Mental Models – How to Use them in Everyday Life

Developing sound approaches to problem solving is the simplest way to improve life outcomes. Effective choices stem from well-developed, pragmatic mental models that go deeper than the surface layer.

The best problem solvers recognize that a toolbox requires more than just a hammer. Why? Not every problem is a nail.

For the best chance of success when faced with a challenge, it is necessary to come fully prepared with an intellectual arsenal. That means having multiple mental models to meet the task. Don’t get caught flat footed with one narrow approach.

What Are Mental Models?

Mental models are the frameworks through which we process events. They are the methods we use to understand life itself.

Get cut off on the highway? Deciding what to do with a pay raise? Trying to connect the dots between seemingly unrelated issues?

The mental models you’ve established—good and bad alike—over years of reinforcement are what you rely on for these and all other questions. I like to think of a quote from an ancient Greek philosopher to highlight this:

“We don’t rise to the level of our expectations, we fall to the level of our training.”

– Archilochus

Raise the Level of Your Training

The way to prepare your mind proactively is to ensure you have resilient mental models in place. It’s a fool’s gambit to expect yourself to perform well under pressure when you haven’t laid a solid foundation.

The great thing is that you’re not on your own. The heavy lifting has already been done by the world’s finest thinkers—you just need to take what they’ve found and employ the lessons.

My Introduction to Multiple Mental Models

While I have always gravitated to systematic forms of thinking, it was Charlie Munger who first explicitly introduced me the concept of multiple mental models.

In a 1994 speech to a business class at the University of Southern California, Munger stated:

“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 fail 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 have just 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.”

– Poor Charlie’s Almanack, Expanded Third Edition, Page 166

Latticework of Mental Models

Specializing in one field of study and analyzing life through that singular lens is a poor way to manage your life. You need to wear more than one hat.

It is necessary to understand life events through various means. Doing this makes it possible to synthesize data into meaningful units that are actionable when it matters.

Knowledge without wisdom is a toothless lion.

Taking Munger’s quote from above, what does a latticework of mental models actually mean?

Quite simply, it comes down to assessing information in various ways before casting final judgment. It naturally forces a deeper level of intellectual rigor. Our questions should pass through many filters before we feel a conclusion is satisfactory.

So, let’s compare the common form of decision making to this meticulous approach:

The average person uses the top method. They move quickly from stimulus to response.

Higher-level thinkers use the second approach. The progression from Event to Response is more than a knee-jerk; the appropriate response is only taken after the Event passes through the synthesis of diverse models.

Which of the two methods do you think yields better results?

My Top 3 Mental Models

Through careful study and personal reflection, I have come across many pivotal paradigms that have enabled me to improve my outcomes.

The bottom line in life is that being right or perfect in life is useless if you’re not effective. If you need to know what to do tomorrow, but your analysis is going to take a month to be perfect, it’s useless.

Being a perfectionist is overrated. You need to be able to take action in life when it counts.

Narrowing my personal list, these are my Top 3 Mental Models:

1. Antifragility
2. Inversion and Reductio Ad Absurdum
3. Occam’s Razor

Antifragility

Much of society’s progress owes itself to black swans, which are highly impactful, rare, and unpredictable events. These are the sort of outliers that change how we think about the world and choose to live in it.

After these outliers take place, people tend to give them basic explanations, though they were not at all foreseeable beforehand.

In a world where life can be upended rapidly by unpredictable events, it is necessary to have a practical strategy that accepts this reality and has redundancies in place to mitigate this apparent randomness.

Nassim Nicholas Taleb refers to the opposite of the fragile as the antifragile, describing this as follows:

Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.

…

And we can almost always detect antifragility (and fragility) using a simple test of asymmetry: anything that has more upside than downside from random events (or certain shocks) is antifragile; the reverse is fragile.

– Antifragile, Pages 1-5

Using a latticework of mental models is, in itself, a form of antifragility. It insulates decision-making from the random shocks of life. It both increases one’s odds of making good decisions and decreases the likelihood of missing an important factor.

When building the Get Rich Investment Plan, my focus was on investments I could depend on to withstand major shocks to the system. This strategy has proven itself worthy through plenty of volatility.

Inversion and Reductio Ad Absurdum

The concept of inversion implores us to look at problems from the other side of the coin. For example, rather than ask how to get rich, the question becomes how to go broke.

Then you begin listing the ways to lose money:

• Gamble based on hot tips, don’t research investments.
• Ignore fees.
• Use leverage/borrow to supercharge your investing returns, ignoring the downside.

Once you know how to do what you don’t want, invert the list and do the opposite:

• Make calculated investments based on extensive research.
• Keep fees minimal so more of your dollars benefit from compound interest.
• Only borrow for productive assets (e.g., rental real estate).

I have found this approach particularly useful in cases where I am struggling to find a direct path forward. When the right way to solve a problem isn’t immediately obvious, listing the ways that are obviously wrong can be beneficial, if only to limit the options.

Along a similar vein, there is a logical form of reasoning called reductio ad absurdum which is a form of reasoning which aims to prove a claim by demonstrating that its opposite is absurd, or a contradiction. Once you’ve removed the absurd, what is left over is the truth.

While inversion and reductio ad absurdum are not exactly the same concepts, they both encourage one to begin with what you don’t want/isn’t true. Begin there and work your way to what counts.

Occam’s Razor

This principle is commonly summarized to as “the simplest explanation is usually correct”. It is a mental heuristic used to cut through competing hypotheses and arrive at basic truths.

Whenever faced with the problem of understanding human behaviour, for example, I always keep this principle in mind. People are, well, people. They can be driven by altruism, but also by greed, fear, jealousy, and other emotions of this ilk.

Jumping to conclusions is to be avoided, but investing time and energy with complicated rationalizations is equally wasteful.

On the financial side of the equation, a company with a multi-decade track record of raising dividends has proven it has staying power. A company which routinely loses money is likely to continue doing so.

It has been my experience that where there is a plume of smoke, there is also fire.

Concluding Thoughts

Life can feel overwhelming when each decision is tackled on its own. Mental models help with making good decisions and avoiding bad ones.

There are no foolproof strategies in life to guarantee truth or correctness. Even if such methods exist, we may never find them as our humanity itself implies fallibility.

Still, we can tilt the odds in our favour by employing multiple mental models to separate the wheat from the chaff. By building antifragility and employing inversion, reductio ad absurdum, Occam’s Razor, and your own grouping of mental models, I hope you are also able to effectively define your latticework.

My guiding life principle is that the complex loses over time to the simple. Likewise, a leaky ship can never be seaworthy without addressing the hull. Everything else builds on that.

All the best on developing your own mental fortifications.

What mental models are you currently employing? Which mental models would you like to adopt?