The Circle of Competence is a concept that has helped investors like Charlie Munger and Warren Buffet get to where they are today. So, what is the Circle of Competence? It’s simply knowing what you’re good at and knowing what you’re not good at. If it sounds obvious, you would be surprised at...
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The twaddle tendency is the need to speak confidently on something we don’t know enough about. The talk that comes from the twaddle tendency never adds value or unique input. It’s typically a rote repetition of facts, lines they’ve heard somewhere else, or a jumbled grouping of authoritative-...
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What is the Dunning-Kruger effect? To put it simply, it’s the correlation of excess confidence to limited knowledge. It also shows a correlation for lower confidence in more capable people. Ironically, people overestimate their knowledge about the Dunning-Kruger effect too. Take a lo...
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Inversion is probably one of the most important mental models you can learn, not because of what it can help you do, but because of what it can help you avoid. Inversion looks at a problem backward, asking the opposite of what it is you’re trying to achieve. If you want brilliance, you avoid stup...
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By now, you may already know something about cognitive biases, but you probably haven’t given too much thought to how they interact. Charlie Munger, an incredibly successful investor, coined the Lollapalooza effect to describe the interactions between cognitive biases and how they interact with e...
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“Patients can have as many diseases as they damn well please.” John Hickam Occam’s Razor implies that the simplest answer is usually the correct one. This is often not the case in the medical profession. The body is a complicated organism with a lot of moving parts. To ...
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The lipstick effect defies what most people would come to expect during an economic downturn. The theory states that during a recession, the sales for lipstick nearly always increase. This has been shown in many cases, and it continues to perplex economists. A few theories may explain the ca...
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Hume’s guillotine is a mental model for separating facts from values. In the words of David Hume himself, “If the cause, assigned for any effect, be not sufficient to produce it, we must either reject that cause, or add to it such qualities as will give it a just proportion to the effect.” ...
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Hanlon’s Razor is about giving people the benefit of the doubt. Just like many other mental models, it is a tool to help us see past the bounds of our ego. We too often assume the actions of others have to do with us, as if our lives are the ruling factors in theirs. Whether you do this co...
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“When technology moves as fast as it does in a civilization like ours, you get a phenomenon which I call competitive destruction. You know, you have the finest buggy whip factory and all of a sudden in comes this little horseless carriage. And before too many years go by, your buggy whip busines...
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