One of the best ways to embody practical intelligence is Charlie Munger’s concept of mental models. These are heuristics, or handy rules of thumb, for how to approach situations in smart ways. It’s when we try to freelance everything in our lives that we truly run into trouble, so having (relatively) universal guidelines or blueprints for how to act intelligently and efficiently can be invaluable.
Among the innumerable approaches that exist, we talk about the Pareto Principle (80/20 ratio), thinking about secondary consequences, distinguishing between feeling and thinking, satisficing (satisfy + suffice), prioritizing motion over planning, and addressing Murphy’s Law (whatever can go wrong, will go wrong).
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At this point, we’ve examined how our brains work on a biological level to periodically sabotage us. We’ll go along with the theme of being more intentional about our thinking as we introduce the concept of mental models and how they can act as a virtual safeguard against unintelligent (stupid) thinking.rate Berkshire Hathaway since: ech at USC Business School in:
“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.
What are the models?
Well, the first rule is that you’ve got to have multiple models—because if you just have one or two that you’re using, the nature of human psychology is such that you’ll torture reality so that it fits your models, or at least, you’ll think it does. You become the equivalent of a chiropractor who, of course, is the great boob in medicine.
It’s like the old saying, ‘To the man with only a hammer, every problem looks like a nail.’ And of course, that’s the way the chiropractor goes about practicing medicine. But that’s a perfectly disastrous way to think and a perfectly disastrous way to operate in the world.
So you’ve got to have multiple models. And the models have to come from multiple disciplines—because all the wisdom of the world is not to be found in one little academic department. That’s why poetry professors, by and large, are so unwise in a worldly sense. They don’t have enough models in their heads. So you’ve got to have models across a fair array of disciplines.
You may say, ‘My God, this is already getting way too tough.’ But, fortunately, it isn’t that tough—because eighty or ninety important models will carry about ninety percent of the freight in making you a worldly-wise person. And of those, only a mere handful really carry very heavy freight.”
Additionally, Munger asserted the following about mental models: “You must know the big ideas in the big disciplines and use them routinely—all of them, not just a few. Most people are trained in one model—economics, for example—and try to solve all problems in one way.
Munger makes it clear that to navigate the world without a well-rounded set of mental models is tantamount to taking stabs in the dark. There are too many variables for one to deal with effectively, and unless you have a model for which to organize them, things will go poorly. If life is a construction site, mental models would be how to use a hammer, a saw, nails, a sander, and so on. The more models you acquire, the better you can deal with the job.
So then what exactly is a mental model? It’s a filter of sorts to run situations through to try to quickly gain understanding and make an optimal decision. They provide guidance to us as sort of rules of thumb for living. You can call them life heuristics or guidelines to evaluate and comprehend. You can also think of them as a set of goggles you can strap on that will help you pay attention to certain elements and think toward a specific goal.
They give us the ability to filter noise from the signal. No model is an entirely perfect reflection of the world, but they don’t have to be. As long as they help us evaluate the complexity around us, they can be used to improve our decisions. Skepticism and critical thinking are essentially mental models for specific purposes. If our purpose is practical intelligence, we can easily adjust for that as well.
We already have our own mental models; they’re what we’ve developed over the course of our lives. Every one of us possesses a set of values, ideas, and processes that we apply to what we see going on around us. Based on our own experiences, we’ve learned to process conditions and solve problems in a certain way. You may refuse to use banks out of distrust for large institutions and keep your money tucked under your mattress as a rule of thumb. While self-reliance and eschewing large institutions can be seen as a mental model, it may not be very effective, smart, or even applicable to most areas of life.
By definition, our own mental models are limited and only reflect a biased perspective. These are the proverbial hammers Munger speaks of—our limited views.
If my mental approach is the only thing I use when I’m trying to perceive and understand the world, I’m not going to have a very broad spectrum of comprehension about the world. Invariably, I will get some things completely wrong, and will come up blank in other situations when nothing in my experience can apply.
Therefore, the more, the better. Understanding a certain object, action, event, or subject through a new viewpoint or set of standards helps you discover multiple facets about what you see, and could offer a wider array of potential solutions than you’d have if you stuck to your own frame of reference.
This is especially helpful if these models are universal, widely applicable, and tend to lead to answers and truth rather than speculation and opinion. The more varied perspectives you possess, the more you can view the world in terms you can understand. It’s truly not what you know, but how you think.
For example, take the Pareto Principle, a mental model that’s a personal favorite. It’s also called the 80/20 Rule. It states that in any given endeavor, 80 percent of the effects are caused by 20 percent of the causes. When you’re in a scenario where you’re trying to determine efficiency and what to focus on, you can strap on your Pareto Principle goggles. You can use this mental model to find that in the office, 80 percent of sales come from 20 percent of the customers; in a doctor’s office, 80 percent of all sports injuries are caused by the most common 20 percent of the hazards; in the gym, 80 percent of the weight lost is caused by 20 percent of the exercises, and so on. Now, the model might not hold true, and the numbers certainly won’t always be so exact, but it gives you an idea of how to organize your information and decision-making without even having to know anything beforehand.
It’s a general rule of thumb that can produce a helpful truth about trends, possibilities, decisions, and insights we wouldn’t have otherwise. It’s a useful hammer for a certain type of situation.
You can see how it benefits you to have a wide range of mental models to employ. As useful as the Pareto Principle is, it doesn’t help you decide where to go on vacation, for instance. You could try (80 percent of the enjoyment of a vacation comes from 20 percent of the factors), but it’s not quite suited for it.
Of course, that’s also what Munger espoused in his reference to a latticework of mental models. You need multiple models from a wide variety of disciplines because life has innumerable dimensions. In fact, the power of mental models lies in having a latticework that is applicable across many situations.
If you don’t have this framework, you risk falling prey to the fable of the blind men and the elephant, which goes something like the following: there were once six blind men, and they all reached out and could only feel different parts of an elephant: the knee, the side, the tusk, the trunk, the ear, and the tail. They all came to the conclusion that they were feeling different animals or objects. None of these blind men were wrong in isolation, but they could only see from a single perspective, so they were wrong about the elephant’s overall appearance. In other words, not everything is solvable using the Pareto Principle.
Multiple models challenge each other to produce a more unified overview, whereas just using one or two restricts your long-range view to a limited context or discipline. Having a huge range of mental models can expand your viewpoint and cancel out some of the stray “errors” that using just one or two models would produce.
This doesn’t mean you have to know all the ins and outs of a million different disciplines to employ multiple mental models. You just need to understand the basic points and fundamentals of a few essential ones. Just don’t be the person with a single hammer.