Super Thinking: Upgrade Your Reasoning and Make Better Decisions with Mental Models

by Gabriel Weinberg

Gelman suggested in The American Statistician in 2016, we must “move toward a greater acceptance of uncertainty and embracing of variation.

If all you have is a hammer, everything looks like a nail. This phrase is called Maslow’s hammer

cost-benefit analysis, a natural extension of the pro-con list that works well as a drop-in replacement in many situations. This powerful mental model helps you more systematically and quantitatively analyze the benefits (pros) and costs (cons) across an array of options.

A central challenge with cost-benefit analysis is that this end result is sensitive to the chosen discount rate. One way to show this sensitivity is through a sensitivity analysis, which is a useful method to analyze how sensitive a model is to its input parameters.

simple probability distribution [see Chapter 5], which describes how all the probabilities are distributed across the possible outcomes.

utility values, which reflect your total relative preferences across the various scenarios.

utilitarianism that expresses the view that the most ethical decision is the one that creates the most utility for all involved.

black swan events, which are extreme, consequential events (that end in things like financial ruin), but which have significantly higher probabilities than you might initially expect.

cascading failures (see Chapter 4). As you recall, in a cascading-failure scenario, parts of the system are correlated: if one part falters, the next part falters, and so on.

To better determine the outcome probabilities in highly complex systems like banking or climate, you may first have to take a step back and try to make sense of the whole system before you can even try to create a decision tree or cost-benefit analysis for a particular subset or situation. Systems thinking describes this act, when you attempt to think about the entire system at once.

Chatelier’s principle, named after French chemist Henri-Louis Le Chatelier, states that when any chemical system at equilibrium is subject to a change in conditions, such as a shift in temperature, volume, or pressure, it readjusts itself into a new equilibrium state and usually partially counteracts the change.

in economics, if a new tax is introduced, tax revenues from that tax end up being lower in the long run than one would expect under current conditions because people adjust their behavior to avoid the tax.

laffer curve states that as the tax increases ,the revenue also increases but upto certain threshold after that with more increase in tax ,people start to find ways to evade tax as a result revenue decreases. So exorbitant tax in county is a bad idea.

homeostasis (see Chapter 4), which comes from biology: recall how your body automatically shivers and sweats in response to external conditions in order to regulate its internal temperature.

A related mental model that also arises in dynamic systems and simulations is hysteresis, which describes how a system’s current state can be dependent on its history.

In physics, when you magnetize a material in one direction, such as by holding a magnet to another piece of metal, the metal does not fully demagnetize after you remove the magnet. In biology, the T cells that help power your immune system, once activated, thereafter require a lower threshold to reactivate. Hysteresis describes how both the metal and the T cells partially remember their states, such that what happened previously can impact what will happen next.

path dependence (see Chapter 2), which more generally describes how choices have consequences in terms of limiting what you can do in the future.

Monte Carlo simulation is actually many simulations run independently, with random initial conditions or other uses of random numbers within the simulation itself.

Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.

Known knowns: These might be risks to someone else, but not to you since you already know how to deal with them based on your previous experience. For example, a project might require a technological solution, but you already know what that solution is and how to implement it; you just need to execute that known plan.

Unknown knowns: These are the risks you’re not thinking about, but for which there exist clear mitigation plans.

counterfactual thinking, which means thinking about the past by imagining that the past was different, counter to the facts of what actually occurred.

The butterfly effect (see Chapter 4) reminds us that one small change can have ripple effects, so when considering a counterfactual scenario, it is important to remember that if you change one thing, it is unlikely that everything else would stay the same.

lateral thinking, a type of thinking that helps you move laterally from one idea to another, as opposed to critical thinking, which is more about judging an idea in front of you. Lateral thinking is thinking outside the box.

groupthink, a bias that emerges because groups tend to think in harmony.

Within group settings, members often strive for consensus, avoiding conflict, controversial issues, or even alternative solutions once it seems a solution is already favored by the group.

bandwagon effect describes the phenomenon whereby consensus can take hold quickly, as other group members “hop on the bandwagon” as an idea gains popularity.

Thebandwagon effectis a phenomenon whereby the rate of uptake of beliefs, ideas, fads and trends increases the more that they have already been adopted by others. ... As more people come to believe in something, others also "hop on thebandwagon" regardless of the underlying evidence

Diversity of opinion: Crowdsourcing works well when it draws on different people’s private information based on their individual knowledge and experiences. • Independence: People need to be able to express their opinions without influence from others, avoiding groupthink. • Aggregation: The entity doing the crowdsourcing needs to be able to combine the diverse opinions in such a way as to arrive at a collective decision.

If you can design a system with these properties, then you can draw on the collective intelligence of the crowd.

Intelligence: Brainpower is crucial, especially the ability to enter a new domain and get up to speed quickly. • Domain expertise: While you can learn about a particular domain on the fly, the more you learn about it, the more it helps. • Practice: Good forecasting is apparently a skill you can hone and get better at over time. • Working in teams: Groups of people can outperform individuals as long as they avoid groupthink. • Open-mindedness: People who are willing to challenge their

Training in past probabilities: People who looked at probabilities of similar situations in the past were better able to assess the current probability, avoiding the base rate fallacy (see Chapter 5). •Taking time: The more time people took to make the prediction, the better they did. • Revising predictions: Forecasters who continually revised their predictions based on new information successfully avoided confirmation bias

business case, a document that outlines the reasoning behind your decision. This process is a form of arguing from first principles (see Chapter 1). You are laying out your premises (principles) and explaining how they add up to your conclusion (decision). You are making your case. Taking this explicit step will help you identify holes in your decision-making process. In addition, a business case provides a jumping-off point to discuss the decision with your colleagues.

Getting into an arms race is not beneficial to anyone involved. There is usually no clear end to the race, as all sides continually eat up resources that could be spent more usefully elsewhere.

Game theory is the study of strategy and decision making in adversarial situations, and it provides several foundational mental models to help you think critically about conflict.

prisoner’s dilemma.

Here’s where it gets interesting. The simplest formulation of this game assumes that the consequences for the players are only the prison sentences listed, i.e., there is no consideration of real-time negotiation or future retribution. If, as a player, you are acting independently and rationally, the dominant strategy given this formulation and payoff matrix is always to betray your partner: No matter what they do, you’re better off betraying, and that’s the only way to get off free. If your co-conspirator remains silent, you go from one to zero years by betraying them, and if they betray you too, you go from ten to five years.

Hence the dilemma: do you risk their betrayal, or can you trust their solidarity and emerge with a small sentence?

The dual betrayal with its dual five-year sentences is known as the Nash equilibrium of this game,

The Nash equilibrium is a set of player choices for which a change of strategy by any one player would worsen their outcome.

the Nash equilibrium is the strategy of dual betrayals, because if either player instead chose to remain silent, that player would get a longer sentence. To both get a shorter sentence, they’d have to act cooperatively, coordinating their strategies. That coordinated strategy is unstable (i.e., not an equilibrium) because either player could then betray the other to better their outcome.

The mental model this study illustrates is called reciprocity, whereby you tend to feel an obligation to return (or reciprocate) a favor, whether that favor was invited or not.

Quid pro quo (Latin for “something for something”) and I’ll scratch your back if you’ll scratch mine are familiar phrases that relate to this model.

clients. Giving someone something, even if they didn’t ask for it, significantly increases the chances they will reciprocate.

The second model that Cialdini describes is commitment—if you agree (or commit) to something, however small, you are more likely to continue to agree later. That’s because not being consistent causes psychological discomfort, called cognitive dissonance

Salespeople will also try to find common ground through a model Cialdini calls liking. Quite simply, you are more prone to take advice from people you like, and you tend to like people who share characteristics with you.

The technique of mirroring also follows this model, where you mirror the physical and verbal cues of people you talk to. People tend to do this naturally, but trying to do this more (for example, consciously folding your arms when they fold their arms) can help you gain people’s trust. Studies show that the more you mirror, the more you will be perceived as similar.

A fourth influence model is known as social proof, drawing

social proof, drawing on social cues as proof that you are making a good decision. You are more likely to do things that you see other people doing, because of your instinct to want to be part of the group

Scarcity is another influence model, this one describing how you become more interested in opportunities the less available they are, triggering your fear of missing out (FOMO). So-called “limited-time offers” and “once-in-a-lifetime opportunities”

Cialdini’s sixth major influence model is authority, which describes how you are inclined to follow perceived authority figures.

We firmly believe that any intelligent person could learn about any topic with the right research and enough time.