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decision-making

The Great Mental Models (Vol. 1), by Shane Parrish

2020-04-15 by Roberto Zoia Leave a Comment

Shane Parrish was a cybersecurity expert at Canada’s top intelligence agency when the world suddenly changed on September 11, 2001. He “was thrust into a series of promotions for which I had received no guidance, that came with responsibilities I had no idea how to navigate.”

While going through and MBA program and looking for mentors, he discovered Charle Munger, the billionaire business partner of Warren Buffet at Berkshire Hathaway. “Munger has a way of thinking through problems using what he calls a broad latticework of mental models, (…) chunks of knowledge from different disciplines that can be simplified and applied to better understand the world.” He started documenting his learning on his blog, Farnam Street.

The Great Mental Models Volume 1: General Thinking Concepts is the first in a series of books by Parrish about timeless, broad ideas “to allow others to approach problems with clarity and confidence, to make their journey through life more successful and rewarding.” This volume describes 9 mental models about general thinking that will “improve the way you approach problems, consider opportunities, and make difficult decisions.”

TheGreatMentalModels-380

1. The Map is not the Territory

Maps are limited but useful representations that reduce complexity to simplicity. The goal of a map is not simplification but understanding. However, don’t forget that maps cannot be everything to everyone. Good maps are created and updated by explorers of the territory, who reflect their values, standards, and limitations on the map. Maps cannot be everything to everyone.

For example, supply and demand curves may be useful for a general understanding of price flexibility and customer behavior. But it’s certainly a simplification of how customers behave.

2. Circle of Competence

A circle of competence is the subject area which matches a person’s skills or expertise. True knowledge of a complex territory cannot be faked. Within our circle of competence, we know exactly what we don’t know. We know what is knowable and unknowable.

Don’t take your circle of competence for granted, nor operate as if it were static. Curiosity and a desire to learn, either from yourself (slow) or others (more productive) are essential. Track your record, monitoring honestly so you can use the feedback in your advantage. Go to people you trust to ask for feedback. We have too many biases to rely only in our own observations.

Most important of all, know the boundaries of your circle of competence, so you don’t operate outside of it without noticing. When consciously operating outside your circle of competente, learn at least the basics of the new realm without falling into unwarranted confidence.

3. First Principles Thinking

First Principles thinking clarifies complicated problems by separating the underlying ideas, facts, and non-reducible elements, from any assumptions based on them. What remains are the essentials. “When you really understand the principles at work, you can decide if the existing methods make sense. Often they don’t.”

Methods to separate the essential from the accidental include Socratic Questioning , which “stops you from relying on your guts and limits strong emotional responses”:

  1. Clarify your thinking and explain the origin of your ideas.
  2. Challenge assumptions. Why do I think this is true? What if I though the opposite?
  3. Look for evidence. Question the sources.
  4. Consider alternative perspectives. What do others think? How do I know I’m correct?
  5. Examine consequences and implications of being right, but also of being wrong.
  6. Question the original questions.

Another method is asking the 5 Whys, where the goal is to land on a what or how. “It’s about systematically delving further into a statement or concept so that you can separate reliable knowledge from assumption.”

Sometimes we don’t want to fine-tune what is already there. We are skeptical, or curious, and are not interested in accepting what already exists as our starting point. So when we start with the idea that the way things are might not be the way they have to be, we put ourselves in the right frame of mind to identify first principles. The real power of first principles thinking is moving away from random change and into choices that have a real possibility of success.

4. Thought Experiment

Thought experiments are “devices of the imagination used to investigate the nature of things (…) to understand the situation enough to identify the decisions and actions that had impact.” They let us explore the limits of what we know and the limits of what you should attempt. Uses of this model include imagining physical impossibilities, re-imagining history, and intuiting the non-intuitive.

Thought experiments help us learn from our mistakes and avoid future ones. They let us take on the impossible, evaluate the potential consequences of our actions, and re-examine history to make better decisions. They can help us figure what we really want, and the best way to get there.

Albert Einstein was a great user of the thought experiment. “One of his notable thought experiments involved an elevator. Imagine you were in a closed elevator, feet glued to the floor. Absent any other information, would you be able to know whether the elevator was in outer space with a string pulling the elevator upwards at an accelerating rate, or sitting on Earth, being pulled down by gravity? By running the thought experiment, Einstein concluded that you would not.”

5. Second-order Thinking

Second-order thinking teaches us two important concepts. First, if we are interested in understanding how the world works, we must include second and subsequent effects. Also, we must be observant and honest as we can about the web of connections we are operating in.

Areas of application include prioritizing long-term interests over immediate goals, and constructing effective arguments.

“(…) any comprehensive thought process considers the effects of the effects as seriously as possible. You are going to have to deal with them anyway. The genie never gets back in the bottle. You can never delete consequences to arrive at the original starting conditions.”

Warren Buffett used a very apt metaphor once to describe how the second-order problem is best described by a crowd at a parade: Once a few people decide to stand on their tip-toes, everyone has to stand on their tip-toes. No one can see any better, but they’re all worse off.

6. Probabilistic Thinking

“Probabilistic thinking is essentially trying to estimate, using some tools of math and logic, the likelihood of any specific outcome coming to pass.”

Effectively applying this model implies basic understanding of bayesian thinking (using relevant prior information in making decisions), conditional probability (taking in account the conditions that precede the event you want to understand), and fat-tailed curves. Also, considering the probability of your probabilities —the meta-probability—, and possible asymmetries (i.e., projects are most often late than ahead of time).

Part of this mental model is recognizing the possibility of black swans. Preparing and benefiting from volatility involves seeking out situations that we expect have good odds of offering us opportunities (“upside optionality”), and learning to fail properly by developing personal resilience to learn from failures and start again. “Whenever possible, try to create scenarios where randomness and uncertainty are your friends, not your enemies.”

7. Inversion

Inversion means approaching a situation from the opposite end of the natural starting point. Think about the opposite of what you want. Combining the ability to think forward and backward allows us to see reality from multiple angles.

To apply inversion, assume that what you are going to prove is either true or false. Then show what else would have to be true for that to happen. Also, think deeply, from different angles, what you must avoid to achieve your goal. It implies shifting from “how do we fix this problem” to “how do we stop it from happening in the first place”.

Another approach to inversion is called the Kurt Lewin’s process. Identify the forces that support change towards your objective, and the ones that impede change towards it. Then strategize by augmenting supporting forces, or reducing impeding ones.

8. Occam’s Razor

This model states that simpler explanations are more likely to be true than complicated ones. While sometimes things are simply not that simple, most of the time, “instead of wasting your time trying to disprove complex scenarios, you can make decisions more confidently by basing them on the explanation that has the fewest moving parts.”

“Take two competing explanations, each of which seem to equally explain a given phenomenon. If one of them requires the interaction of three variables and the other the interaction of thirty variables, all of which must have occurred to arrive at the stated conclusion, which of these is more likely to be in error?“

Occam’s Razor can be applied in leadership. “When Louis Gerstner took over IBM in the early 1990s, during one of the worst periods of struggle in its history, many business pundits called for a statement of his vision. What rabbit would Gerstner pull out of his hat to save Big Blue? (…) His famous reply was that the last thing IBM needs right now is a vision. What IBM actually needed to do was to serve its customers, compete for business in the here and now, and focus on businesses that were already profitable. It needed simple, tough-minded business execution.”

9. Hanlon’s Razor

“We should not attribute to malice that which is more easily explained by stupidity.” This model helps us avoid paranoia and ideology. It helps us look for options instead of missing opportunities. “When we see something we don’t like happen and which seems wrong, we assume it’s intentional. But it’s more likely that it’s completely unintentional.”

I would recommend this book to anyone trying to improve her or his thinking and decision making process.

(Este artículo también está disponible en castellano: The Great Mental Models, Vol. 1, por Shane Parrish).

Filed Under: Book Reviews Tagged With: charlie munger, decision-making, mental models

Problem Solving Skills for the Future

2019-08-28 by Roberto Zoia 1 Comment

Learning complex thinking is uncomfortable. Complexity is, after all, the realm of unknown unknowns.

The Cynefin Framework is a conceptual framework created in 1999 by Mary E. Boone and Dave J. Snowden while working for IBM Global Services. It classifies the issues leaders face into five contexts, defined by the nature of the relationship between cause and effect. It offers decision-makers a “sense of place” from which to view their perceptions, and make better decisions.

Obvious or simple is the domain of best practice, or known knowns. Problems in this realm can be solved by applying rules or best practices. There is rarely disagreement or doubt about what needs to be done.

Complicated is the domain of experts, the realm of the known unknowns. Relating cause and effect requires expertise and analysis, but once the problem has been analyzed, the course of action is clear: apply the appropriate good operating practice.

Complex, on the other hand, is the context of the unknown unknowns, where the relation between cause and effect is known only in retrospective. “Complexity is more a way of thinking about the world than a new way of working with mathematical models1.” Complex systems are dynamic. They involve large numbers of interacting elements. Interactions are non-linear. The whole is greater than the sum of its parts.

Political entities, organizations, markets, the rainforest… are examples of complex realities.

Solutions to complex problems can’t be imposed. There is no ‘right solution’. Deciding on the criteria to be used to evaluate possible solutions is part of solving problems in this realm.

Most situations and decisions in organizations are complex because some major change—a bad quarter, a shift in management, a merger or acquisition—introduces unpredictability and flux. In this domain, we can understand why things happen only in retrospect2.

Finally, a problem is chaotic when it’s too confusing to wait for a knowledge-based response. Because cause and effect are unclear, we need to establish certain level of order first, sense where stability lies, and try to turn what’s chaotic into the realm of complexity.

Guess what kind of problem solving skills will give you an unfair advantage and won’t get you replaced by a robot, automation, or a clever machine learning algorithm anytime soon. “Work is moving yet again. The move from Simple to Complicated that was a hallmark of the twentieth century is being outpaced by a move from Complicated to Complex and Chaotic3.”

To learn to navigate the sea of complexity, you need a sense of curiosity and the habit to notice the nature of things around you. You need to nurture the ability to learn new things. Expose yourself to complex situations, where identifying the problems is part of the challenge, leaving behind the shallow and safe waters of what’s just complicated and tactical.

Photo by Samuel Zeller on Unsplash


  1. cfr HBR, November 2007. A Leader’s Framework for Decision Making. SNOWDEN, David J. and BOONE, Mary E. ↩
  2. cfr HBR, November 2007, idem. ↩
  3. Taylor Pearson, The Commoditization of Credentialism: Why MBAs and JDs Can’t Get Jobs. ↩

Filed Under: Strategy and Technology Tagged With: competitive advantage, complexity, cynefin, decision-making, frameworks, learning, problem solving

Why being objective is hard and how it affects your decision-making

2015-01-08 by Roberto Zoia Leave a Comment

People whose work involve managing other people, evaluating their work, or somehow passing judgment about other people, know that soft skills, attributes, and people’s behaviors in general are hard to gauge objectively.

Being objective is hard. While we have some experience managing the tension between emotional and rational arguments –we are rarely detached from the situation at hand– more often than we think we judge and make decisions based on our intuitions and affected by our biases1. We like to believe that we are always rational, but we really should know better. Most often than not, we unconsciously backwards-rationalize our not-so-rational decisions2.

For example, consider a concept like executive presence. Jenna Goudreau writes in Forbes that, according to a 2012 study by the Center for Talent Innovation, feedback on executive presence is often contradictory and confusing. However, the same study finds that executive presence counts for 26% of what it takes to be promoted. Executive presence certainly can be a factor for a promotion, but only if we understand what it entails as an evaluation criteria.

Another example is when we let our perception of someone or a situation get affected by circumstantial comments or facts. It takes consistent results and effort over a long period of time for an employee to gain his or her bosses’ trust3. Making echo of some anecdotal negative incident about that employee can unjustly hinder or destroy his or her reputation in no time.

What can we do? One solution is to acquire habits that help us step over our biases and separate perceptions from concrete and factual information; distinguish anecdotal gossip from consistent behaviors… to the point that it becomes second nature to us, an almost unconscious way of thinking and reasoning. That is, it becomes part of your identity.

Acquiring this kind of habits can be hard. But it can be done. Four things you can try:

Always be specific when expressing your opinion about other people or situations

Nobody is a complete mess or totally a star. Be clear and concise when presenting the information. Be polite, but firm when refuting. Listen, and recognize when you are wrong.

For example, if a colleague says about someone that he always arrives late, you could ask how many times in the last three months? to verify if it is a fact or just a perception. To an opinion that someone cannot be considered for a position because she lacks executive presence, you could ask what would be the three most important things that person would need to work on in order to be ready for promotion in the next six months.

Make no negative comments about anyone

If you need to refer to anything negative, refer to the facts and not the person. And do it as you would if the person responsible was sitting in front of you.

Ask a colleague to help you by pointing out each time you fail4 at this.

Learn to be discrete when talking about other people

There is a quote by an author from the 6th century AC that comes to mind5:

Be the one who presides discrete in silence, and [useful] when speaking, so that he does not speak when he should not, nor remain quiet when he should speak. Because as careless speaking can lead others to error, not speaking up can leave others in error.”

Do your homework before passing judgement

This is very relevant if you are going to say something important that will affect other people.

For example, if you work for a company that has annual performance reviews, and have a team to evaluate, do your work throughout the year, not just the week before the evaluation meeting. Have a mental framework for the evaluation. Ask other’s for feedback about your reports, specially those who are likely to attend the meeting6.


  1. Biases –cognitive biases– are tendencies to think in certain ways that can lead to systematic deviations from a standard of rationality or good judgment. See, for example, Wikipedia, List of Cognitive biases. ↩
  2. cfr Taylor Pearson, Identity Based Decision Making: How Your Identity Makes You Wealthy. ↩
  3. cfr Stephen M.R. Covey, The SPEED of Trust: The One Thing that Changes Everything. ↩
  4. Optional: make the compromise to donate a fixed amount of money to a worthy cause each time you fail. ↩
  5. Translated from the text in Spanish: “Sea el que preside discreto en el silencio y útil cuando hable, de modo que ni diga lo que se debe callar, ni calle lo que se debe decir; porque así como el hablar imprudente conduce al error, así también el silencio indiscreto deja en el error a los que podrían ser instruidos” (San Gregorio Magno, Regula Pastoralis, II, 4) ↩
  6. Ask for general feedback and you will find yourself with vague answers. Some people tend to remember anecdotical examples from the last weeks. So, ask for feedback about specific points. ↩

Filed Under: Uncategorized Tagged With: decision-making, identity based decision making, managing people, objectivity, rational thinking

Understanding other people’s point of view

2013-01-23 by Roberto Zoia Leave a Comment

People said to have ‘leadership skills’ are usually good at listening, and at considering things from points of view different than their own. They try to put themselves in the other person’s shoes before delivering judgment, and ask for advise when they think it’s relevant.

As St. Thomas Aquinas said centuries ago, Truth is the intellect’s conformity with reality1. The reality of a situation, being objectively the same, is differently perceived by different people when judging it. Reality is complex, you don’t necessarily have all the information necessary to understand all of its aspects, or you may lack the hability to make use of the available information.

Listening to others and considering things from different points of view are proven means to gain better understanding of a situation, and make better decisions.

Seth Godin, in A legend in my own mind{: target=‘_blank’ }:

Everyone lives with self mythology.

The more important a memory is to the story we tell ourselves about ourselves, the more often we rehearse the memory. And the more often we relive those memories, the less likely it is that they are true.

Despite our shared conception that we are rational actors making intelligent decisions based on an accurate view of the world and ourselves, precisely the opposite is true. Your customers, your workers, you and I, we are all figments2 of our imaginations.

Understanding the mythology of your partner, your customer and your audience is far more important than watching the instant replay of what actually happened.


  1. cfr De Veritate q.1, a.1&3{: target=‘_blank’ }. ↩
  2. figment: a thing that someone believes to be real but that exists only in their imagination. ↩

Filed Under: Uncategorized Tagged With: decision-making, empathy, management

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