Mental Models I Find Repeatedly Useful
Gabriel Weinberg
11.1K134

Very good list, thanks for putting this together. Here are a couple more:

- Overconfidence bias: we usually think we’re better than the average on something we know how to do (driving) and worse than the average in something we don’t (juggling), even if almost nobody knows juggling and everyone knows how to drive

- No alpha (aka can’t beat the market): you can only consistently beat the market if you’re far better at financial analysis than thousands of people who do it every day all day. So don’t bother trying unless you're absolutely sure of that

- Value chain vs. profits: you’ll find that most of the excess profits in the value chain of a product will be concentrated in the link that has the least competition

- Non-linearity of utility functions: the utility of item n of something is smaller than item n-1. Also, the utility of losing $1 is smaller than (1/1000) utility of losing 1000. This explains insurance and lotteries: using linear utility function, both have a negative payout, but they make sense when the utility function isn’t linear

- Bullwhip effect in supply chain: a small variation in one link of the supply chain can cause massive impacts further up or down as those responsible for each link overreact to the variation (also explains a lot of traffic jams)

- Little’s law: in supply chain (and a lot of other fields): number of units in a system = arrival rate * time in the system

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