The man who is in need of a new thinking tool, but hasnt acquired it yet, is already paying for this.
Mental models: worldly knowledge.
1. The swiss army knife approach.
To the man with a hammer, everything looks like a nail.
To have many different tools to solve problems, its more likely that you can solve that problem.
2. Make friends with the eminent dead.
Keep learning from people (even if they r dead) through books, history,…
Learn from your friends
Choose your “friends” wisely to learn from.
3. Invert, always invert.
How to be miserable: be envious, do drugs and anger
How to fail: be unreliable, learn everything urself, give up too early, never invert.
Instead of asking yourself “how to invent X ?”, ask urself “how to avoid inventing non X ?”
Ex: How to build a good marriage ? <-> How to ruin a marriage ? and avoid the 2nd one.
4.Compounding
Avoid: management fees, brokerfees, unnecessary taxes.
5. Crush your cherished beliefs:
Whenever u have see an idea that contradicts with ur beliefs, write it down immediately or your brain will quickly forget that idea.
6. Opportunity costs:
There are many choices, and not all choices created equal, that means when u do something, u cant do others.
7. Pool betting:
The betting game is all about considering the price AND the quality. The best decision to make is have the quality more than the price you would pay.
-> looking for a mispriced gamble.
8. Survival of the fittest:
– You have to be specialized, and have a thing that let people remembering you.
– Offer a niche that has a low competivity.
MI: -> Combining existed one is 1 way of creativity.
9. Margin of safety:
10. The superpower of incentives:
11. Independent thinking:
– Always fear the professional advice when it is good for the advisor.
12. Simplicity
– Take a simple, basic idea.
– Take it very seriously.
13. Technology as a problem
– Its hard to predict for investor.
14. The world most important question
WHY ????
15. Circle of competence
Calculating intrinsic value:
– How much cash will it generate ?
– When will it generate cash ?
– Where will interest rate be at ?
There are many businesses in many different fields, in order to heighthen the chance of making good prediction, you should choose the business that is related to your circle of competence. To know if the field of the business is in your circle of competence, ask yourself
“how will the industry looks like 10 years from now ?”
if you can make a good guess, then u r all good to go.
When you ask yourself: “Can I afford that car ?” that means you are not able to afford it.
16. Filters
– Use the filters to eliminate the bad choices.
17. The fat-pit strategy
– Wait until the best chance to come and dont waste money on something that u r not positive at.
– The hard part here is staying calm when others taking actions, its mental hard.
18. Because you are worth it
– The best way to have what you want (maybe the only way) is to deserve to have what you want.
– You have to work hard in order to earn good, instead of cutting corner and try finding shortcuts.
19. Probability mindset
20. The bell curve
21. Physics envy
– Human craves in simplicity and elegancy.
– But those subjects that are related to social science cannot be reduced and simplify.
– Dont try to make economics into beauty equations like physics.
22. Vaguely right beats precisely wrong
– Do not overweigh stuff that is easy to attach numbers to.
How to be vaguely right ?
-> How reliable and skillful is the management of the company ?
-> What will the industry look like in next 10 years ?
-> How strong is the pricing power of the company ?
23. Secondary and Tertitary effects
24. The cancer surgery formula
– Remove what is dangerous/bad, preserve what is healthy and vibrant.
25. Scale
– A good company needs a competitive advantage.
– Competitive advantages:
-> Scale
-> Experience
-> Social proof
26. Limits
27. Non-linearity
28. Manage expectations
29. The iron prescription
30. The 5Ws
How to convince
Be specific
WHY ? When ? Where ? Who ? What ?
31. The two-track analysis
Our cognition has limit, so you should analyze the problem in 2 perspectives. They are:
– What is really going on, rationally speaking ?
– What is influencing us subconciously ?
32. Psychology of human misjudgments
32.1 Reward and punishment
-> We tend to repeat actions that receive rewards and stop actions that receive punishments.
32.2 Liking/Loving
-> We tend to ignore the faults of what we like/love.
32.3 Dislike/Hating
-> We tend to amplify the falls of what we dislike.
32.4 Doubt avoidance
-> Come to conclusion to quickly
32.5 Inconsistency avoidance
-> Its hard to change beliefs and habits.
32.6 Curiosity
-> We want answers and we seek them.
32.7 Kantian fairness
-> We expect people to follow a behaviour that its followed by others
Envy
Its painful to see others
32.9 Reciprocation
-> An eye for an eye.
32.10 Influence from mere association
-> We like things that are aassociated with what we already like
32.11. Pain – avoiding denial
-> If reality to tough to handle, we minimize until its become bearable.
32.12 Excessive self-regard
-> Many thinks that they r above average.
32.13 Overoptimism
32.14. Deprival
-> u dont know what u got until u miss it alot.
32.15. social proof
-> The herd mentality
32.16 Contrast
-> We think a 50$ bowtie is cheap when we have just bought a 500$ vest.
32.17 Stress
-> Causes disfunction
32.18 Availability misweighing
32..19 Use it or lose it
-> Use your skill daily in order to maintain it.
32.20. Drug misinfluence
32.21. senescene.
-> Aging also causes misfunction
32.22. Authority
-> We tend to follow authority without asking too many questions.
32.23 Twaddle
-> As social animals, we sometimes speaking without thinking first.
32.25 Reason respecting
-> We love to hear the why, even if its meaningless.
33. Checklists
– No good pilots take off without taking his list of security questions.
– Anytime u want to make a rational decision, use your checklist first.
34. Lollapalooza effect
– When multiple forces acting the same direction, its high stake time. Its can kill you or it gives you a huge opportunity.
35. Cheauffer knowledge
– Chauffeur knowledge = can repeat information, but does not understand its meaning.
– Like a parrot.
Mental models is like this, you have to practice and really understand it, not just repeat it like a parrot. Repeat it intentionally.
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