Mental Models

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Mental Models

What is a mental model?  I think of it as a framework for an idea or thought process.  Mental models are all around us, and help describe how the world works.  One of the reasons I like them is because they are not only applicable to investing, but to so many other aspects of life.

The idea of mental models was popularized by Charlie Munger, particularly in his book Poor Charlie’s Almanack (an expensive book, but worth it).

It has also been covered extensively by people like Shane Parrish over at Farnam Street / The Knowledge Project (another great resource).

While I love mental models generally, my goal here is to not only breakdown the fundamentals, but to figure out each one’s application and context in the world of the individual investor.  Although learning new ideas is wonderful, is is the connection to our lives that make them powerful.

Alex Mason

Hi, I'm Alex and I'm an individual investor and podcaster who's curious about the world, especially when it comes to long term investing in the stock market. I'm always looking for better ways to analyze businesses and add more mental models to my brain's tool belt.

Mental Models Studied

Check out the mental models we’ve covered on the show below.  I’ll update this page as we make progress.

mental model seizing the middle

Seizing the Middle

mental model opportunity cost

Opportunity Cost

mental model fight or flight

Fight or Flight

mental model bottlenecks


mental model leverage


mental model omission


mental model irreducibility


mental model gresham's law

Gresham’s Law

mental model churn


mental model law of diminishing returns

Law of Diminishing Returns

mental model intergenerational transmission

Intergenerational Transmission

mental model the first $200,000 is the hardest

The First $200,000 Is The Hardest

mental model the path of least resistance

The Path of Least Resistance

mental model dunning-kruger effect

Dunning-Kruger Effect

mental model mr market

Mr. Market

mental model survivorship bias

Survivorship Bias

mental model synergy


mental model pareto principle

Pareto Principle

mental model second order thinking

Second Order Thinking

mental model hanlon's razor

Hanlon’s Razor

mental model occam's razor

Occam’s Razor

mental model law of large numbers

Law of Large Numbers

mental model thought experiment

Thought Experiment

mental model first principles

First Principles

mental model randomness


mental model the map is not the territory

The Map Is Not The Territory

mental model circle of competence

Circle of Competence

mental model inversion