This article is an excerpt from the Shortform book guide to "Poor Charlie's Almanack" by Charles T. Munger. Shortform has the world's best summaries and analyses of books you should be reading.
Like this article? Sign up for a free trial here .
What are the major types of mental models? What should be your focus when learning a mental model?
The many types of mental models cut across several disciplines including math, psychology, economics, physics, and more. They include models like Gaussian distribution, reciprocity, autocatalysis, and opportunity cost. Your focus should be on learning the fundamental meaning of these models and not their nitty-gritty details.
Read on to discover more about the major types of mental models.
The Types of Mental Models
Here’s a list of mental models suggested directly by Munger across his speeches in Poor Charlie’s Almanack. It’s not a complete set of mental models you should know, but it’s a good start to build off of.
Observe a few things about the list:
- It reaches broadly across disciplines that you wouldn’t normally think of interacting, like economics and physics.
- Each discipline has specific ideas that have relevance outside the discipline.
We’ve included links for the different types of mental models under each category as a starting point for research.
The types of mental models include:
- General
- Math
- Numbers, quantities, basic arithmetic
- Compound interest
- Permutations and combinations
- Accounting
- Decision trees
- Gaussian distribution (or bell curve)
- Psychology
- Incentive-caused bias
- Hammer-and-nail bias
- Appealing to person’s self-interest
- Consistency principle
- Social proof
- Sunk cost
- Deprival super-reaction (or loss aversion)
- First conclusion bias
- Crowd folly
- Reciprocity
- Five Ws—Who, What, Where, When, Why
- Engineering
- Backup system (or redundancy)
- Breakpoints
- Margin of safety
- Physics
- Economics
- Free market economy (as an ecosystem where specializers can occupy a niche)
- Advantages of scale
- Disadvantages of scale
- Balances of advantages and disadvantages
- Wealth effect
- Opportunity cost
- Incentives
- Tragedy of the commons
- Comparative advantage in trade
- Specialization
- Markets
- Technology can help or kill you
- Competitive destruction with technology
- Pari-mutuel system
- Mr. Market
- A stock is a piece of business
- Margin of safety
- Cancer surgery formula: Cut out everything in a business that doesn’t work, and you’re left with something that does.
- Management
- Checklists
- Big “no-brainer” questions
- Patents and trademarks
- Biology
- Statistics
- Philosophy
- History
Get the Core Ideas, Don’t Sweat the Details
For purposes of general cognition, you don’t need to learn the nitty-gritty technical details of the various types of mental models. You need only build an intuition for the fundamental meaning of the mental model.
For instance, for the engineering concept of “margin of safety,” you don’t need to be able to analyze a bridge and calculate the exact margin of safety to five significant figures. Instead, take away the general idea—that a system should have a degree of buffer before it fails.
———End of Preview———
Like what you just read? Read the rest of the world's best book summary and analysis of Charles T. Munger's "Poor Charlie's Almanack" at Shortform .
Here's what you'll find in our full Poor Charlie's Almanack summary :
- A collection of Charlie Munger’s best advice given over 30 years
- Why you need to know what you’re good at and what you’re bad at to make decisions
- Descriptions of the 25 psychological biases that distort how you see the world
