Around 2003 I came across Charlie Munger’s 1995 speech, The Psychology of Human Misjudgment, which introduced me to how behavioral economics can be applied in business and investing. More profoundly, though, it opened my mind to the power of seeking out and applying mental models across a wide array of disciplines.
A mental model is just a concept you can use to help try to explain things (e.g. Hanlon’s Razor — “never attribute to malice that which is adequately explained by carelessness.”). There are tens of thousands of mental models, and every discipline has their own set that you can learn through coursework, mentorship, or first-hand experience.
There is a much smaller set of concepts, however, that come up repeatedly in day-to-day decision making, problem solving, and truth seeking. As Munger says, “80 or 90 important models will carry about 90% of the freight in making you a worldly‑wise person.”
This post is my attempt to enumerate the mental models that are repeatedly useful to me. This set is clearly biased from my own experience and surely incomplete. I hope to continue to revise it as I remember and learn more.
How-to Use This List
I find mental models are useful to try to make sense of things and to help generate ideas. To actually be useful, however, you have to apply them in the right context at the right time. And for that to happen naturally, you have to know them well and practice using them.
Therefore, here are two suggestions for using this list:
- For mental models you don’t know or don’t know well, you can use this list as a jumping off point to study them. I’ve provided links (mainly to Wikipedia) to start that process.
- When you have a particular problem in front of you, you can go down this list, and see if any of the models could possibly apply.
- Most of the mental models on this list are here because they are useful outside of their specific discipline. For example, use of the mental model “peak oil” isn’t restricted to an energy context. Most references to “peak x” are an invocation of this model. Similarly, inflation as a concept applies outside of economics, e.g. grade inflation and expectations inflation.
- I roughly grouped the mental models by discipline, but as noted, this grouping is not to be taken as an assertion that they only apply within that dicipline. The best ideas often arise when going cross-dicipline.
- The numbers next to each mental model reflect the frequency with which they come up:(1) — Frequently (63 models)(2) — Occasionally (43 models)
(3) — Rarely, though still repeatedly (83 models)
- If studying new models, I’d start with the lower numbers first. The quotes next to each concept are meant to be a basic definition to remind you what it is, and not a teaching tool. Follow the link to learn more.
- I am not endorsing any of these concepts as normatively good; I’m just saying they have repeatedly helped me explain and navigate the world.
- I wish I had learned many of these years earlier. In fact, the proximate cause for posting this was so I could more effectively answer the question I frequently get from people I work with: “what should I learn next?” If you’re trying to be generally effective, my best advice is to start with the things on this list.