Mental models in a nutshell

Four, the core thinking models.

The Beijing Olympics Bird's Nest Stadium. Breathtaking, isn't it? The picture above shows the Beijing National Stadium, popularly called the Bird's Nest. Since its construction for the 2008 Beijing Olympics, it has captivated the imagination of regular folk as well as connoisseurs of art and architectural masterpieces. Seemingly fragile but strong, light but sturdy, the bird's nest is so-called for its elliptical lattice work shell of intoxicating beauty that lingers on the imagination. A lattice is an interlaced structure or pattern resembling strips of wood or metal. It is the image called to mind by the creator of the core mental models theory, Charles Munger, vice-chairman of Berkshire Hathaway. In his lattice work of mental models, Munger described an enlightened approach to thinking that has informed his business decision-making over the years and made him into a billionaire investor. Using the image of a lattice structure, Munger explained that the facts and theories in your head should be interlaced in a framework of simple representations and concepts.

The mental models. The more models you are acquainted with, the more tools you have in your toolkit and the more intricate the problems you can solve. He described his lattice work concept as follows. "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 them back. If the facts don't hang together on a lattice work 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 lattice work 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 lattice work of models in your head." Charles Munger.

Mental models are not deep academic theories, although they may derive from them. Models are the simple frameworks that a practical thinker latches on to when gathering the facts and structuring them in a meaningful context. Mental models are tools within easy reach that we can use every day.

The art of practical thinking. Confronted with the phrase "the art of practical thinking," my first reaction was, "Isn't all thinking practical?" Thinking helps you decide what to do, what action to take. On the other hand, it occurred to me that there was also something akin to impractical thinking, like musings or wishful thinking. Surfing online yielded many descriptions of practical thinking, but none of them seemed compelling until I happened upon Edward Dono's definition that practical thinking is everyday thinking that is useful for our own purposes. He contrasts this with the intricate theories of philosophers that have little to do with everyday life. Practical thinking is about everyday thinking. How the mind actually works, not how philosophers think it should. Now, there's a definition that actually makes sense.

Let's acquaint ourselves with some of the core mental models in Munger's lattice work.

Inversion. This is another mental model that has proved very useful and practical for logical thinkers. The term inversion, of course, means inside out, upside down, or back to front. Anything referring to the reverse of the natural order. But before we further discuss inversion, let's play a game. Could you identify who said the following? "Named must be your fear before banish it you can. The greatest teacher failure is truly wonderful. The mind of a child is difficult to see. Always in motion is the future. If no mistake you made, losing you are." If this famous sage came to mind, then you are correct. Yoda, Jedi Master from Star Wars.

Yoda, a fictional character, has captured the imagination of moviegoers with his strange way of speaking. His sentences were always in reverse order: object, subject, verb, rather than the regular subject, verb, object pattern. Star Wars creator George Lucas admitted in an interview that he thought of this unique manner of speaking for the wisened but wise Jedi Master because it forces people to listen closely to what he says. "The language was designed to make you focus on the boring philosophical lessons," explained Lucas. Lucas was on to something. A statement such as "failure is the greatest teacher" sounds so commonplace that audiences would typically just gloss over it. However, Lucas draws everyone's full attention to decipher Yoda's profound statements by reversing the order.

The mental model involved in this case is an inversion, coming from the root word "invert," which means to turn something upside down. The model states that to solve a problem, it is sometimes useful to view the situation in reverse. Doing so forces us to view the problem from a new angle. Instead of thinking about how to reach a goal, focus instead on what not to do. For instance, if you want to get rich, you should not slack off or procrastinate. Charlie Munger explained inversion this way: "All I want to know is where I'm going to die, so I'll never go there."

Another great thinker who used the power of inversion is the German mathematician Carl Jacobi. He coined the strategy: "Man must immerin invert, always invert." This involved restating a mathematical problem in its inverse form. For instance, to test if two mathematical expressions are equal, one can instead find out whether there are instances where the two are not equal.

Applying inversion to personal relationships, instead of asking, "How can I have a successful marriage?" we can instead ask, "What can destroy a marriage?" The first question is almost impossible to answer because it is broad and abstract. However, its reverse brings quick, actionable responses: infidelity, inflexibility, escalating disagreements into fights, lack of trust and communication, keeping secrets from each other. We can be as specific as we can. It follows that avoiding these things that ruin a marriage can bring us closer to a successful marriage.

The map is not the territory.

After we were married, my husband, Null, had to leave for an assignment abroad. During his contract stay, I gave birth to our firstborn. Null came home to see his newborn son, but could stay only briefly before he was off to complete the rest of his contract. By the time he came home to stay, Arnold was 2 years old. That was when he saw his father for the first time. "Say hi to your daddy, Arnold," I said. The little boy shook his head and buried his face in my lap. "That's not my daddy," he cried. I was flabbergasted. I explained to Null that I showed our son his father's picture constantly so we would recognize him on sight. After some cajoling, Arnold insisted, "That's not my daddy." Then he pointed to Null's picture hanging on the wall. "That's my daddy." We were surprised at how literally little children accept what we tell them. Our 2-year-old believed that the picture I pointed to was daddy, not the person it portrayed.

But the difference in appearance misleads not only children but adults. Consider the following photos. At first glance, it is difficult to imagine that the two photographs are of the same thing: the Great Pyramid of Giza, except that the one at the left is the top view, while the one at the right is a three-dimensional view from ground level. Even just the inconsistency in perspective is enough to introduce a difference in perception between two depictions of the same thing. Much like the disparity between a two-dimensional view from the top and a three-dimensional perspective of the terrain, a map is radically dissimilar from the actual territory it represents. A map is much smaller and simpler than the reality it represents. It is also a snapshot from a point in time. Depending on its production date, the territories could have changed during the intervening years. Even if the concept of representation is quite clear to adults, we still often fall into the trap of mistaking the representation for reality or, conversely, not recognizing reality in the representation.

When we make decisions, we rely on data, computer printouts, annual reports, grades in school, even pictures, and other visual material that represent real-world situations. When we analyze these data to arrive at a conclusion, we sometimes forget that they are limited in space and time. Further, technology limits the data captured. Much as a black and white photograph cannot show color. Representative devices have limitations. To make better decisions, we should be mindful of how these limitations can affect our decisions.

Circle of competence.

Each of us has accumulated valuable knowledge garnered from study or experience that deal with specific areas of endeavor. Based on our different interests, we develop competence in those fields we studied or have experience in. But we are not experts in every field. Nobody is. At best, Thomas Huxley admonishes, "We try to learn something about everything and everything about something." Often we think that we know more than what we actually know. The circle of competence comprises that which we actually know. The crux of the circle of competence mental model is understanding where we are weak as much as where we are knowledgeable. Being honest with ourselves about our limitations makes us aware of our vulnerabilities. This helps us make better decisions, plan for more attainable goals, and make provisions about where there might be shortfalls. We avoid problems, identify areas for improvement, and learn from others.

The circle of competence is a mental model used by Warren Buffett, the most successful investor to build his wealth in the stock market. Buffett runs Berkshire Hathaway, an equities investment firm in Oklahoma, Nebraska. How can a firm located so far from Wall Street succeed in stock investing? Buffett does not select his investments based on stock market gossip or riding technical rallies. His main strategy is to evaluate potential investments by capitalizing on one's knowledge and where its limitation lies. Buffett said, "You don't have to be an expert on every company or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important. Knowing its boundaries, however, is vital." Warren Buffett. By faithfully adhering to his circle of competence, Buffett, who bought his first check at age 11, has amassed a real-time net worth of $16.9 billion as of December 16th, 2021.

First principles thinking.

If you are a parent or work with little kids, you are certainly aware of the "why" game. My own experience with it went like this: Me: "Come and join the family picture, Charlie." Charlie: (absorbed in Donkey Kong) "Why?" Me: "Because you need to be in it, Charlie." Charlie: "Why do I need to be in it?" Me: "Because we'll send the picture out with our Christmas cards." Charlie: "Why do we have to send a picture every Christmas?" Some people can patiently take 10 or more "whys," but three is my limit. The next answer must be a clincher. Me: "Because Santa needs the picture so he can prepare everyone's presents. If you're not in it, then you might miss out. Don't you want your present?" Charlie: (abandoning Donkey Kong) "Coming, guys. Wait for me." Charlie is lucky. I had a mom with only one reply: "Because I said so." End of story.

Sometimes you get the feeling that children just want to annoy you with their incessant questions. But I see it as them really wanting to know what is at the root of everything. This is the first principle. It is the basic proposition with no logical antecedent and therefore accepted as the indemonstrable truth. They are accepted as fundamentally true without the need for further justification. First principles provide a firm basis for our everyday reasoning and are unquestionable in the full sense. An example of first principles thinking is the Socratic method of learning. It involves propounding a series of probing questions to cultivate critical thinking. My civil law professor, Dean Augusto Alagada, practiced this method during discussions by asking his students a series of progressively probing questions to reach the first principle. I was called upon to answer his instant "why, why, why" so often that I remained standing for hours on end. So incisive was his line of questioning and so difficult to answer that I failed his class twice. He mercifully passed me on the third time. But when I took the bar exam, I scored 92% in civil law thanks to this fearsome but wonderful teacher.

Reasoning by first principles enables us to create something from an insightful understanding of the basics, resulting in unique and original outcomes. On the other hand, the opposite, which is reasoning by analogy, means we imitate or build on something that someone else has created. One who embodied first principles thinking was Steve Jobs. At the time when competitors were racing against each other in the development of personal computers, Jobs set out to do something entirely different. "What does the consumer want?" became the question he set out to solve. He ultimately determined that people wanted a communications device that was portable and handheld, small enough to fit a purse or pocket, and without any keys cluttering the face of the device. He wanted something that was simple to operate, which responded to the human touch on its display. Based on his vision of what people wanted, Jobs eventually came up with the idea of the iPhone, the device that revolutionized personal communications, stealing the limelight from PCs and rendering pagers obsolete. Much like a child who asked "why" over and over, Jobs realized that the consumer experience formed the first principle of the devices he sought to make and designed his products accordingly.

Second order thinking.

Let us not confuse first principles thinking with second order thinking. First principles thinking seeks the basic elements upon which to form a conclusion. Second order thinking searches for the implications of a situation or event and bases the decision on them. This type of thinking recognizes that the first-order impacts that immediately follow an event have implications for optimal decision-making. So while first-principle thinking traces backward, second-order thinking traces forward along the cause-and-effect chain of events.

As a professor of finance, I taught my students that a stock's price reflects its company's fundamental value. As a stock trader for 10 years, I learned that stock prices reflect the company's values and also the sentiment of the investors buying and selling them. During the financial crisis of 2008, every stock market in the world plunged, quickly erasing the portfolio value of many small investors. Many of my clients panicked. "The market is falling. Sell everything!" screamed through the phone lines. That was the impact of first-order thinking. Mindful of the financial market contagion, I did some homework as soon as the signs of an impending crash became obvious. While the crash would significantly impact banks and financial institutions, other companies with solid businesses selling necessary commodities like food and beverages, with little debt and a comfortable cash position, should ride the tide handily. If their prices decline because of the panic, then this would present an opportunity to buy quality stocks at low prices. I called my clients before trading began and told them, "Let's sell the banking stocks. There is a list of companies that I think we should buy when they get oversold." I explained my idea of gradual accumulation. "As others sell, let's buy going down, little by little. Every 10% down, let's buy some shares. Once this crisis is over and the market recovers, you will ride the reversal with a tidy windfall." This advice proved quite profitable for my grateful clients. It was also the result of second-order thinking.

Second-order thinking anticipates the repercussions of first-order impacts. It involves an understanding of the event and a keen observation of the ensuing effects. It also requires awareness of what these events imply and what actions to take in response to these implications. Second-order thinking is difficult and it needs a good deal of study and analysis, like I did days before the stock market crash. That's why few people engage in it. First-order thinking is much more obvious and easier to do.

Pareto principle.

The Pareto principle, also known as the 80/20 rule, claims that 80% of the outcomes comes from 20% of the causes. The Italian economist and sociologist Vilfredo Pareto initially applied this principle in macroeconomics. In 1906, the professor articulated this rule when he described the wealth distribution in Italy. Pareto observed that 20% of the pea pods in his garden produced 80% of the peas gathered. Expanding on this observation, he then proved how 20% of Italy's population controlled 80% of the national wealth. Subsequent studies validated the 80/20 rule. In 1940, an expert in operations management, Dr. Joseph Juran, showed that 80% of product defects were caused by 20% of problems in production methods. More recently, Pareto analysis was used in a Total Quality Management (TQM) study to sort and rank critical success factors according to their level of criticality and identify the factors that contributed most to the delivery of quality service in certain industries.

The Pareto rule is powerful because it offers a quick and easy guide to clearly determine what factors or objects are important versus those that are unimportant. The effective application of this rule requires us to observe these four steps:

1. Identify 20% of the cause. For example, steps in a process or members of a population that would enable at least 80% of the output. For example, productivity, performance, effectiveness, etc.

2. Retain the 20% and nothing else unless the thing to be excluded serves a crucial purpose.

3. Test the selection for effectiveness and determine the implications of the reduced range or holding.

4. Refer to the resulting solution to generally known and accepted theory or practice is considered appropriate to understand its implications prior to application.

Two quick caveats. First, the Pareto principle is not applicable in all instances. It is a statistical distribution consistent with the power law wherein a small number of items is clustered either at the top or bottom of a distribution. It therefore does not follow the normal distribution or bell curve. We should use the Pareto principle in situations wherein a small amount of some input results in a disproportionately large effect. Second, the Pareto principle is not a hard and fast rule and is not intended for unconditional use. Thus, we must carefully analyze when to retain or exclude particular inputs or whether to include more or less than the 20% recommended. The discretion remains with us as decision-makers.

Probabilistic thinking.

We make decisions on information we know, but seldom do we know everything about a decision that must be made. In a world of uncertainties, we are aware that some outcomes are more likely than others based on experience, background knowledge, and logic. We assign odds to the more probable outcomes and give them greater weight in making a decision. This is the essence of probabilistic thinking: the estimation of the likelihood of particular outcomes upon which to base our decisions. For the most part, our everyday decisions involve probabilistic rather than deterministic thinking, i.e., where all events are fully determined by previously existing and known causes.

The famous fictional detective Sherlock Holmes conducted his criminal investigations using probabilistic induction. "We are coming now rather into the region of guesswork," said Dr. Mortimer. "Say rather into the region where we balance probabilities and choose the most likely. It is the scientific use of the imagination. But we always have some material basis on which to start our speculations. Now, would you call it a guess?" "No doubt. But I am almost certain that this address has been written in a hotel." "How in the world can you say that?" "If you examine it carefully, you will see that both the pen and the ink have given the writer trouble. The pen has spluttered twice in a single word and has run dry three times in a short address, showing that there was very little ink in the bottle. Now, a private pen or ink bottle is seldom allowed to be in such a state, and the combination of the two must be quite rare. But, you know, the hotel ink and the hotel pen, where it is rare to get anything else." *Hound of the Baskervilles*, Chapter 4.

Sherlock Holmes's responses to the two questions are instructive. The first one explains the difference between probabilistic thinking and guessing, which is that the former is supported by some material basis, while the latter is purely conjecture. The response to the second question illustrates Holmes's application of probabilistic thinking to why he thinks the address, subject of the discussion, was written in a hotel. The key words in this explanation that mark it as probabilistic are the words "seldom" and "rare." Both words refer to a low probability of something occurring. In this case, Holmes believed there was a low probability that a privately owned pen and ink set would be poorly maintained so as to splutter and dry up. The occurrence of a dry inkwell and a pen in poor condition rarely coincide except in hotels. Therefore, Holmes suggested that they examine the waste paper baskets in hotels around the area. The analysis shows that the conclusion was based on a set of premises informed by keen observation (the dry ink and spluttered writing) and knowledge of the probabilities of related occurrences. Holmes then eliminated the unlikely alternatives (privately owned pen and ink set), and what is left should be the solution. Holmes himself said, "By the method of exclusion, I have arrived at this result, for no other hypothesis would meet the facts." *A Study in Scarlet*, Part Two, Chapter 7. "How often have I said to you that when you have eliminated the impossible, whatever remains, however improbable, must be the truth." *The Sign of Four*, Chapter 6.

Not everyone uses probabilistic inference. That is why it is a distinct advantage to develop mastery of such a useful mental tool. When applying probabilistic thinking, we need to take some aspects of probability into consideration as they influence our assessment of what is probable. A discussion of three of these precepts: Bayesian thinking, fat-tailed curves, and information asymmetry follows.

Bayesian thinking, also called Bayesian updating. This model states that when we encounter something new, we should take into account what we already know about the matter. Based on our existing knowledge, we must adjust the probabilities we assign to the new information when making our assessments. This presupposes that we have existing but limited knowledge relevant to the problem and that we constantly encounter new information to update our knowledge. Thomas Bayes (1702-1761), an English theologian and mathematician, first discussed the Bayesian theorem in an essay "Toward Solving a Problem in the Doctrine of Chances," written in the early 18th century. Applying this to the selection from *Hound of the Baskervilles* above, Sherlock Holmes notes that the pen spluttered twice in a single word, and the ink ran out in three places in the address. He mentally compared this to his existing knowledge of how good pens write with ample ink, and inferred that the pen was poor and ink low in the inkwell. He further associated this observation with his experience about where such writing implements may be found. Thus, both new and old impressions informed Holmes's probabilistic assessment, allowing him to conclude that the address was written in a hotel.

Fat-tailed curves. Recall our discussion in chapter 3 about the bell curve and how it was a graph of the normal distribution. If we evaluate information that we are assured follows the normal distribution, then we can more or less determine where the extreme events are likely to fall. These are the points where the bell curve approaches the horizontal axis where probability is 0%. Statistics determine this to be at about three standard deviations either to the left or right of the mean coincides with zero on the x-axis. Check out the bell curve below. With a normal distribution, it is easy to estimate the probability of an event happening because the parameters are determined. But what if the distribution is not normal, as in the case of fat tails? Observe the graph below.

The bell curve versus the power law. The importance of fat tails. The figure shows two curves. The light blue is a bell curve and the dark blue is the distribution associated with the power law. Power laws are functional relationships between two interdependent quantities wherein one quantity is proportional to another quantity raised to some numeric power. A simple example of a power law in action is the relationship between a square and its area. Doubling the side of a square will quadruple its area. So the area is related to each side by a power of two (area = side^2). Why is the curve of a power law distribution called fat-tailed? Compare the power law curve against the bell curve and you will notice that they differ in their tails. The tails of the normal distribution curve fall close to zero, three standard deviations away from the mean. The tails of the power law curve, however, are still far from zero at this point and taper more gradually, moving farther from the mean. Essentially, you have a relatively flatter curve compared to the bell curve. The implication is that larger or more significant events occur more often than would be normally expected. These extreme events are not outliers but should be expected with more consequential outcomes. Mark Buchanan cites the change in stock valuations as an example. According to the bell curve, the value of a stock may be predicted to experience a 1-day drop of 10% only once every 500 years. But even casual investors know it happens more frequently than that. The empirical power law gives a more reasonable estimate: a 10% 1-day drop in stock price is likely to happen about every 5 years. Fat-tailed curves are associated with any phenomenon with a relatively high probability of extreme outcomes. So when we make probabilistic analyses, we must determine whether the events we are investigating fall within this type of phenomena rather than simply assume them to behave normally.

Information asymmetry.

Asymmetry is one of those words whose meanings are easier to convey with pictures. Look at the two photos following. If you were like me and countless others who do not belong to the avant-garde, then you would have assumed that the lady on the left's haircut was not quite done, or the lady on the right's dress might have run out of material. Like me, you would be wrong. Asymmetric hairstyle and fashion. The asymmetric style is simply clothing or hairstyle in which one side is not the same as the other. Asymmetric is the opposite of symmetric, as shown in the following illustration.

Symmetric versus asymmetric. What is the implication when we describe information as asymmetric? Information asymmetry is the situation wherein the buyer and seller of a good have unequal information about it. When this happens, the buyer and seller will tend to behave differently. We could credit this discovery to 2001 Nobel laureate George A. Akerlof in his work "The Market for Lemons." Akerlof chose the used car business to demonstrate the effects of information asymmetry. Used cars do not come in their top form and often have something wrong with them, i.e., they are lemons. The used car seller typically knows of this but withholds it from the buyer. As a result, the seller could persuade the buyer to agree to a higher price than what the seller knows it to be worth. It is only after the sale, when the buyer discovers those defects, that he experiences buyer's remorse. Had there been information symmetry, then he might not have bought the car at all, or might have had it discounted to a much lower price.

What the seller described versus what the buyer got: result of information asymmetry. The unfair playing field created by information asymmetry causes a loss of trust between parties such that they refuse to transact even at a fair price. Akerlof cites the "market for lemons" theory in explaining why people experience difficulty in obtaining credit, why the elderly encounter problems in qualifying for insurance, and why minorities have trouble finding employment. Information asymmetry skews the workings of the law of supply and demand in markets where information transparency is not present. This is the reason why institutional markets such as the stock, bond, commodities, and currencies markets adhere strictly to full compliance with disclosure and transparency requirements.

Ockham's razor.

Ockham's razor is a theory that was first articulated by a 13th to 14th-century scholastic philosopher, William of Ockham, for which reason it is also spelled Ockham's razor. The tenet states: "Pluralitas non est ponenda sine necessitate," which translates to "Plurality should not be posited without necessity" in English. This means that the simplest explanation that accounts for all of the data is the best reason from all possible alternatives. Because of its emphasis on simplicity, Ockham's razor is also referred to as the law of economy and the law of parsimony. From the name of the theory's originator, Ockham, one can tell that Ockham was a misspelling of his name. The word "razor" is not as readily obvious except by linking the word to a typical razor's function, which is to cut out what is unnecessary. Therefore, Ockham's razor urges that we cut out the more difficult and unlikely versions of a situation that may have several explanations.

The following illustration has been frequently used in many business presentations to demonstrate the disparity among perceptions of the same thing by people in an organization and their customers. In each successive step of the project, the client's requirements are interpreted in a different and increasingly complicated manner, when in the end all the client wanted was a simple functional tire swing. Another way of explaining Ockham's razor is: the answer that requires the fewest assumptions is generally the correct one. In the project above, new assumptions are apparently made by the project members regarding the number of ropes and seats and how they are attached to the tree. But none of the new assumptions helped to achieve the function the user wanted: to swing. Had the project participants simply taken the user's purpose at face value and avoided additional assumptions, they would have completed the project sooner at the least cost.

Hanlon's razor.

Hanlon's razor states that the worst intentions should not be presumed in the actions of others. A humorous interpretation states: "Never attribute to malice that which is adequately explained by stupidity or incompetence." It is probably named after Robert J. Hanlon, a resident of Scranton, Pennsylvania, who in 1980 submitted the statement for a book entitled *Murphy's Law, Book Two: More Reasons Why Things Go Wrong*, a compilation of jokes. Like Ockham's razor, Hanlon's razor persuades us to eliminate unnecessary inclusions, which we attach to situations that tend to distort the truth. This time, we should exclude thoughts that attribute malice to others when the situation may have a more innocent explanation. Take the dilemma of a bride on her wedding day when her husband-to-be is late for the ceremony. It is easy to imagine the many thoughts that could have crossed her mind that get darker and more sinister with each passing moment. Did he have cold feet? Did he do this to embarrass me in front of all our family and friends? Does he not want to marry me after all? The explanation could be as simple or stupid as having overslept after a night of drinking at his bachelor's party. It is mindless and irresponsible, but far from intentionally wicked. If this were the case, it was also highly possible that his best man had also been at the party and was also in a drunken stupor.

The waiting bride and the hungover groom. While the model is named after Hanlon, the contest winner remains largely unknown. Nevertheless, throughout history, more famous individuals have articulated the principle behind it, including Napoleon Bonaparte, who said, "Never ascribe to malice that which is adequately explained by incompetence." Johann Wolfgang von Goethe, the prolific 18th-century German poet, artist, author, scientist, and statesman, wrote in 1774, "Misunderstandings and neglect create more confusion in this world than trickery and malice. At any rate, the last two are certainly much less frequent." In the end, what likely influences us to jump to the wrong, more negative conclusion might be linked to our biases based on the limited information we have (availability bias) or our tendency to validate pre-existing beliefs (confirmation bias). This is the lattice work of mental models at work. The wisdom of Hanlon's razor is that by making us suspend our judgment until we obtain more information, we avoid entering more serious conflicts that might be difficult or impossible to resolve due to our prejudgment.

Thought experiments.

Thought experiments allow us to explore nearly impossible situations in order to hypothesize their likely implications and consequences. Basically, thought experiments are devices of the imagination. Through them, many great thinkers have systematically confronted difficult problems and arrived at sound logical solutions. A better explanation of what constitutes a thought experiment is this: A thought experiment is an attempt to draw instruction from a process of hypothetical reasoning that proceeds by eliciting the consequences of a hypothesis which, for anything that one actually knows to the contrary, could be false. It consists in reasoning from a supposition that is not accepted as true, perhaps even known to be false, but is assumed provisionally in the interests of making a point or resolving a conclusion. Nicholas Rescher.

From Rescher's definition, we may deduce that since a thought experiment is hypothetical, we may draw conclusions that are not assuredly accurate. The experiment presumes that the logical foundations it relies upon are momentarily true. Another attribute of thought experiments is that they are not aimless wonderings of the mind but follow a structured and logical process using narratives and analogies. They also incorporate empirical evidence when available and adopt an alternative viewpoint. A famous thought experiment we will use as an illustration is Galileo's demonstration of the consistency of acceleration due to gravity and that the time of the descent of an object from a considerable height is constant regardless of the mass of the object. Galileo formulated the hypothesis that two bodies made out of the same material with different weights and falling through the same medium would travel to the ground at the same speed. This assertion contradicted Aristotle's theory that heavier bodies will fall faster than lighter bodies. The imaginary experiment proceeded in this manner: Two objects of the same material, one lighter than the other, are connected by a string. They are then released from the top of a tower, here pictured as the Leaning Tower of Pisa. If Aristotle's theory is true, then the heavier object will fall faster than the lighter one, thus pulling the string taut at some point in their descent. However, the system as a whole, the two balls tied with a string, is considered heavier than either of the two objects and therefore likely to fall faster than either of them. It contradicts the idea that the lighter object falling slower would impede the fall of the heavier object. The two as a system will fall faster than the heavier object falling alone. This is a logical contradiction leading to the only plausible conclusion that both the light and the heavy object will reach the bottom at the same time, and proving that the speed of descent is constant and independent of the mass of the falling objects.

Action steps.

Similar to the action steps in the preceding chapter, select a problem that poses a significant challenge to your personal or work affairs. Then try to discern how Charlie Munger's core mental models may be applied to address this problem. To illustrate, let us assume that you own a small retail business located in a residential community. It may be a small coffee shop, a grocery outlet, or a small boutique. It may even be a combination of any of these businesses. As a retail store, your business would be stocked with items that you hope would sell briskly among the community residents. What aspects of the problem could be resolved using which core mental model? Let's see.

Circle of competence: Is the business owner. What facet of running a business are you competent in? There are some people who have a good sense of the marketing aspect or the particular good or service being sold, but they have a poor sense of controlling the finances. Others are good at financing but poor in marketing. Still others are competent at controlling the number of inventories and timing of deliveries but have little grasp of customer relationships. Seldom do business owners have a mastery of every aspect of their business. For these areas they lack competency in, they hire employees trained in those areas.

Probabilistic thinking: What are the goods and services that the community residents are most likely to purchase? What brands and price ranges would they find most attractive? The exact items consumers will purchase are uncertain. They may buy some things once, other things often. Demand for some commodities may be seasonal.

Inversion: Looking at it another way, what goods and services will the community residents most likely *not* purchase? What brands and price ranges would they consider undesirable or prohibitive? What products are regarded as taboo? Knowing what these are, a good businessman will avoid offering them in the community store.

First principles thinking: Why do the customers buy the products they purchase? What purposes do the items serve them? Do they serve a fundamental and persistent need? For which reason you may expect them to keep making repeat purchases? This would be true for most foods, beverages, and basic household items or services such as personal care, pet grooming, and appliance repair.

Second-order thinking: There are such things as complementary goods and services, items that are related to each other, such that demand for one item is accompanied by a demand for its complements. Bath soaps are complemented by shampoos and other personal care products. Pasta noodles are complemented by carbonara or marinara sauces. Thus, if there is a great demand for a certain type of good or service in the community, it makes sense to expect that there will likewise be strong demand for its complementary goods and services.

These are only five of what could be 10 or more core mental models forming in the decision-making lattice work of a business. For any other problem you may encounter that appears to be too complex to solve, you could use the lattice work of mental models in much the same way as we have done here.

Moving on, Charles Munger conceived of the core mental models as thinking aids in solving practical problems. They work best when related to each other as in a lattice work of decision-making. Knowledge is never isolated. It is integrated with other facts and information in ways that make the most comprehensive sense. In the next chapter, we will explore other aspects of thinking and decision-making that can optimize the benefits we can derive from the lattice work of mental models.

Key takeaways.

* Practical thinking is thinking in a way that effectively serves our everyday purposes rather than trying to abide by philosophical rules of logic.

* Thinking practically involves applying a network of mental models that are derived from pragmatic principles and applied fields of endeavor.

* Charles Munger conceived of the lattice work of mental models, stating that arranging information in a network of mental models is an effective way of making decisions.

* Munger's core mental models include the following:

* Inversion, reversing the natural order of things.

* The map is not the territory.

* The circle of competence.

* First principles thinking, finding the basic proposition.

* Second-order thinking, finding the next repercussion.

* Pareto principle, the 80/20 rule.

* Probabilistic thinking, including Bayesian thinking, fat-tailed curves, and information asymmetry.

* Ockham's razor, the simplest explanation is the right one.

* Hanlon's razor, avoid attributing malice where an innocent explanation exists.

* Thought experiments, drawing a hypothetical conclusion.

Five, getting the most out of mental models and ultimately out of life.

A microbe originating from a bat gets ingested by pigs slaughtered in a Hong Kong wet market. The chef cuts up the pork in preparation for a classy Hong Kong dinner. The customer, quite pleased with her meal, asks for the chef to shake his hand and thanks him. In his hurry, the chef wipes his hands on his apron instead of washing off the pork blood on it. He shakes the hand of the lady customer who then leaves to catch her flight to Europe on her way back home to the US. Unaware of the deadly pathogen she was incubating, she inadvertently affects her clandestine lover, random people in her flight, the son, and the husband she embraces when she arrives home. The disease then spreads with each new contact, and the deaths come fast and unexpectedly. In all, 30% of those who happen to catch the infection die.

The movie *Contagion* was first shown in theaters in 2011. Interest in it largely waned over the next decade, but in March 2020 and the months thereafter, the movie experienced a surge in demand on cable television and online streaming services. The onset of COVID-19 provided the movie with a context relevant to the current times. *Contagion* only rated 6 out of 10 during its original showing. Recently, viewer ratings jumped to 8 out of 10 thanks to the pandemic lockdowns. What could explain the current interest? Incredible as it may be, people appeared to try understanding the real-life pandemic by turning to a Hollywood invention for answers. Instead of art fictionalizing an aspect of real life, it became a case of a work of fiction informing real life. Rather than watching a movie to escape their problems, people watched a movie to find a solution for them. Is this a sensible way to solve a global dilemma? Yes, there were some scientific facts in the movie, but the movie itself was far from factual. According to experts, the disease it alleged could not possibly exist in real life. The movie alleged a virus transferred quite handily from a bat to a pig to humans. However, in reality, zoonotic events, when an animal pathogen begins to infect and spread among people, require that a virus overcome many hurdles before it can infect humans and defeat our robust immune system. Viruses that manage to jump species are rare, especially ones that do so successfully enough to cause large epidemics.

Jude Law in the movie *Contagion* versus actual COVID healthcare responders. In *Contagion's* pandemic, the virus kills 25% to 30% of people it infected. But COVID-19 had a global case fatality rate that peaked at 7.2% during April 22nd through 28th, 2020 and declined swiftly to 2.2% (2%) by December, suggesting low virulence. Finally, in the movie, a vaccine was developed in the space of a few months, but the Centers for Disease Control (CDC) says assuming a vaccine can be created, that could take more time than 4 to 6 months. Experts say that vaccine development is a long and complex procedure that lasts 10 to 15 years.

What do we learn from all this? Not all sources of information are trustworthy because some of them depart substantially from the truth. We should carefully select the data upon which we base our decisions. Building the wrong foundation for our analyses would certainly lead us to faulty conclusions.

Aligning ourselves with the world as it really is.

Obviously, unless a movie is a certified true documentary, it rarely portrays the world as it really is. There are things other than movies that distort our view of reality. Wishful thinking is one of them. In our childhood, our parents indulged our Christmas wishes through letters to Santa Claus or a visit to the resident wish-maker in the local mall. Childhood idealism is a cherished quality that sustains our optimism throughout life. But wishful thinking has no place in making life's hard decisions. Pragmatism is what differentiates adults from children. Charles Munger extols pragmatism by investing, telling us to accept reality even if we didn't like it.

In 1964, my dad bought a penny stock that his Chinese client, a veteran investor, said would double in value in a short time. A big company will be acquiring it as a shell so they could use it as a back door to getting listed on the exchange. My dad, an accountant, took a good hard look at the company's balance sheet and thought that it was not worth the price. But out of curiosity and awe at the stock market's mysterious workings, he bought just enough not to be disappointed if he lost it all. Rightly so, his client told him a week later to sell the stock because the backdoor listing deal fell through. But my dad fell in love with this stock, the very first and only stock he bought in his life, and held high hopes that it would still double, even triple in value. In time, the company shut down. Its framed stock certificate hangs today on the wall of my dad's office, a testament to the lesson that we should face reality and cut our losses while we can.

The importance of getting feedback.

We are convinced of the things we know to be true because we want them to be true. But how can we be sure that they are? The only way is to get feedback from other sources that corroborate the truth of what we know. Getting feedback can also confirm the opposite: that what we know is actually untrue. Either way, we validate the basis upon which we make future decisions. There are different sources from which we could get feedback. People are our best source of information. Our best sources of feedback are people, groups, or institutions who are direct, candid, and knowledgeable about the information we wish to corroborate. Face to face can convey nuanced information beyond the simple exchange of words. Body language, facial expressions, the volume and tone of verbal communication—all of these contribute to a well-rounded impression of the feedback you gather. Written words may try to hide the truth about some things, but words, actions, expressions, and intonation make it difficult to mask the truth. That is why feedback acquired through a personal exchange is the best way to corroborate information.

Reading as a source of information. When a primary source such as a person is unavailable to answer direct questions, then the next best source of information is secondary sources from which other knowledgeable people's thoughts and ideas may come to light. Intelligent reading, in contrast to reading for entertainment, such as social media, gossip columns, or comic book reading, is a key to filtering information. By exposing our minds to a broad range of written information, we get to compare and contrast ideas and weed out fact from falsehood. Reading also helps us create new models, validate what we already know, and replenish our knowledge stockpile.

Past decisions and actions as information sources. There is a saying that experience is the best teacher. This is true even if other people and the books we read are better sources of information because they extend far beyond what we may have experienced in our young lives. But at some point, we must have heard your elder say something like, "If I've told you once, I've told you a thousand times, and yet you don't listen." We do not always pay attention to what we are told.

or what we read about because our ego gets in the way. We feel that we can do better.

To his mother's dismay, author had a penchant for setting off firecrackers during festivities and celebrations. His older brother had already told him that if he were to light a firecracker, he should lay it on the ground and light it with the long stick. Instead, Arthur would join his buddies in vying for who could set off the loudest pyrochnic in the most daring way possible. They would hold the firecracker while lighting it with the match, then wait to release it. "One of these days you'll get your fingers blown off," his mother would wail. "It hasn't happened yet," Arthur would quip.

Last 4th of July, Arthur had just downed his fifth Budweiser when he lit up a black cat. He held it in one hand and lit the fuse. Then he waited a few seconds to show his daring and dexterity before he threw it. It was only after a second or two when he realized that what he threw was the match. He quickly released the firecracker, which he was still holding on to. Too late. The thing exploded in midair a few inches from Arthur's outstretched arm, resulting in powder burns, a large mean blood blister, and a mangled finger, plus bloodshot eyes, and a ringing in the ears that lasted for a week. Today, author's index finger is shorter by half an inch, and he has sworn never to hold another firecracker again.

Learning from the experiences of others. Have you heard of vicarious experiences? It is the phenomenon of feeling what other people feel as they go through their experiences. As you listen to somebody tell you their life story, you imagine yourself in their place. You get to feel their emotions and learn from the story as if it were your own. When others make mistakes and we learn from them, we save ourselves the trouble of suffering its adverse effects while gaining the benefit of insights we can apply in our own lives. This is the advantage we have when we read the biographies of famous people in history, emulating the things they did right while avoiding their mistakes or failures. We benefit from hindsight and thus make better decisions than we would have without it.

One leadership development practice that organizations have come to adopt widely is mentoring. Mentoring is more than the relationship between a trainer and a trainee. It is a close bond fostered between an expert who teaches, guides, and advises a less experienced colleague. It involves close communication and extended duration and deep collaboration between mentor and mentee. This is probably the most insightful manner by which one person can learn from another's experience. There are many examples of successful mentoring relationships such as Christian Dior mentoring IV St. Lawrence on hot quarter or Audrey Hepburn mentoring Elizabeth Taylor on acting skills. Among ancient Greek philosophers, Socrates mentored Plato who in turn mentored Aristotle. In more recent times, Gopal Krishna Gokal mentored Mahatma Gandhi on politics, social reform and statesmanship. The writings of Gandhi thereafter profoundly influenced the life and works of Nelson Mandela, the hero of the abolition of apartheid in South Africa. The experiences of great men and women need not die with them but bear even greater fruit when passed on to succeeding generations. Gopal Krishna Gokao Mahatma Gandhi and Nelson Mandela. As Isaac Newton wisely observed, if I have seen further, it is by standing on the shoulders of giants.

The Swiss Army knife metaphor. Are you familiar with the Swiss Army knife? It looks exactly like the photo below. A Swiss Army knife is not one knife or gadget, but many tools assembled into a handy contraption that you can carry in your pocket. There are several models of the Swiss Army knife, some with more tools than others. The idea is to have enough tools handy in our possession to serve whatever purpose we might need for them.

So far, we have discussed several mental models developed by Charlie Munger. Well, at least some of the better known ones. Mer literally identified more than 100 models. Some of them are more commonly used while others are more specialized. While you will likely not use all of them, it is always an advantage to get to know as many as you can and store them in your mental toolbox to keep them handy just in case you will need them, much as a Swiss Army knife.

The wisdom of checklists in creating mental models. Having a collection of tools is one thing, but knowing how and when to use them effectively is another. To organize the use of his tools when making investment decisions, Mer constructed a checklist, which is also a tool comprising 10 items. The following table is a concise representation of the Munger checklist.

Charlie Munger's investing checklist.

Principle risk application. Beware of both qualitative and quantitative risk. Use a margin of safety. Require additional compensation for assuming unknown hazards. Safeguard your reputation.

Principle independence. application. Think for yourself. You need to be different, but also be right. Mimicking the herd will get you the results of the herd.

Principle preparation. Application. It is impossible to always know when opportunity knocks. Be prepared at all times. Be an avid reader and never stop learning from others. Keep asking why.

Principle intellectual humility. application. Accept the limits of your knowledge and stay within the circle of your competence. Avoid false precision from detailed models and search for contradictory evidence.

Principle analytic rigor application. Analyze the drivers of value rather than price. Ask how can this be wrong or how could it fail? An investment. Buy something for less than its present value. Use checklists to avoid biases and emissions. Don't lose the forest for the trees by seeking out second and third order effects.

Principle allocation. Application. The best use of capital should be measured by its next best use. Opportunity cost. When the odds are greatly in your favor, bet heavily. Concentrate on your best ideas.

Principle patience application. Resist the temptation to act when it's not needed. Compound interest is the eighth wonder of the world. Never interrupt it unnecessarily. Enjoy the process along with the results. Guard against the effects of hubris and boredom.

Principle decisiveness. Application. Act decisively when your patience is rewarded. When the right opportunity presents itself, be aggressive where others are fearful. When conditions are right, act swiftly.

Principle change. Application. Accept the world as it is with all its changes. Not as you wish it were. Never fall in love with an investment. Stay skeptical. Continually challenge your favorite ideas. Concentrate on what will not change rather than try to predict what will change.

Looking closely at the applications for each principle in the checklist, you will discover that several of them mention some of the models we have become acquainted with in the foregoing chapters. The margin of safety is included under risk. First principles thinking is inferred by the need to ask why under preparation. Circle of competence is included under intellectual humility while inversion is used for analytical rigor. Compounding is the tool pertaining to patience while seeing the front opens our minds to change. These are not the only tools applicable nor are they applicable only under these principles. Thinking through a lattice work of models signifies that logically applying several models to a problem usually leads to the best decision possible.

How to challenge mental models? Now that we have our models and the models are organized in a checklist, does this mean that we are ready to use our lattice work? Not quite. Because the models we strung along our lattice may not be the best possible combination of tools and some of them may be downright wrong for our purpose. It is crucial for us to test our chosen methodology to validate its sustainability for the decision we wish to arrive at. There is a mental tool called the latter of inference that helps us revisit the facts supporting our decisions and actions. Using our beliefs and experiences to expand our perspective rather than being influenced by them in a way that narrows our scope of the judgment. Let's get better acquainted with it using the latter of inference.

In 1970, the distinguished professor ammeritus at Harvard Business School, Chris Argyus first proposed an analytical framework that begins from observations and facts and progresses through a set of mental processes that will eventually lead to a conclusion. He called this framework the latter of inference which is depicted in the following diagram.

Acting based on what we believe in.

Decisionmaking.

Adopting beliefs about the world.

Beliefs.

Forming conclusions.

Judgments.

Formulating premises based on meaning.

Assumptions.

Adding meanings.

Interpreting reality.

Selecting information from what we observe.

Selected reality.

Observing information and experiences.

Reality and facts.

To illustrate how the latter works, let us adopt a common enough realworld situation. Let's say Joel is contemplating how his business could adopt a social entrepreneurship approach. Joel's business manufactures a variety of envelopes, boxes, and packaging materials for business use. In this exercise, the question confronting Joel is, "How can my business be more socially relevant while remaining profitable?" Applying the ladder of inference to solve this problem requires Joel to move from the bottom step to the top as follows.

Step one, reality and facts. Joel first accumulates as much information about people, events, places, conversations, and other factual data that may have a bearing on the problem. The information he gathers involves the market for boxes and packaging materials, the profiles of the consumers requiring his products, and the beneficiaries of his social entrepreneurship program. Joel should also gather data about his competitors.

Step two, selected reality. Joel's small tomedium scale business typically serves the immediate community and city where it is located and its beneficiaries and competitors are also within the same area. From all the data gathered, he selects the information within his immediate market, including consumers, beneficiaries, and competitors, and the likely demand for his products.

Step three, interpreting reality. The selected data may now be analyzed in a way that Joel can derive relationships among the pieces of information. For instance, for many residents in his market area, the recent pandemic lockdowns incentivized home businesses selling food products, handiccrafts, household products, and others through online marketing. They happened to constitute a new demand for boxes and packaging materials by which they can transport their products to customers. A correlation study can be made relating the need of this new niche with products Joel's company can adapt to their needs.

Step four, assumptions. Having interpreted how data relate to each other in a meaningful way, the next step is to establish premises relevant to that interpretation. These premises may or may not be entirely valid. Thus they are assumptions but they are the postulates that guide the analysis while establishing the relationship between home e-commerce businesses and the types of product packaging they need as well as the social relevance of product packaging. Joel assumes the following. Home businesses require durable packaging for product transport. The packaging materials must be recyclable or reusable. The manufacturing method must be sustainable with a low carbon footprint.

Step five, judgments. Based on the assumptions made and how the information gathered is selected, Joel can now arrive at tentative conclusions to answer his question. How can my business be more socially relevant while remaining profitable? After a careful integration of the relevant data with the assumptions, Joel will likely come up with the following solutions. Materials to be used. Corrugated cardboard sheets and similar strong organic materials that could be reused or recycled and eventually naturally decomposed and be incorporated into the soil. Design minimalist to reduce or eliminate scraps and wastage as well as multi-purpose to encourage reuse. Process labor intensive where possible to provide skills training and employment to the surrounding community as well as to hire persons with disabilities in tasks that are suited to their skill sets.

Step six, beliefs. The foregoing conclusions become the foundation upon which Joel can now form a set of beliefs moving forward. Recyclable materials can be used multiple times before eventually being discarded. This reduces the depletion of our natural resources and minimizes trash sent to the landfill. Using materials that decompose into the soil, such as cardboard or paper, eliminates the use of plastics, styrofoam, and other artificial materials that do not degrade. Using degradable materials, therefore, reduces pollution of our land, water, and air. Providing employment to more people in the community raises the standard of living of the population. Employing persons with disabilities who otherwise could not find gainful work makes them productive citizens who contribute to the good of society.

Step seven, decision-making. Joel then resolves to take action according to the conclusions arrived at because they are based on what he believes to be right and good. The latter of inference describes how we think, proceeding from our observation of the things around us to deciding what to do about them. Despite being entirely rational, the latter of inference still potentially leads to poor judgment and bad decisions. Two reinforcing loops that lead to bad judgment are inherent in the latter. The first loop involves a subconscious iteration between steps two and six, selecting data on the basis of beliefs. As we sort through the mass of information we initially gather, we are forced to weigh which of the data are relevant and in doing so our beliefs may influence us. Let's say Joel is a firm believer in Milton Freriedman shareholder theory. According to Freriedman, a firm is responsible only for increasing its shareholders wealth. With this belief system, Joel will select data that deals with profit generation and will likely discard data on stockholder benefits or the welfare of individuals the firm impacts other than its stockholders. The second reinforcing loop involves actions, step seven, that creates observable data, step one, that further reinforces the decision and action. For example, the standard practice among small businesses is to use styrofoam and plastic to package their products. Since these are the status quo, suppliers produce them in large quantities that impose a lower cost. Joel's cardboard packaging is more expensive because it hasn't yet attained economies of scale to produce. Thus, the data Joel is likely to gather about the acceptability of cardboard packaging will be negative as it appears too costly compared to the status quo. The existence of these iterative loops does not mean that the latter of inference is inherently flawed. It simply means that we should take care to avoid logical traps. One way is to think of the ladder's implication going downwards. Even as we execute the steps going up to avoid the belief data selection loop, question your beliefs and assumptions before selecting the data. Joel must be aware of his belief system and his partality towards Freriedman and set this aside for the moment. He will need to discipline his thinking away from his biases in order to view the gathered data objectively to escape the action data gathering interference. Seek data that may be contrary to the current situation. Joel, aware that businesses in the locality are not aware of the benefits of sustainable packaging, may seek out another community or locality where sustainable packaging is already accepted and use that as a model for what he intends to build in his own business environment.

Assimilating and accommodating mental models. We have gone through an introduction and description of mental models mostly identified by Charles Munger. Be aware that this is not an exhaustive list. In fact, there are many other mental models that we may come across and find useful that Munger had not even considered. Apart from just knowing about them, what is important for them to be useful is that we must assimilate them. Assimilation is the cognitive process of fitting new information into our present knowledge of the world. Psychologists have a name for this schema. Schemas are organized structure of knowledge about things that exist in our memory and are aggregated with all other schemas we have built in our minds since our childhood. Check out the diagram below.

When a child meets a four-legged animal and learns to call it a doggy, this experience forms a new schema in her mind. In her mind, a girl forms the hypothesis that four-legged animals are doggies. Each new encounter with the doggy is assimilated into her schema and reinforces her hypothesis. At another time, the girl sees another four-legged animal and calls it a doggy. Her mom corrects her and teaches her to call it a cow. This new experience is not consistent with her hypothesis and changes her understanding of a doggy that is only a certain kind of four-legged animal is a doggy because another kind of four-legged animal is called a cow. The child therefore accommodates the new experience by adjusting her schema about four-legged animals. Thus, assimilation involves reinforcement of the schema while accommodation includes altering the existing schema or developing new ones. These cognitive tasks are also best applied to the mental models that we have learned in this chapter as well as the other mental models we may encounter in our daily lives.

Action steps. Mental models are useful tools for decisionmaking and so are Charles Mer's checklist and Chris Argyus' ladder of inference. There are many more theories and frameworks that we may use to make the right decisions, but none of them is failafe. To avoid logical traps, it helps to adopt the following concrete steps to test whether the mental tools we use lead us to sound judgments.

One, ask thought-provoking questions. At every step of your deliberation, be aware of your thinking process. Ask yourself questions such as, "Why am I doing this? Does it serve a useful purpose? Does it advance my decision-making process to the next logical step? Or is it counterproductive?" Being keenly aware of your thought process helps you avoid logical errors and subjectivity.

Two, reflect on your feelings, thoughts, and actions. Make a candid assessment of strong feelings, misguided thoughts, and unwise actions have unduly affected yourself and other people. Recall that in the latter of inference, any undue influence of feelings, beliefs, and actions on the data gathering and selection compromises your results further along in the thinking process.

Three, compare your viewpoints with those of others. No matter how well adjusted you think your viewpoints may be, they are still mere opinions until they can be challenged. Comparing them with the opinions of others, provide some degree of corroboration where there is agreement. Where there is disagreement, assess whether the contradicting opinions may have greater merit than your own.

Four, interpret information objectively. This is easier said than done. So, it is where the use of the mental models provides the greatest advantage. Employ the mental models as impartially as you can and be guided by the structure of their decision-making framework. Employ as many relevant models as you can find in the lattice work. Then, judiciously compare their results before deciding on actions you may take.

Five, gain feedback from others. When you have arrived at a decision, it is wise to seek the counsel of others, particularly your own peers, superiors, or others who can speak from a position of authority. Their feedback about your decision may enlighten you to reconsider points you omitted in your thought process or validate your decision and strengthen your resolve.

Moving on. We go to the movies to escape the routine and stress of real life. That is the most compelling reason why we should not look for real life solutions in Hollywood's fantasy world. To make sound decisions, our thinking process should begin with gathering reliable data, selecting the relevant information, analyzing them with our mental models, weighing them against our belief system, and forming a decision that leads us to action. Mastering this method objectively and efficiently is the key to achieving the most out of life.

Key takeaways. We should align our knowledge with the world as it really is, not how it is represented in fiction or how we prefer it to be. We should validate our knowledge through feedback gathered from other people, reading materials, our past experiences, and the experiences of others. Our mental toolkit should resemble a Swiss Army knife where the most essential mental models are within easy access. Charlie Mer's checklist is a good example of the principles and applications for which we may summon the mental models we accumulate. The latter of inference is a helpful tool by which we can organize our thinking, but we must avoid its logical traps that lead to bad judgment.

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This has been mental models in a nutshell. Practical thinking frameworks to amplify your decision-making and simplify your life. Written by Think Netic. Narrated by Aaron Joerger. Copyright 2022 by Think Netic. Production copyright by Think Netic.