How I Live My Life With Mental Models

Jayme Hoffman
Oct 6, 2017 · 7 min read

Ray Dalio’s new book, Principles, gives a ~600-page view into the thinking that built the world’s largest hedge fund.

As I was reading the book, I couldn’t help but wish for this level of transparency into the thinking of all the best entrepreneurs, philosophers, writers, inventors, investors, artists, politicians and scientists.

Everyone thinks all day, every day. So, why isn’t sharing thinking practices more common? 🤔

A friend of mine suggested that I make “my thinking” public.

Since I try to think in terms of mental models [1], here are the mental models I live by on a daily basis and how I use each one.

[1] What are Mental Models? — Mental models are shortcuts for thinking. They’re thought processes for how stuff works in the real world.

[2] Disclaimer — I haven’t lived as long or as fully as Ray Dalio. My list is short. I’m still learning and adding to my latticework. Please feel free to recommend your models, principles and thought processes.


Compounding

Compounding is when your interest earns interest. It’s the growth on your previous growth. It applies to so much more than just your investments and credit cards.

I think about compounding as it applies to knowledge, relationships, business, writing, experience and playing Settlers of Catan. I try really hard to not live each day as if it were my last. I make incremental investments in the things that are important to me in the long-term.

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it. — Albert Einstein

SNOWBALL
Imagine a small, 3 inch snowball rolling across the snow. The small snowball picks up snow slowly (interest) with each roll. The snowball grows to 2x, 3x, 4x… The newly collected snow (interest) allows the snowball to pick up even more snow as it moves across the snow.

Now, imagine this snowball is your knowledge of a particular subject or your relationship with a close friend or your blog’s audience. Make small investments in these areas and watch your growth compound.

Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it. — Warren Buffett

“Friendships are what count.” — I think he’s referring to compounding.


Habits

Habits are routines we perform automatically or subconsciously. They save our brain effort by combining a set of actions into an automatic routine. Driving, checking notifications and brushing teeth are all habits we perform without much thought.

I form habits for everything that’s important to me.

Examples:

Being a good spouse
My wife and I make a habit of going on two dates every week, saying what we’re thankful for before dinner and talking each night before going to bed. These small habits bring us closer and help us stay on the same page when we’re swamped with work.

Being a good person
I study and practice a different virtue each week similar to Benjamin Franklin’s 13 Virtues. This helps me understand the importance of virtues like humility, focus, courage, patience, reflection and many more.

Being a good writer
I write one blog post every week and write for an hour every Sunday. I keep a trello board of ideas so that I always have something to write about. Writing helps me think and learn about new things.

Being inquisitive
I interview one person every day about their work and life. Sometimes it’s scheduled and sometimes it’s random. For example, I was getting my wife wine and talked to the wine store owner for 45 minutes on the challenges of managing a wine store. The short conversation was fascinating and I learned so much about wine. Asking people questions every day helps me learn about different industries and different perspectives.

Other small habits

  • Work out first thing every morning. (This is tough)
  • Make bed.
  • Meditate for 10mins daily.
  • Check my airtable spreadsheet of stuff I want to learn instead of twitter when distracted.
  • Clean dishes immediately after use.
  • Haircut each month.
  • 1 goal for the day.
  • Invert the goal for the day.

Developing habits
It’s easier for me to develop habits when I set them in Todoist with a reminder.


Inversion

Inversion is thinking about problems or situations backwards. Inversion helps you avoid what you don’t want. It’s powerful because it’s much easier to avoid what you don’t want than to get what you do want.

I use inversion every morning by asking myself what are the 1–2 things that would make the day good and what would make the day bad. I avoid the things that would make my day bad. This helps me get done what I want to get done and have a much more enjoyable day.

I also think about inversion all throughout the day:

  • Meeting: what would make this call ineffective? Let’s avoid that.
  • Task: how can we not get this done? Don’t waste time there.
  • Vacation: what would make this vacation bad? Ok, don’t do that.

Invert, always invert — Carl Jacobi


Circle of Competence

Circle of competence is focusing on operating in the areas you know and knowing the areas you don’t know. Shan Parrish said it best…

Areas not inside that circle are problematic because not only are we ignorant about them, but we may also be ignorant of our own ignorance. Shane Parrish

I used to have a lot more confidence in my knowledge. Like many others, the more I know, the more I realize how little I really know.

Circle of competence helps me stay in the areas that I understand and understand the areas that I don’t know anything about. When something is outside my circle of competence, I either avoid it or make a priority to understand it.


Triangulation

Triangulation is gathering and confirming information from more than one source. Triangulation gives you a better perspective, increases the credibility of information and helps you eliminate bias by not relying on one source.

This is the fastest way to get a good education and enhance decision-making.
— Ray Dalio

I use triangulation whenever I’m uncertain or have conflicting information.

  • I have a network of friends that I rely on for quality feedback and information. I keep these friends in contact groups for quick access.
  • I include others in meetings / phone calls to ask questions I don’t think of.
  • I have survey templates ready to go in Mixmax and Airtable.
  • I share the feedback and information I collect with others to generate different arguments.

These efforts help me get to the truth faster and eliminate any sort of favorable position (bias) I might have.


Confirmation Bias

There are many forms of bias. Confirmation bias is my favorite because it explains why people, including myself do a lot of silly things. Confirmation bias is favoring information that confirms your existing beliefs or biases.

Examples:

  • You read/watch the news that supports your political party.
  • You hang out with people that think your awesome (i.e. your Mom 😜).
  • You research all the reasons why your product idea will work.

I use confirmation bias on a daily basis to keep myself in check. I ask myself… “why are you doing this?” It’s often because I’m trying to confirm my belief. Confirming your beliefs feels good in the short-term… but it prevents you from getting to the inevitable truth.

I also use confirmation bias to understand the motives of others around me. I question their thinking internally. Why is this person sending me a link about the product idea they haven’t made yet? Why is this person telling me how great their political party is? You’ll quickly see that a lot of people’s actions are driven by confirmation bias.


Sunk Cost Fallacy

Sunk cost is the cost that’s already been paid and cannot be recovered.

You experience the sunk cost fallacy when you continue working on a bad idea, stay in an unwanted relationship, eat a meal that makes you feel sick or go to a concert during a tornado warning. The sunk cost of time, money or energy makes you continue even when you know shouldn’t.

If something isn’t working, I move on. I try not to waste time or get attached to time invested. I think about sunk cost with adventures, eating, projects, learning, books and movies.

Jeff Bezos said “people who were right a lot of the time were people who often changed their minds.” Sunk costs deter people from rightfully changing their minds. I try to never let this happen.

Jayme Hoffman

Written by

Entrepreneur, husband & new dad. Founder & CEO homeward.io (Acq by Keller Williams). jaymehoffman.com