘Skin in the Game’?
It helps you to understand the motivations behind people's actions.
For example, if a salesperson is trying to sell you something, you can ask them if they own the product themselves.
If their answer is ‘yes’, you can have confidence that it’s worth buying because they have personally invested their money in it.
Working out who has skin in the game or not helps prevent you from falling prey to people trying to rip you off.
Where can you read more about ‘Skin in the Game’?
Nassim Taleb's excellent book Skin in the Game: Hidden Asymmetries in Daily Life explores this idea in depth.
10. The Precautionary Principle
“Precaution is better than cure.”
What is the ‘Precautionary Principle’?
Would you dive into a swimming pool without first checking it was empty?
If you did and there was no water in it, you’d be at risk of serious injury.
Ok, so it’s an unpleasant thought.
Still, it’s also a good analogy to describe the precautionary principle: until you know the full extent of the situation, it’s better to proceed with caution.
The precautionary principle is used to prevent harm to the public or the environment from the release of new products.
For example, most countries have a rigorous testing programme for new drugs before they are released on the market.
Why is it helpful to know about the ‘Precautionary Principle’?
Before rushing into anything, especially anything that might endanger your health, it’s wise to take precautions.
For example, the precaution of wearing a mask, keeping your physical distance from others and washing your hands was a sensible approach in the early days of the COVID-19 pandemic.
This would have massively reduced your risk of experiencing severe illness or possibly death.
Where can you learn more about the ‘Precautionary Principle’?
You can read more about the precautionary principle in the wider context of environmental law here.
If you enjoyed this post on mental models, you would probably enjoy our popular courses on a range of topics featuring other mental models you can apply to improve your thinking, problem solving and decision-making.
