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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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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“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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“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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Occam’s Broom is a play on Occam’s Razor. The term is used to describe the process of sweeping away inconvenient facts when they oppose your view. The term was created by microbiologist, Sydney Brenner, to describe what happens in heated scientific debates. Scientists are often heavily i...
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Mental models are tools we use to understand the world and inform our decisions. They help us think outside the box with an eye for the future. It’s not about raw intelligence or even how smart you are. It’s about having the right mental tools to help us make complicated decisions and think...
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Occam’s Razor is a mental model that helps us choose an explanation when there are competing theories. In a nutshell, it claims the theory with the least assumptions is usually the correct one. This mental model is named after William of Ockham, a 14th century friar and philosopher. Occ...
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Depending on the point in time a reward is received, humans value them differently. Humans are impatient by nature in the short-run. Humans become more patient over the long-run. Hyperbolic discounting makes for inconsistent decision-making. Hyperbolic discounting can affect your personal an...
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