February 8, 2012

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Mental Model: Addition Through Subtraction

January 7, 2012 By 2 Comments
Mental Model - Addition Through Subtraction

Sometimes, in order to make something better, or work more effectively, you must take something away.  This principle is called addition through subtraction.  The theory behind addition through subtraction is that reducing components and complexity can add value if you make something: Simpler Faster More reliable More profitable Less expensive (though not always; certain strategies and business models allow you to charge more because the value of the other considerations has utility to … [Read more...]

Filed Under: Philosophy Tagged With:

Mental Models Applied: Don’t Fall for the “Too Nice to Use” Trap

December 27, 2011 By 4 Comments
Reed & Barton Francis I Sterling Silver 46-Piece Flatware Set in Chest

Of the many stupid things to do in life, one of the most foolish is to the fall for the "too nice to use" trap.  The moment I hear anyone, whether friend or family member, business associate or stranger, talk about how they "never use" something, I want to grab them by the shoulders and explain the mental models behind their actions.   It doesn't matter if you are talking about vintage cars, books, sterling silver flatware, fine china, cashmere sweaters, carpets, tea pots, fountain pens, … [Read more...]

Filed Under: Philosophy Tagged With:

Mental Model: The Micawber Principle

December 11, 2011 By Leave a Comment
The Micawber Principle

In Charles Dickens's novel, David Copperfield, published in 1850, the eternal optimist Wilkins Micawber was known for saying "something will turn up".  He was poor but lived in expectation of becoming rich, sometimes foolishly taking on debts due to the belief.  We have Micawber to thank for one of the most famous sayings in personal finance, often called The Micawber Principle. "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual … [Read more...]

Filed Under: Psychology, Saving Money Tagged With:

Mental Model: Horns Effect and Halo Effect

November 12, 2011 By 3 Comments
Horns Effect and Halo Effect

One of the most powerful, and potentially harmful, mental models you will encounter in your life is known as the horns effect and halo effect.  It can cloud your judgment, and because it is closely related to the mere association mental model, has the power to cause you to make sub-standard decisions or hold irrational beliefs.  You must train yourself to actively fight against it.   What is the horns effect and halo effect?  It is a cognitive bias that causes you to allow one trait, either … [Read more...]

Filed Under: Psychology Tagged With:

Using Mental Models to Understand the Joe Paterno and Penn State Scandal

November 10, 2011 By 8 Comments
Joe Paterno

We often talk about avoiding wipe-out risk on this blog.  In fact, avoiding wipe out risk is one of the main reasons to study mental models because it takes a lifetime to build a reputation and only a few minutes to destroy it.  I can think of no better real-world case study than the Joe Paterno and Penn State debacle that has dominated the news cycle (and rightly so) for the past few days.  There is a lot to learn and had any one of the people involved looked at the world through the lens of … [Read more...]

Filed Under: In the News Tagged With:

Mental Model: Cui Bono

November 3, 2011 By Leave a Comment
Charlie Munger Mental Models

Lucius Cassius Longinus Ravilla was a famous Roman judge, who, according to Marcus Tullius Cicero, was regarded as an "honest and wise" man.  He was known for a habit of constantly asking the question, "Cui bono?", which roughly translates into "who benefits?".   In a crime or a political scheme, Lucius Cassius believed the best place to start was by looking at, not necessarily the most likely suspect, but to the person or people who were in a position to benefit most from the event.  Many … [Read more...]

Filed Under: Economics Tagged With:

Mental Model: The Hundredth Monkey Effect

October 17, 2011 By Leave a Comment
The Hundredth Monkey Effect Mental Model

In social evolution, there is a mental model that describes the moment that knowledge, behavior, or belief reaches a tipping point (when the "100th monkey" is added), and instantaneously spreads throughout society so that it reaches the rest of a population without being taught, becoming common.   The original research involving the hundredth monkey effect has been discredited.  In fact, it turned out to be bunk. It was thought that monkeys on an island learning how to wash sweet potatoes … [Read more...]

Filed Under: Sociology Tagged With:

Mental Model: The Thief Among Us

October 11, 2011 By 1 Comment
Thief Among Us Mental Model

One of the things that has perplexed me for a long time is Charlie Munger's insistence that a significant minority of humanity is wired in such a way that they will steal if given the opportunity, regardless of whether or not they need the resources they are taking from another person.  Whether this is an adaptive evolutionary trait (which would make sense) or a byproduct of other mental models, he asserted that this known fact makes it important for the people designing society's systems to … [Read more...]

Filed Under: Psychology Tagged With:

Do You Rely on Intuition or Reflective Reasoning When Drawing Conclusions?

September 24, 2011 By 4 Comments
Intuitive Thinking Versus Reflecting Resoning

There is a quick test that can help you determine if you rely on intuition or reflective reasoning (intellect) when making decision.  Answer the following question as quickly as possible: "A bat and a ball cost $1.10 in total. The bat costs $1 more than the ball. How much does the ball cost?"  Do you have your answer?  Good.  Now I want you to think about it.  Commit to it.  Say your answer out loud.   If you are an intuitive thinker that relies on your gut feelings, it is highly … [Read more...]

Filed Under: Psychology Tagged With:

Wendy’s Brilliantly Relies on Mental Models from Psychology to Reinvent the Classic Wendy’s Cheeseburger

September 19, 2011 By 5 Comments
Wendy's Hot 'n Juicy Dave Cheeseburger

Wendy's recent commercial introducing the remade cheeseburger named after founder Dave Thomas is one of the best examples of marketing and psychology I've ever seen.  It's brilliant; mental models applied in a constructive way.   I'm not going to take the fun out of it, but be on the lookout for some of the clues as to which mental models are at work: By invoking the imprimatur of the founder through his daughter and namesake - yes, the real Wendy of Wendy's - it immediately lends credence … [Read more...]

Filed Under: Case Studies & Profiles, Psychology Tagged With:
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