Mental Models - Reducing Complexity In a World Filled With (rampant) Noise

The world is complex. Advice is rampant. And there is enough data to support each opposing side of most arguments.

Here are three facts:

Fact 1: Information is no longer scarce (one of the reasons why I dropped out of university).

Fact 2: Not all information is the presented accurately and in full.

Fact 3: Accurate interpretation is scarce, rare & immensely valuable.

Information has never been more useless, interpretation has never been more valuable…

Accurate interpretation is the ability to see reality clearly, for what it is, as it is (my previous blog). However, since we delude ourselves with our countless mental biases, fluctuating emotions and negligently formed beliefs about how the world should work, we cannot leave our thinking and decision making up to chance.

We need a model. A system. A method of reducing complexity, cutting through noise and having a better understanding of objective reality, as well as the consequences of our actions.

Introducing: Mental Models.

The quality of our thinking is proportional to the models in our head and their usefulness in the situation at hand. Models are created based on data. Thus, the first step is creating an accurate data sample. For this, we need to understand our mental biases, beliefs and emotions.

Understanding all of our delusions and cognitive biases is a topic that needs a blog post in itself. However, some common cognitive biases that I have fallen victim to in the past include:

1. Sunk cost fallacy - our tendency to follow through on an endeavour if we have already invested time, effort, or money into it, whether or not the current costs outweigh the benefits (“I’ve come too far to quit now…”)

2. Confirmation bias - the tendency to interpret new evidence as confirmation of one's existing beliefs or theories (“look… even google says so!”)

3. Survivorship bias - the logical error of concentrating on entities that passed a selection process while overlooking those that did not (“university dropouts create the best businesses!”)

4. Anchoring bias - relying too heavily on the first piece of information we are given (“normally its $10,000, but wow… for today only it’s $997, I must buy this now!!!)

5. Social Proof Tendency - tendency to look at others for answers when we feel uncertain - we think and act as we see others around us think and act (“I’m going to go to university and do a business degree!”)

Once we understand our biases and can counteract them, we can then feed more accurate data through our mental models and make better decisions. Here is a list of mental models I want to master.

Mental models I want to master…

1. First Principles Thinking

This is one of the best tools to simplify a complicated situation into its simplest components. The way to do this is by separating the underlying ideas ors facts from any assumptions based on them - thereby leaving only the essentials. In other words, think in terms of roots rather than symptoms. To get to the roots, ask “why” five times.

Sometimes, even if you ask why repeatedly, you may delude yourself about the real cause (you may lie to yourself so you feel better about yourself - pleasure seeking bias). Find truth and root cause takes time.

2. Second Order Thinking

It’s easy to forecast the immediate results of your actions. However, second order thinking forces you to forecast further into the future. This is useful because you can then consider not only your actions and their immediate consequences, but the subsequent effects of the consequences, also. To do this, a helpful question is: “and then what?”

Example: I see a cookie in the morning and I want to eat it. I know that after I eat it, my urge will go away for a bit. Now I ask “and then what?”. I eat the cookie, my urge goes away and then my blood glucose spikes, crashes and I feel groggy and can’t focus. 

Action = eat the cookie. Effect = urge goes away. Consequence = I lose my ability to focus.

3. Inverted thinking process

“All I want to know is where I’m going to die, so I’ll never go there.” — Charlie Munger

Our brains have a negativity bias. This can be useful. 

Instead of focusing on how to solve a problem, achieving a goal or succeeding at whatever it is you want, focus on what you can do to ensure failure - THEN AVOID DOING THAT.

Rather than asking, how do I become rich, ask how do I become poor?

Rather than asking, how do I become happy, ask how do I become depressed?

Rather than defining what you want, define what you don't want.

This is what helped me decide on dropping out of university. I didn’t know what I wanted. No 18yr old does. Rather, I knew what I didn’t want - and that is to lose the freedom of setting my own schedule, choosing my own location, and deciding what I want to work on.

Avoiding stupidity is easier than seeking brilliance.

4. Probabilistic Thinking

“We suffer more in imagination than in reality - Seneca”

This model uses probabilities to choose the best decision. Normally, we are paralysed from taking action because of fear. Thus, we choose unhappiness (in our current state) over uncertainty (in the unknown state). Probabilistic thinking helps bring logic to these emotional situations of fear.

Steps = identify what matters, come up best, worst and medium scenarios and choose sensible odds.

5. Thought Experiment

What if?

This question can be used to evaluate potential consequences of our actions and predict what will happen in hypothetical situations. This is useful because rather than making a mistake and learning from it, we can learn without making the mistake.

However, this model needs to be paired with the ones mentioned above + others to provide utility. Otherwise, the question of what if can counterproductively spark fear and stop us from taking action. The framing of the question is also important. 

Example: what if it doesn’t work out? vs what if it does work out?

These mental models help us to see reality for what it is, rather than what we want it to be.

This is a skill that once mastered, allows you to align yourself to reality to work with it, rather than against it.

This list of mental models are not exhaustive. And this is a list that I have not yet mastered. However, this is a list I want to pursue getting better at utilising.