Mental Models: 58 Ways to Think Clearer

What is a mental model? A mental model is tool used to help you understand the underlying reality. Why do we need mental models? Life is complicated and often doesn’t make sense, but mental models provide a way to understand the past, present and future.

Here are 58 mental models that I’ve explained as simply as possible. Some of these are too simple, but at worst it can work as a list to find some new models to research.

1. Circle of Competence – You don’t need to be an expert on everything, but you should be on what you own
2. Optionality – Reduced dependence on a specific path
3. Catalysts – Something that increases the rate of reactions
4. Autocatalysis – The science behind flywheels
5. Compounding – Exponential gains
6. Network Effects – Incremental gains for current users driven by each new user
7. Antifragile – Things or people that thrive in or gain from disorder
8. Ergodicity – Path dependence matters, especially with possibility of ruin
9. Invert – “All I want to know is where I’m going to die, so I’ll never go there.”
10. The Map is not the Territory – Maps are imperfect models of our understanding; those imperfections cause confusion and create opportunity
11. Law of diminishing returns – Constraints will at some point return a lower unit of output per incremental unit of input
12. Tragedy of the Commons – Openly shared resources are overexploited
13. Monopoly – Controlling entire supply
14. Monopsony – Controlling entire demand
15. Entropy – Things descend into chaos
16. Hanlon’s Razor – “Never attribute to malice that which is adequately explained by stupidity.”
17. Occam’s Razor – The simplest answer is usually the best
18. Pareto Principle – 20% of customers make up 80% of profit
19. Opportunity Costs – The cost of our decisions
20. Game Theory – Predicting interactions between multiple players
21. Anchoring – People are attached to things
22. First Principles – Breaking down reasoning into its foundational elements
23. Second Order Thinking – Ask yourself, and then what?
24. Margin of Safety – Things are complicated and opportunity costs are high, so we should add some wiggle room
25. Combinations – You can only choose two from $SE, $SQ and $SPOT… how many unique portfolios can you create?
26. Permutations – Combinations, but order matters
27. Leverage (Archimedes Lever) – “Give me a lever long enough and I can move the world.”
28. Critical Mass (tipping point) – Gradually then suddenly
29. Comparative Advantage – Sometimes just because you are better at something, doesn’t mean you should do it
30. Economies of Scale – “A proportionate saving in costs gained by an increased level of production.”
31. Efficient Market Hypothesis – All current news is priced into the stock market
32. Supply and Demand – Interactions between the amount vs the demand of goods
33. Hyperbolic Discounting – People will irrationally choose a small reward now vs a much larger return later
34. Locus of Control – Understand what you truly can control
35. Depth Over Width- Specialists over generalists
36. Making Smaller Circles – “I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.” – Bruce Lee
37. Deconstructing Common Root Structures – identifying common struggle points through your history
38. Channeling the Subconscious – our brains work even when we aren’t actively trying, leverage that
39. Regret Minimization – Decision-making framework that will reduce long term regrets
40. Signaling – People are constantly broadcasting not only via their actions, but also clothing, etc…
41. Tribalism – Humans were herd animals
42. Scarcity – Short supply
43. Normal Distribution – Symmetrical around the mean, majority
44. Natural Selection – Organisms better suited for their environment survive and have offspring, repeat
45. Redundancy – Adding extra components to prevent failure sometimes increases the likelihood of failure (complexity/leads to more risk taking)
46. Power Laws – A change in X leads to an exponential change in Y
47. Incentives – Something that drives behavior
48. The Cobra Effect – Incentives gone wrong, but that could have been prevented with second order thinking
49. 1000 True Fans – $100 per fan means $100k salary – the internet allows anyone to go niche, yet have an audience
50. Causation vs Correlation – Does A cause B or could it be just a coincidence?
51. Moats – Durable competitive advantages that set you apart for a long time
52. Pace of Innovation – The speed at which things improve
53. Breaking Points – Engineering minor failures to prevent major failures
54. Social Proof – People inherently copy others
55. Fat Tails – Distributions that carry significantly more risk
56. Time Horizon – People think in terms of time (past, present or future), and sometimes we don’t understand others because we are on a different horizon
57. Hormesis – A small dose of a stressor can make you stronger
58. High Agency – Do you choose to accept the story you are told or do you bend reality to your will?