SUPERMEGATHREAD TIME: 50 tweets summarizing 50 complex ideas in ways everyone can understand and apply to better navigate the world around them...
Pareto Principle: 80% of results come from 20% of actions. EX: 80% of wealth is held by 20% of people, 20% of drivers cause 80% of all traffic accidents, 20% of employees are responsible for 80% of the results.
Resulting Fallacy - a logical fallacy where we evaluate the quality of our decisions based on the outcome they achieve. If we didn't get the result we wanted, we assume it must be because we did something wrong
Lindy Effect - the longer a period something has survived to exist or be used in the present, it is also likely to have a longer remaining life expectancy. EX: The longer a restaurant is open the longer it is likely to remain open.
The Map is not the Terrain - Maps are models and representations of things but they are not those things. EX: A road map is a model of a roadway or street but is not the actual street.
Survivorship bias - the logical fallacy to focus on people or things that have made it past a certain selection process due to visibility. EX: Believing a college education is not worth the investment because Bill Gates dropped out and became a billionaire.
Texas Sharpshooter Fallacy - improperly asserting a cause to explain a cluster of data. EX: Concluding planes are unsafe and 100% crash rates by citing a data set of planes that have had accidents.
Correlation is not causation - Just because events are seemingly related does not mean there is a cause-effect relationship. EX: The use of umbrellas does not cause rain.
Opportunity Cost - the loss of potential gain from other alternatives when one alternative is chosen. EX: If you choose to go to the beach this is time you can not spend skiing in the Alps, thus you lose out on the potential joy you would get from skiing in the Alps
Sunk Cost Fallacy - This is a cost that is already incurred & can not be recovered. EX: you buy concert tickets and then decide you want to do something else that has more value but you believe you must attend the concert for the sole reason you already spent money on tickets
Bayes' Theorem - Describes the probability of events based on prior knowledge of conditions. EX: The probability of you finding a parking spot is impacted by the time of day and location of the parking spot.
First Principles Thinking - is a basic proposition or assumption that cannot be deduced from any other proposition or assumption. EX: A bike is made up of various components that if broken down to their core components could be used to build something else.
Law of noncontradiction - states that contradictory propositions cannot both be true in the same sense at the same time. EX: if an animal is a dog it can also not be a dog.
Nash Equilibrium - a system involving the interaction of different participants, in which no participant can gain by a unilateral change of strategy if the strategies of the others remain unchanged. EX: A tied game of tic tac toe
Liar's Paradox - A statement from a liar that he or she is lying. EX: "This sentence is a lie." is a paradox because if it is a true statement it can not be true and if it is a false statement then it is relaying a truth.
Chaos theory - is an interdisciplinary theory stating that within the randomness of complex systems there are patterns & constant feedback loops. EX: The stock market is a chaotic system with an element of randomness and traders use patterns and feedback loops to place trades.
Entropy - A system left unchecked will break down over time. EX: a campfire as the wood burns it becomes ash, smoke, and gases. This is nature's tax.
The Bandwagon Effect - People will adopt behaviors, norms, or customs simply because others are doing so. known as "herd mentality". EX: Standing in line to get the newest iPhone.
Dunning-Kruger Effect - Stupid people dont know they are stupid & tend to think they are smarter than they are which leads to overconfident decision-making. EX: People with no financial expertise make riskier investment decisions because they lack an understanding of risks
The Baader–Meinhof phenomenon is the illusion where something that has recently come to one's attention suddenly seems to appear with improbable frequency shortly afterward. EX: When you buy a new car you suddenly notice everyone else who also owns that car
IKEA Effect - The tendency for people to place a disproportionately high value on objects that they partially assembled themselves. EX: People tend to value decisions they directly contributed to over ones that make more logical sense that they were not part of
Money Illusion - A tendency to focus on the nominal costs of items and ignoring total costs. EX: People opting to drive to a long-distance location due to higher flight costs ignoring the cost of lost time due to longer travel times
Kettle Logic - Using multiple, jointly inconsistent arguments to defend a position. EX: claiming you are pro-life but also supporting the death penalty for convicted murderers.
Second-Order Thinking - is the process of tracking down and unraveling the implications of decisions. EX: Overeating calories will lead to weight gain which will lead to poor health outcomes
Occam's Razor - The simplistic explanation is the only necessary one needed to draw conclusions. EX: If a glass falls & breaks it can be explained by gravity. Not gravity and ghosts. The ghosts are unnecessary and add no value to the reasoning.
Network Effect - is the phenomenon by which the value or utility a user derives from a good or service depends on the number of users of compatible products. EX: Facebook has more value than MySpace to marketers due to having the most users.
The Red Queen Effect - Is the idea that species must constantly evolve, adapt, and proliferate in order to survive. EX: Advances in technology improve workplace efficiencies but are in constant states of learning and adapting.
Availability bias: greater likelihood of recalling recent, nearby, or immediate examples and the inferred importance to those examples over others. EX: A single act of crime occurring in your neighborhood will lead people in the immediate area to conclude crime is more prevalent
Regression to the mean - Events as single data points, even if initially outliers, will revert to the average EX: Madden Effect - Players who appear on the cover of Madden Football video games will have declines in performance. The reality is good games and bad games occur
Hot Hands Fallacy - Events that are currently happening will continue to happen into the future based on past performance. EX: A basketball player makes a bunch of shots in a row the assumption is they have "hot hands" to get them the ball they will continue to make those shots.
Gambler's Fallacy - A belief events that have occurred more often in a row will result in the opposite happening in the next series of events. EX: Flipping a coin and it landing on heads several times in a row people tend believe tails is next despite the coin toss being random.
Fat Tail Risk - Events that are unlikely to happen will occasionally still happen and you should consider data that is at least three standard deviations from the current data point. EX: Plane crashes
Black Swan Events - an event that comes as a surprise, has a major effect and is often inappropriately rationalized after the fact with the benefit of hindsight. EX: heart attacks
Ludic Fallacy - using games to model real-life outcomes, they take into account past events and often can not predict all scenario. EX: Sept 11th terrorist attacks. While we could predict terrorist attacks in US & on the World Trade Center, models failed to determine when and how
Cromwell's Rule - Statements on events that will never happen or will definitely happen should be avoided except in cases of logically true or false statements such as 2+2 is 4 and not 5. EX: Once night happens we will never see the sun again is a logically false statement
Inversion - using inverse logic to solve complex problems based on the opposite preferred outcomes. EX: If you wanted to have a good diet to lose weight ask yourself: "How would I design the worst possible diet?" Then list those choices and map them to their opposite choices
Markov Chain - the likelihood of any particular outcome happening is dependent on the outcome of previous events occurring in a certain order. EX: Winning the lottery is dependent on buying those numbers in that specific combination at that particular time in that jurisdiction.
Zero-sum - One person's gain is another person's loss. EX: Finding $20 on the ground. You found a $20 bill on the ground is only contingent on someone else dropping and losing their $20 bill. In this example, someone is $20 richer and someone is $20 poorer.
Efficient Market Hypothesis - A theory that the price of any good or service is correct because it considers all given information at that particular point. EX: The price of gasoline is always the correct price because it considers all factors impacting supply and demand
Dollar Cost Averaging - An investment principle where investors buy shares over a long period of time and varying price points to lower the average price paid per share . EX: Buying items in bulk...
Law of Creative Destruction - Austrian economist Joseph Schumpeter states we must destroy old systems, technologies, and processes to create better newer systems, technologies, and processes. EX: We destroyed the horse and carriage industry in favor of the automobile industry
Signalling - Ability to transfer information about ones-self to another party. EX: People who buy flashy watches not for the appreciation of the watch itself but for the status signal the watch sends that they are the type of person who can afford expensive watches.
Signal vs. Noise - is the relevant or important information or data and the data that interferes with that information. EX: On-base percentage is a signal of a hitter's skill and ability while their off-field antics are noise that infers their future potential.
No Free Lunch - This is an economic concept which states that everything has a cost whether obvious or not. EX: Use of social media is free it comes with a cost of loss of privacy.
Schrodinger's Cat - thought experiment where there is a cat in a box and to the outside observer the cat is both alive and dead. Even know these concepts are juxtaposition the cat can not be alive and dead at the same time the outside observer must assume both possibilities.
Fundamental Attribution Error - Overemphasizing one's actions or beliefs as part of one's personality and not due to circumstance. EX: Someone who is rude to you in one instance you ascribe person is a rude person and not a polite person who was experiencing a moment of stress
Locus of Control - The degree people believe they are exempt from outside forces & have control over the outcome of the events. EX: Luck vs hard work - how you interpret outcomes is largely due to your internal and external control and belief in which one is stronger.
Berkson's Bias - when a sample population is used to explain larger trends. EX: Assuming a state is more liberal or conservative by only sampling registered voters
Endowment Effect - People believe the things they already have are more valuable than things they currently do not have that are equal or of lesser value. EX: People believe the trade-in value for their used car is worth more than a dealership is willing to pay for it.
Moral Credentialing Effect - People believe they are entitled to engage in poor behavior when they have done something good first. EX: Eating ice cream after going to the gym.
Normalcy Bias - the inability to plan for an event that has never occurred. EX: Most people do not buy long-term care insurance because they can not plan for their inability to work in the future.
The map is not the terrain is one of 50 mental models to better understand the world theonepercentbetterblog.blogspot.com
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