My Mental models
Greetings friends, hope the day finds you well.
The topic of today is inspired by the book, Poor Charlie’s Alamanack, about the life and story of Charlie Munger.
In the section about Charlie’s approach to life, investing, and Learning, Charlie talks about the principal reason behind his immeasurable success: Mental models. The question Charlie gets asked often is How can i get rich and wise? The success of Berkshire’s Hathaway is mainly the result of a collaboration of the two great minds of Charlie Munger and Warren Buffet, but our focus here is how Charlie’s brain works. Charlie’s operating system runs on mental models that are updated constantly( Charlie argues that even at an old age one can still acquire new mental models). Charlie uses the hammer/nail analogy to scold narrow specializers( mainly economists), and thinks that it is crucial that one integrates the big ideas in the various different fields outside of theirs into their mental models. For instance, one should understand at least the big ideas in physics, chemistry, engineering, art…etc. The purpose of this integration is to have access to different perspectives when solving a certain black swany/ unexpected problem, or any other problem for that matter.
Charlie advices that one should derive his own mental models and live life according to them. There is no such thing as a list of things I can tell you to apply so that you become rich and wise, Charlie retorts.
Reading this, I realized that I too should write down a list of my mental models or what I think are good programs to run for a better life.
My mental models
1- Assume you’re stupid/wrong and work on being less stupid and less wrong everyday. ( Credits to Elon)
2-In a world hurling a blizzard of things at you everyday, it is important that you know not what to take in but what to ignore. What’s more, you should think of what not to do, what not to become, what to avoid, instead of the reverse. Speaking of avoiding things, avoid jail, debt, and legal but expedient means of acquiring wealth and status.( Credits on this one goes to Nassim Taleb)
3- Realize that you’re in a fierce competition with your younger self. Strive to be a little wiser everyday. Whenever you wake up in the morning( thankful to be alive for another day and all that jazz) assume that today’s 24 hours are more precious than those of the previous day and act accordingly.
4- When making decisions, assume second and third order consequences. The reason why creating good habits is hard and creating bad habits is easy is because good habits incurs pain in the short term( 1st order consequences),but pays long term dividends( 2nd and 3rd order consequences), whereas bad habits give immediate reward in the form of chemicals going bananas in the brain, but alas have long term bad consequences. Speaking of decisions, don’t forget the expected value return calculation( probability of success x Rate of return) when making a decision. Always weigh the cost of waiting for more information to make a decision against making it at the time. Some decisions don’t wait. ( Learned this from Ray Dalio).
5- Be radically open minded. But, don’t listen to people with no believability/skin in the game. It is important you be open minded, but only to people who have a track record of achieving things, solving problems, and building useful stuff. If those people disagree with you, then you better listen to what they have to say. Incidentally, put the ideas that are dear to your heart on a a shelf, and whenever you get better ideas, put the ideas on the shelf in a sandbox and annihilate them. Your goal is to find ideas that work and make your life better, not to cling dogmatically/emotionally to what you think works but doesn’t in reality.
6- You need to be an optimist. what kind of optimism are we talkin’ about here? you’re not a polyannistic blind optimist, assuming everything is gonna be alright, or a blind pessimist with a precautionary principle where you stagnate and fear that everything is going to hell. Our kind of optimism is the one where you assume that the future will be better when we create the knowledge necessary to deal with the problems ahead( obstacles= problems and problems are soluble). We assume that our current situation is derived from a lack of knowledge( and resources?) and we strive to acquire that knowledge. ( Credits go to David Deutsh)
7- Look at life as 20 different slots of opportunities that yield the highest returns on investment. To seize those handful opportunities, you need to have a prepared mind, say No to a lot of things, and choose things that are low risks high rewards, aka obvious to you, high risks to others. You need to build your circle of competence and demarcate it to determine where risks lay. ( Learned this from Warren Buffet)
8- According to Daniel Kahneman, we have two selves, the remembering self, and the experiencing self. The remembering self spends long periods of times visiting past experiences created by the experiencing self. The remembering self can feel jubilant going down memory lane if the memory is pleasant, but feels remorseful and unsatisfied if the memory is unpleasant.
To reconcile the two selves, one should seek a life full of exciting moment-to-moment experiences that make the remembering self proud, fulfilled, and satisfied with the life he or she’s led.
9- See the world in streams of probabilities and bets and make the best bet you can make to the best of your knowledge. Otherwise, ask how what can I do to increase the probability of a desired outcome to happen? (Learned this from Annie Duke)
10- Befriend dead people( or alive) and put in the effort to see the world from their perspective. It is hard but worth the try. How? Learn everything you can about people you admire from the past or the present, and then have constant conversations with them in your head whenever you’re stuck. ( I learned this heuristic from Marc Anderseen).
11- Don’t do things for money; don’t do things to satisfy others; don’t do things you don’t believe in. Ask yourself instead, what would you do if you had a billion dollars at your disposal; how would you spend it to provide the maximum value to the world. Raising capital and reaching out to top-tier people is not that difficult when you have a good idea.