“To the man with a hammer, everything looks like a nail.”
The Best Way to Make Intelligent Decisions
Charlie Munger summed up the approach to practical wisdom through understanding mental models by saying:
“Well, the first rule is that you 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. You’ve got to have models in your head. And you’ve got to array your experience both vicarious and direct on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You’ve got to hang experience on a latticework of models in your head.”
THE LIST
if you know all the concepts and principles listed below (only 109…), you will know how to interpret most of things that will happen to you during your life…
General Thinking Concepts
1. The Map is not the Territory
2. Circle of Competence
3. First Principles Thinking
4. Thought Experiment
5. Second-Order Thinking
6. Probabilistic Thinking
7. Inversion
8. Occam’s Razor
9. Hanlon’s Razor
Numeracy
1. Permutations and Combinations
2. Algebraic Equivalence
3. Randomness
4. Stochastic Processes (Poisson, Markov, Random Walk)
5. Compounding
6. Multiplying by Zero
7. Churn
8. Law of Large Numbers
9. Bell Curve/Normal Distribution
10. Power Laws
11. Regression to the Mean
12. Order of Magnitude
Systems
1. Scale
2. Law of Diminishing Returns
3. Pareto Principle
4. Feedback Loops (and Homeostasis)
5. Chaos Dynamics (Butterfly Effect)/ (Sensitivity to Initial Conditions)
6. Preferential Attachment (Cumulative Advantage)
7. Emergence
8. Irreducibility
9. Tragedy of the Commons
10. Gresham’s Law
11. Algorithms
12. Fragility – Robustness – Antifragility
13. Backup Systems/Redundancy
14. Margin of Safety
15. Criticality
16. Network Effects
17. Via Negativa – Omission/Removal/Avoidance of Harm
18. The Lindy Effect
19. Renormalization Group
20. Spring-loading
21. Complex Adaptive Systems
Physical World
1. Laws of Thermodynamics
2. Reciprocity
3. Velocity
4. Relativity
5. Activation Energy
6. Catalysts
7. Leverage
8. Inertia
9. Alloying
10. Viscosity
The Biological World
1. Incentives
2. Cooperation (Including Symbiosis and Prisoner’s Dilemma)
3. Tendency to Minimize Energy Output (Mental & Physical)
4. Adaptation
5. Evolution by Natural Selection
6. The Red Queen Effect (Co-evolutionary Arms Race)
7. Replication
8. Hierarchical and Other Organizing Instincts
9. Self-Preservation Instincts
10. Simple Physiological Reward-Seeking
11. Exaptation
12. Ecosystems
13. Niches
14. Dunbar’s Number
Human Nature & Judgment
1. Trust
2. Bias from Incentives
3. Pavlovian Association
4. Tendency to Feel Envy & Jealousy
5. Tendency to Distort Due to Liking/Loving or Disliking/Hating
6. Denial
7. Availability Heuristic
8. Representativeness Heuristic
a. Failure to Account for Base Rates
b. Tendency to Stereotype
c. Failure to See False Conjunctions
9. Social Proof (Safety in Numbers)
10. Narrative Instinct
11. Curiosity Instinct
12. Language Instinct
13. First-Conclusion Bias
14. Tendency to Overgeneralize from Small Samples
15. Relative Satisfaction/Misery Tendencies
16. Commitment & Consistency Bias
17. Hindsight Bias
18. Sensitivity to Fairness
19. Tendency to Overestimate Consistency of Behavior (Fundamental Attribution Error)
20. Influence of Stress (Including Breaking Points)
21. Survivorship Bias
22. Tendency to Want to Do Something (Fight/Flight, Intervention, Demonstration of Value, etc.)
23. Falsification / Confirmation Bias
Microeconomics & Strategy
1. Opportunity Costs
2. Creative Destruction
3. Comparative Advantage
4. Specialization (Pin Factory)
5. Seizing the Middle
6. Trademarks, Patents, and Copyrights
7. Double-Entry Bookkeeping
8. Utility (Marginal, Diminishing, Increasing)
9. Bottlenecks
10. Bribery
11. Arbitrage
12. Supply and Demand
13. Scarcity
14. Mr. Market
Military & War
1. Seeing the Front
2. Asymmetric Warfare
3. Two-Front War
4. Counterinsurgency
5. Mutually Assured Destruction
