Mental Models: The Best Way to Make Better Decisions

A Mental Model is a fancy word for a concept. You don’t realise it, but you think in mental models. This is how you make sense of the world. Mental models are mental chunks of knowledge that represent a concept.

For example, if you rotate the regulator, the speed of the fan increases. It’s a simple model that builds a connection between the knob and the fan. This helps you understand how the fan speed works.

Mental models guide your perception and behaviour. They are the thinking tools you use to understand life, make decisions, and solve problems. Learning a new mental model gives you a new way to see the world.

For example, Supply and Demand is a mental model that helps you understand how the economy works. Opportunity Costs is a mental model that helps you understand how choices work. Entropy is a mental model that helps you understand how disorder and decay work.

But, one model is not enough. Because the quality of our thinking is proportional to the models in our head. Think of your brain as a toolbox, and a Mental Model as a tool. The bigger is your toolbox, and the more likely you are to see reality.

But, most of us operate like a carpenter with only a hammer. To a man with a hammer, every problem looks like a nail. No matter the job, we pull out our hammer and attempt to make it work. While a hammer can often get the job done, it comes with a cost.

For example, a typical engineer will think in systems. A digital marketer will think click through rates or CTRs. A designer would think how the product looks and functions. HR would think in terms the job satisfaction and happiness of employees. Finance would think clash flow.

None of them are wrong, but neither are any of them able to describe the full scope of a company. They are all relying on isolated models. Instead we need a latticework of mental models.

And, you cannot blame them. We’ve separated knowledge into different silos since school. Biology, economics, history, physics, philosophy. In the real world, information is rarely divided into defined categories.

Charlie Munger summed up this approach in, A Lesson on Elementary Worldly Wisdom:

“What is elementary, worldly wisdom? Well, the first rule is that 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. And you’ve got to array your experience both vicarious and direct on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You’ve got to hang experience on a latticework of models in your head.”

World-class thinkers are often silo-free thinkers. They avoid looking at life through the lens of one subject. Instead, they develop “liquid knowledge” that flows from one topic to the next.

You don’t need to master every detail of every subject to become a world-class thinker. There are only things you need to know. A few dozen mental models that you need to learn to have a firm grasp of how the world works. But building your latticework is a lifelong project. It’s one thing to know something, and it’s completely different to put it into effect

Many of the most important mental models are the big ideas from disciplines. If you can master the fundamentals, you can develop an accurate and useful picture of life. They’ll help you understand reality, make better decisions, and live a meaningful life.

To quote Charlie Munger again, “80 or 90 important models will carry about 90 percent of the freight in making you a worldly-wise person. And, of those, only a mere handful really carry very heavy freight.”