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How to make informed decisions using mental models
Material posted: Publication date: 29-10-2017
We make conclusions based on the usual judgment and evaluate each situation independently. This limits and prevents to achieve the goals. To consider problems from different points of view, you need a set of mental models.

Simplify complex

We usually don't think about the fact that each event is the sum of billions of variables. Would you be able to influence variables responsible for the result, you would be able to increase the chances of a positive outcome. But how do you know what are these variables?

There is no point in trying to influence all the smallest details, and it is impossible, our brain is not built for it. Here's the handy mental model. Using them it is possible to separate the wheat from the chaff.

One of the examples of mental models — the Pareto principle. It States that 20% of efforts give 80% of the result, and the remaining 80% of the effort — only 20% of the result. The law helps weed out the unimportant and focus on key points.

Munger and Buffett have applied the law when you decide what to invest. They assess companies in search of those that provide disproportionately high returns.

Get rid of prejudices

Both the advantages and disadvantages of the human mind is the ability to determine cause and effect. On the one hand, this in itself works as a mental model, allowing us to quickly organize all clear to us. On the other — just because of this speed a causal relationship is often erroneous.

We can't look at the world objectively, we all have prejudices. Mental models help to notice them.

Knowing your prejudices, you'll think twice before you make a decision. So you will greatly reduce the likelihood of errors and losses.

See the world through the prism of multiple disciplines

"We need to accumulate a lot of mental models. Using one or two, you will inevitably begin to adjust them in reality, says Charles Munger. — Models should be from different disciplines because all the wisdom of the world can not concentrate in one area".

Usually we look at the world through the prism of their specialty or profession. But it is much more diverse than the view that is formed by our habits, occupation and education.

This does not mean that you need to become an expert in Economics, physics, psychology and other Sciences. But you need to understand the basic principles of all disciplines and use them in making decisions. Brain to work the necessary tools. Mental models will become such tools.


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