Psychology Answers: How Make Smart Decisions?
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In today's fast-paced and complex world, making smart decisions is an absolutely essential skill.
- Choosing a career path
- Making investment decisions
- Solving everyday problems
We are constantly faced with choices that have a deep impact on our lives.
- Choosing a career path
- Making investment decisions
- Solving everyday problems
We are constantly faced with choices that have a deep impact on our lives.
A powerful tool that can significantly improve our decision-making skills is the use of "mental models."
A mental model explains how something works in the real world.
They shape how we think and how we understand.
We need them to simplify the complexities and reason.
They shape how we think and how we understand.
We need them to simplify the complexities and reason.
We can’t keep all of the details of the world in our brains, so we use mental models
The quality of our thinking is the quality of the models in our head
> The more models you have
> The bigger your mind's toolbox
> The more likely you are to make the right decisions
The quality of our thinking is the quality of the models in our head
> The more models you have
> The bigger your mind's toolbox
> The more likely you are to make the right decisions
Most of us are specialists, looking at the problem only one way:
• Engineers think in systems
• Biologists think in terms of evolution
• Psychologists think in terms of incentives
But if you put these together, you can see a problem in 3 dimensional way.
• Engineers think in systems
• Biologists think in terms of evolution
• Psychologists think in terms of incentives
But if you put these together, you can see a problem in 3 dimensional way.
“You can’t really know anything if you just remember isolated facts and try and bang ’em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form. You’ve got to have models in your head.”
- Charlie Munger
- Charlie Munger
10 mental models to add to your thinking toolbox:
1. Inversion Mental Model
Rather than thinking about your desired outcome, consider the outcome you'd like to avoid.
"Avoiding stupidity is easier than seeking brilliance."
Rather than thinking about your desired outcome, consider the outcome you'd like to avoid.
"Avoiding stupidity is easier than seeking brilliance."
2. Occam's Razor
The simplest explanation is usually the correct one.
If you're trying to understand what happened, develop the most basic hypothesis possible.
The simplest explanation is usually the correct one.
If you're trying to understand what happened, develop the most basic hypothesis possible.
3. Jealousy Tendency
There are two types of envy:
- The productive type is "inferiority"
- The unproductive type is “malicious envy”
One motivates you to raise yourself up to another person’s level.
One makes you take something valuable from someone else.
There are two types of envy:
- The productive type is "inferiority"
- The unproductive type is “malicious envy”
One motivates you to raise yourself up to another person’s level.
One makes you take something valuable from someone else.
4. Backward Reasoning
This starts with a list of goals and works backward from the consequent to the antecedent.
It is known as the goal-driven technique because we start from the goal and reach the initial state to extract the facts.
This starts with a list of goals and works backward from the consequent to the antecedent.
It is known as the goal-driven technique because we start from the goal and reach the initial state to extract the facts.
5. Circle of Competence
When ego drives you, you have blind spots.
When you’re honest with yourself, you know where you’re vulnerable and where you can improve.
Understanding your circle of competence improves decision-making and outcomes.
When ego drives you, you have blind spots.
When you’re honest with yourself, you know where you’re vulnerable and where you can improve.
Understanding your circle of competence improves decision-making and outcomes.
6. Diminishing Returns
The incremental benefits you get from an investment get increasingly smaller.
The sooner you notice diminishing returns, the sooner you can jump on the projects that are more valuable to your business's growth.
The incremental benefits you get from an investment get increasingly smaller.
The sooner you notice diminishing returns, the sooner you can jump on the projects that are more valuable to your business's growth.
7. Thought Experiment
When finding empirical evidence is impossible, we turn to thought experiments to understand complex concepts.
In doing so, you can open up new avenues for inquiry and exploration.
Thought experiments help us learn from our mistakes and avoid future ones.
When finding empirical evidence is impossible, we turn to thought experiments to understand complex concepts.
In doing so, you can open up new avenues for inquiry and exploration.
Thought experiments help us learn from our mistakes and avoid future ones.
8. Pareto Principle
Known as the 80/20 rule; most results aren't distributed equally.
• 20% of your traffic yields 80% of your leads
• 20% of the work generates 80% of the returns
• 20% of your time produces 80% of your results
Known as the 80/20 rule; most results aren't distributed equally.
• 20% of your traffic yields 80% of your leads
• 20% of the work generates 80% of the returns
• 20% of your time produces 80% of your results
9. Relativity
“If the earth is moving through space, how come I don’t notice?”
The answer is “Relativity”!
It can also show us the limits of our perception.
And how we must be open to other perspectives if we truly want to understand the results of our actions.
“If the earth is moving through space, how come I don’t notice?”
The answer is “Relativity”!
It can also show us the limits of our perception.
And how we must be open to other perspectives if we truly want to understand the results of our actions.
10. Leverage
“Give me a lever long enough, and I shall move the world.”
With a small amount of input force, we can make a great output force through leverage.
Understanding where we can apply this model to the human world can be a source of great success.
“Give me a lever long enough, and I shall move the world.”
With a small amount of input force, we can make a great output force through leverage.
Understanding where we can apply this model to the human world can be a source of great success.
Mental Models mentioned:
1. Inversion Mental Model
2. Occam's Razor
3. Jealousy Tendency
4. Backward Reasoning
5. Circle of Competence
6.Diminishing Returns
7. Thought Experiment
8. Pareto Principle
9. Relativity
10. Leverage
1. Inversion Mental Model
2. Occam's Razor
3. Jealousy Tendency
4. Backward Reasoning
5. Circle of Competence
6.Diminishing Returns
7. Thought Experiment
8. Pareto Principle
9. Relativity
10. Leverage
Build up your thoughts,
Start reading 100 mental models.
With the help of books, cards, maps, quotes, audiobook,... it will internalize mental models in your head so that you will use them automatically.
Get your copy:
gumroad.com
Start reading 100 mental models.
With the help of books, cards, maps, quotes, audiobook,... it will internalize mental models in your head so that you will use them automatically.
Get your copy:
gumroad.com
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