Today, this article is going to tell you what a mental model is? And what's behind the mental model. Charlie Munger said: "Mental models give you a perspective or frame of mind that determines how you see things and see the world. Top-level mental models increase your likelihood of success and help you avoid failure." Indeed, a mental model is a very good thing that can help us explain problems, solve problems, and predict problems. However, what exactly is it? What exactly can be called a mental model? I believe this is a question that most people cannot answer.
Today, this article is going to tell you what a mental model is? And what's behind the mental model. 1. Excellent people learn the mental model Before answering "What is a mental model", let's first look at what is a model? 1. What is a model? In fact, Charlie job title email list Munger once defined a "model" - any artificial framework that helps you better understand the real world is a model. Case in point: American Airlines handles millions of passengers every year, generating hundreds of billions of dollars in value. But in 2012, the average airfare was $178, and airlines only made 37 cents per passenger per flight. Google, on the other hand, creates relatively little value, but makes a lot of money from it. Google generated only $50 billion in value in 2012 (airlines generated $160 billion),
yet made a 21% profit, a profit margin more than 100 times that of the airline industry. Google's huge profits give it a market value more than three times that of all U.S. airlines combined. Why is this happening? This seemingly complex phenomenon is explained by economists using only two simple models: one is perfect competition and the other is monopoly. Perfect competition means that there is no difference between every company in this market, all selling the same product. Because none of these companies have market power, the price of their products must be set by the market. Conversely, a monopoly says that the monopoly company owns its own market, so it can set its own price. Because there is no competition, monopoly companies can freely determine the supply and price in order to maximize their profits. The airline market is a perfectly competitive market, and the Google market is a monopoly market. Because of this, the profit margins of the two are very different.
This is the use of "models", or "artificial frameworks" as Charlie Munger calls them, to simplify and abstract things that seem complex. So what is a mental model? Simply put, a mental model is the compression of information and is the best framework to help people understand things and solve problems. It can be said that a mental model is a toolbox in our brain for making decisions and thinking about problems, and sometimes it may be expressed as a framework for analysis. For example: SWOT analysis (S=strengths, W=weaknesses, O=opportunities, T=threats); sometimes it may be expressed as a short theory, such as: Mental Accounts Theory. And if we use a fashionable analogy, the mental model is the APP installed in our mind.
When we want to determine the itinerary for the holiday, we turn on our mobile phones and click on the "horse honeycomb" APP above to see how others are playing. When we want to book a hotel, we turn on our mobile phone, click the "Booking" APP above, and complete the hotel reservation in an instant. Similarly, when setting work goals, we can open a file called "SMART" (S=Specific,
M=Measurable, A=Attainable, R=Relevant, T=Time- bound (time-bound) mental model, which is used to set clear, detailed and actionable goals. APPs on mobile phones are toolboxes that can be used directly, and once the mental model is rooted in our minds, it becomes a toolbox that can be used directly. Therefore, the more toolboxes (i.e. mental models) you have in your head and the more effective apps you have installed, the better you will be able to make quick and correct decisions and choices.