Farnam Street - Mental Models - The Best Way to Make Intelligent Decisions - Summary

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The map is not the territory: reality is different from abstractions.

Circle of competence: know what you don’t know.

First principles thinking: start from zero.

Thought experiment: imagine clear scenario.

Second order thinking: indirect consequences.

Probabilistic thinking: uncertainty.

Inversion: start from end.

Occam’s razor: prefer simple.

Hanlon’s razor: stupidity not malice.

Permutations and combinations: counting.

Algebraic equivalence: equation.

Randomness: uncertainty.

Stochastic processes: uncertainty.

Compounding: exponential.

Multiplying by zero: is zero.

Churn: periodic loss.

Law of large numbers: more confidence.

Normal distribution: e.g. heights.

Power laws: e.g. earthquakes.

Regression to the mean: not causation.

Order of magnitude: ballpark.

Scale: matters.

Law of diminishing returns: more gives less.

Pareto principle: 20% make 80%.

Feedback loops: reinforcement.

Chaos dynamics: start matters.

Cumulative advantage: better gets more.

Emergence: more than parts.

Irreducibility: no smaller parts.

Tragedy of the commons: e.g. fishing.

Gresham’s law: bad wins.

Algorithms: e.g. recipes.

Antifragility: gain from disorder.

Redundancy: more than minimum.

Margin of safety: more than minimum.

Criticality: critical mass.

Network effects: e.g. telephone.

Via negativa: don’t do.

Lindy effect: older lasts longer.

Renormalization group: minority impact.

Spring loading: stored energy.

Complex adaptive systems: e.g. stock market.

Laws of thermodynamics: energy conservation.

Reciprocity: tit for tat.

Velocity: speed plus vector.

Relativity: external observer.

Activation energy: e.g. fire.

Catalysts: maintain.

Leverage: multiplies.

Inertia: needs action.

Alloying: more than parts.

Viscosity: slide.

Incentives: motivation.

Cooperation: e.g. prisoner’s dilemma.

Tendency to minimize energy output: not waste.

Adaptation: to survive and replicate.

Evolution by natural selection: random mutation and survival of the fittest.

The red queen effect: periodic loss.

Replication: e.g. DNA.

Hierarchical instinct: follow leader.

Self-preservation instinct: survive.

Simple psychological reward seeking: seek pleasure and avoid pain.

Exaptation: repurpose.

Ecosystems: environment.

Niches: specialization.

Dunbar’s number: trust max 100-250 people.

Trust: more efficient.

Bias from incentives: own interest.

Pavlovian association: event before reward.

Tendency to feel envy: comparing.

Tendency to distort due to like/dislike: miss nuance.

Denial: e.g. drug addiction.

Availability heuristic: easy recall.

Failure to account for base rates: prior odds.

Tendency to stereotype: shortcut.

Failure to see false conjunctions: more specific less likely.

Social proof: compliance.

Narrative instinct: stories.

Curiosity instinct: explore.

Language instinct: speak.

First-conclusion bias: not changing.

Tendency to overgeneralize from small samples: no confidence.

Relative satisfaction tendency: compare.

Commitment and consistency bias: not changing.

Hindsight bias: past didn’t know.

Sensitivity to fairness: justice.

Fundamental attribution error: situation not person.

Influence of stress: worse.

Survivorship bias: consider losers.

Tendency to want to do something: bias towards action.

Confirmation bias: seek to disprove.

Opportunity costs: best alternative.

Creative destruction: winner replaces loser.

Comparative advantage: focus on best.

Specialization: e.g. assembly line.

Seizing the middle: more options.

Trademarks, patents, copyrights: intellectual property.

Double-entry bookkeeping: redundancy.

Utility: benefit.

Bottlenecks: restricted flow.

Bribery: shortcut.

Arbitrage: market inefficiency.

Supply and demand: make price.

Scarcity: competition.

Mr. market: not efficient.

Seeing the front: raw data.

Asymmetric warfare: e.g. terrorism.

Two-front war: not focused.

Counterinsurgency: rebel.

Mutually assured destruction: e.g. nuclear bombs.