Chapter Content
Okay, so, like, finding good mental models, right? It's all about how your brain works when you're, like, making decisions. It's basically a prediction machine based on your past experiences, you know?
But here's the thing, just relying on simple logic, like, "oh, this happened before, so it'll happen again," that's not really the best way to go. It's too dependent on specific situations, it's too much about just experience. You gotta look at each decision individually. What you really need are principles and mental models to make good choices.
So, the best mental models I've found? Well, they come from a few places. First, there's evolutionary theory. Then, game theory. And of course, Charlie Munger. He's, like, Buffett's partner, amazing investor. He's got, like, thousands of great mental models. Oh, and Nassim Taleb too. And Benjamin Franklin. You know, people like that. So yeah, I try to fill my head with all kinds of different models.
I even use my own tweets, and other people's tweets, as, like, little sayings. Tweeting helps me, you know, get down to the essence of what I'm learning. It's also a good way to, like, refresh my memory. Because, I mean, your brain's only got so much space, right? You only have so many neurons. So, you can think of tweets as, like, pointers or addresses, or just little reminders to help you remember those bigger, deeper principles. But, here’s the kicker: you gotta actually connect those principles with your own real-life experiences to really, truly understand and remember them.
Otherwise, these tweets, they can just end up sounding like some cheesy motivational poster, you know? Inspiring at first, maybe you even print them out, put them up to, like, keep you going. But then, you just forget about them and go back to doing the same old thing. What these mental models really are, is just a, like, easy way to, uh, trigger your memory of what you've learned.
Alright, so, evolutionary theory. I think you can explain a lot of things in modern society with evolutionary theory. There's this idea that civilization exists to, like, solve the problem of how to distribute mating rights. Think about it: from a purely sexual selection point of view, men have tons of sperm, but women have a limited number of eggs, so, yeah, there's an allocation problem.
Basically, all of our inventions and accomplishments, you know, deep down, they're all about figuring out how to distribute those mating rights.
And, you know, a lot of life's problems can be explained and even predicted using evolutionary theory, thermodynamics, information theory, and complexity theory.
Okay, so, the way I see it, I don't think I can find the "right" way to do things. Instead, I focus on getting rid of the things that don't work, one by one. I believe that success is just not making mistakes. It's not about always making the right choices, but it's about just dodging the bad ones.
Back in the 90s, I got really into complexity theory. The more I learned, the more I realized just how limited our knowledge and ability to predict things really are. Complexity theory really had a huge impact on me. It helped me build a system that, like, works even when I don't have all the information. Because, you know, deep down, humans are ignorant, and we're really bad at predicting the future.
Microeconomics and game theory? Those are, like, your foundation. You can't succeed in business or even really function well in modern society if you don't have a good understanding of supply and demand, labor relations, game theory, things like that.
Just ignore the noise. The market will sort it out.
And this principle of delegation and agency? I think it's, like, the most basic thing in microeconomics. If you don't understand what delegation is, what agency is, you're not gonna be able to navigate the world. If you wanna start a successful business or make successful deals, you really gotta dig into this.
It's actually pretty simple. Caesar said it best, “If you want something done, do it yourself. If not, delegate.” Meaning, if you really want something done right, you gotta do it yourself. If you're the owner, you have that sense of responsibility, you care about the outcome, so you're going to do a good job. But if you're just doing it for someone else, you might not care as much, and you might do a bad job. You're going to be trying to maximize your own benefits, not the owner's assets.
The smaller the company, the more everyone feels like an owner, like the, you know, main principal. The less they feel like they're just an agent. That's when the work gets done. You gotta try to make the connection between reward and value as tight as possible. That way, people start seeing themselves as the owners, not just the agents.
And I think, deep down, we all know this. We're naturally drawn to being the owners, it just feels better. But the media and modern society kind of brainwash us into thinking that we need agents, that agents are essential, that they're the experts, all that. So, most people just happily become hard-working agents.
Now, compound interest. Most people think of that as just a finance thing. If you don't get it, go read a microeconomics textbook. Seriously, reading one of those cover to cover will really pay off.
Let me give you a finance example to show you what it is. Say you earn 10% per year on one dollar. The first year, you earn 10%, so you end up with $1.10. The second year, you get $1.21. The third year, $1.33. It keeps going up, exponentially. If you get 30% interest per year, compounded, then after 30 years, you don’t get 10x or 20x your money, you get thousands of times your money.
And the same thing happens with, like, intellectual achievements. If a company starts with 100 users, and they grow at a compound rate of 20% per month, then they're gonna have millions of users pretty quickly. Sometimes even the founders are surprised at how big it gets.
Okay, basic math. Seriously underrated. If you wanna make money or invest, you gotta be good at basic math. You don't need geometry, trig, calculus, or any of that complicated stuff to be an entrepreneur or run a business. But you do need algorithms, probability, and statistics. Those things are really important. You need to really understand addition, subtraction, multiplication, division, compound interest, probability, and statistics.
Then there's black swan events. In probability and statistics, there's a branch of studying these tail events, like the really unlikely stuff that happens. I gotta bring up Nassim Taleb again. I think he's one of the greatest philosophers and scientists of our time. He's done a lot of groundbreaking work on this.
Calculus. We can use calculus to understand and recognize rates of change, and how nature works. But really, what's important is understanding the principles. It measures change using small discrete or continuous events. It’s not important to do integrals or derive formulas, because you’re not going to do that in the business world.
Falsifiability. For anyone who says "science" is on their side, this is the most important principle, and the one they understand the least. If you can't make a falsifiable prediction, it's not science. To prove to people that something is true, it should be something you can falsify.
That's why I don't trust macroeconomics. Because macroeconomists make predictions that you can't falsify. And that falsifiability, that's the hallmark of science. There’s only one reality, so when studying the economy, there are never counterexamples. You’ll never find a country with the exact same economy as the US, and doing the opposite economic experiment.
And finally, if it's a hard decision, then the answer is no.
You know, if you're facing a tough choice, like: Should I marry this person? Should I take this job? Should I buy this house? Should I move to this city? Should I go into business with this person?
If you're struggling to decide, then the answer is no. The thing is, there are so many choices out there. We live on a planet with, like, seven billion people, and we're all connected to each other on the internet. There are thousands of possible careers.
Humans have always been limited in terms of how many choices they were even aware of. In ancient tribes, 150 people was the limit for, like, functioning and cooperation. And if someone came into your life, well, that might be your only real option for a partner.
But look, a big decision can impact the next ten, twenty years of your life. Starting a business might take ten years. A relationship might last five years or more. Moving to a city, you might live there for ten, twenty years. These decisions have huge consequences. You can't be absolutely sure, but you gotta be really, really sure before you make a decision like that.
Sometimes, when it’s just too difficult, and you even have to make a list of pros and cons, then just give it up. If it's a difficult choice, the answer is no.
Here's a little life hack: If you're struggling with a tough decision and there's a lot of disagreement, you should choose the path that's more painful in the short term.
If you're facing two choices, and they're both about 50/50, you should pick the one that's going to be harder, more painful, in the short run.
The thing is, one path is going to bring short-term pain, and the other will cause more pain in the long run. Your brain's naturally going to try to avoid the short-term pain.
This only works if the two options are fairly similar. But, if one path is more painful in the short term, it’s probably going to bring greater rewards in the long term. And, because of the way compounding works, that’s what you really want.
Your brain overvalues short-term pleasure and tries to avoid short-term pain.
So, you gotta train yourself to actively seek out the short-term pain, to fight that tendency to avoid it. Because a lot of the really big rewards in our lives come from enduring short-term pain for long-term benefits.
Take exercise, for example. Exercise isn’t really fun for me, because I experience short-term pain. But in the long run, it makes me better, because I develop muscles and improve my health.
When you exercise, your muscles get sore and tired. It's the same with reading. Reading a difficult book can be hard on your brain, and it tires you out in the short term. But in the long run, it makes you smarter, because you’re constantly pushing your brain to process information, and improving its ability to work.
So generally, you should pick the short-term pain for the long-term gain.
And what's the best way to build new mental models?
Read a lot. Read as much as you can.
Spend an hour a day reading science, math, and philosophy, and in seven years, you might be in the top tier of successful people.