persentage icon with blue backgroundWebinar in 2 Days! Join Abhijit Paul to recognize Breakout Failures in trading. REGISTER NOW persentage icon with blue background

The Joys of Compounding by Gautam Baid

Obtain Worldly Wisdom

Obtaining Worldly Wisdom Through a Latticework of Mental Models

 

The author advises making numerous decisions in our lives. Building mental models assist us do the job better. 

 

What exactly are Mental Models?

Each discipline's key ideas are represented by mental models (e.g., mathematics, physics, accounting, etc.). It's a mental framework or worldview that helps us to understand how the world works.


Traditionally, we studied subjects separately in school. In our brain, information about each topic is organized into distinct folders – Math, Science, Arts, and so on. As a result, there is frequently a lack of synthesis between subjects.


This learning style, however, does not reflect the complexities of the real world. Forces from various fields of varying magnitudes shape our outcomes.


We can see the many forces at work by combining information from various disciplines. This enables us to solve problems effectively.

 

The interaction is referred to as a "Latticework of Mental Models" by Charlie Munger.

 

What is the significance of Mental Models?

The stock market is made up of more than just numbers and equations. Fundamentally, the market is driven by humans, who experience a wide range of emotions. As a result, taking a purely quantitative approach while ignoring human nature will not succeed as investors.

 

Increasing the mental model repertoire allows the investors to think critically. Avoid human biases and common psychological pitfalls when making investment and life decisions.

Did you like this unit?

Units 4/35