Hindsight Bias -Mental Model 094

How The Atomic Bomb Dropped In WWII Went From Saving 20,000 Lives To 1.5 Million Lives

Seeing a past event as predictable, despite there being no objective basis for predicting it.


Example: The fourth-quarter comeback to win the game. The politician who had secretly accepted bribes. The lump that turned out to be a tumour. We don’t predict these events. But once they do happen, we feel as if we knew all along they were going to occur. As Steve Jobs said in his famous Stanford Commencement Speech, “You can’t connect the dots looking forward; you can only connect them looking backwards.”


Wisdom: “If you feel like you knew it all along, it means you won’t stop to examine why something really happened.” — Neal Roese


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Preserving Optionality -Mental Model 093

An Unexpected Upside Of Procrastination

Waiting as long as possible to nail down the factors, decisions, or variables that are hardest to undo once they’ve been settled on.


Example: The term ‘Preserving Optionality’ was created by Robert Rubin when he worked for Goldman Sachs in risk arbitrage. The job of someone working in risk arbitrage is to correctly bet on whether a corporate event will occur, such as a merger.


Corporate events are dynamic, due to competition, regulation and internal politics. They are influenced by many factors and are highly uncertain. While practicing risk arbitrage, Rubin learnt that by waiting until the absolute last minute to make a decision, he was more likely to make the correct bet. Why? He had more time to gather information which would influence his decision.


Rubin went on the be US Treasury Secretary under President Clinton, where he put off his decisions as long as possible, and was very successful in his position.   


Wisdom: “People overestimate their knowledge and underestimate the probability of their being wrong”. — Nassim Taleb


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High-context vs Low-context Culture -Mental Model 092

Why Westerners Seem More Expressive Than Easterners

In a higher-context culture, many things are left unsaid, letting the culture explain them. In a low-context culture, communication is more explicit.


Example: Higher-context cultures are more likely to be found in the Eastern cultures of Asia, where the group is valued above the individual. Low-context cultures are more likely to be found in the Western culture of America, where the individual is valued above the group.


The context of culture affects people’s facial expressions. An experiment by the University of Glasgow shows the difference between (low-context culture) Western Caucasians and (high-context culture)  East Asians. The results showed that Western Caucasians express their emotions across their entire face, including eyebrows and mouth, while East Asians use their eyes to express most of the emotions, especially by changing the direction of their gaze.


In a high-context culture people don’t need to be as explicit, as the context does much of the communication. But in a low-context culture, the context does less communication so the individual must be more explicit in their communication.


Another example of high-context vs low-context culture is evident in the scientific fields. The ‘hard science’ fields like physics have lower-context cultures, compared to other scientific fields like sociology. As physics is dealing with knowledge closer to objective reality, they must be more explicit so they communicate exactly what they mean, as a tiny misunderstanding will mean they are completely wrong. Sociology is more subjective and less precise, which means that information is more ambiguous, and understanding it requires a shared subject perception, or a higher-context culture.


Wisdom: “Words and word choice becomes more important the higher-context the culture, as a few words can communicate a complex message very effectively to an in-group.”


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Precautionary Principle -Mental Model 091

Why San Francisco Measures The Potential Impact Of Its $600m Annual Spending

If an action or policy may cause harm to the public or the environment, in the absence of scientific consensus, the burden of proof that it is not harmful falls on those taking action.


Example: On the 18th of July, 2015, the City of San Francisco passed a Precautionary Principle Purchasing ordinance. It requires the city to weigh the environmental and health costs of its $600 million in annual purchases—from everything from cleaning supplies to computers.


Wisdom: “Precaution is better than cure.” — Johann Wolfgang von Goethe


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Peter Principle -Mental Model 090

Why Managers Rise To The Level Of Their Incompetence

The selection of a candidate for a position is based on the candidate’s performance in their current role, rather than on abilities relevant to the intended role.


Example: If you’re a star performer in your current job, you’re more likely to get promoted. Sometimes, you can be promoted into something you’re terrible at.


The creator of the Peter Principle, Laurence J. Peter, gives the example that if you’re a great rule-follower who suddenly is placed in charge of making rules and decisions, you may well freeze up in your new role or gum the productivity of everyone else.


Wisdom: “Managers rise to the level of their incompetence.”


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Parkinson’s Law -Mental Model 089

Why Is The DMV So Slow? 

Work expands to fill the time available for its completion.


Example: Parkinson’s Law is named after Cyril Northcote Parkinson, a British historian. During his time with the British Civil Service, he noted that as bureaucracies expanded, they became more inefficient.


Wisdom: “Delay is the deadliest form of denial.” — Cyril Northcote Parkinson


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Growth Mindset vs Fixed Mindset -Mental Model 088

The Mindset Of Champions Vs The Mindset Of Mediocrity

Having a fixed mindset means you believe your abilities are innate, while having a growth mindset means you believe you can acquire a greater ability if you invest the effort and study.


Example: Derek Sivers writes, “In a fixed mindset, you believe “She’s a natural born singer” or “I’m just no good at dancing.”

In a growth mindset, you believe “Anyone can be good at anything.” Skill comes only from practice.


In a fixed mindset, you want to hide your flaws so you’re not judged or labeled a failure.

In a growth mindset, your flaws are just a TO-DO list of things to improve.


In a fixed mindset, you stick with what you know to keep up your confidence.

In a growth mindset, you keep up your confidence by always pushing into the unfamiliar, to make sure you’re always learning.


In a fixed mindset, you look inside yourself to find your true passion and purpose, as if this is a hidden inherent thing.

In a growth mindset, you commit to mastering valuable skills regardless of mood, knowing passion and purpose come from doing great work, which comes from expertise and experience.


In a fixed mindset, failures define you.

In a growth mindset, failures are temporary setbacks.


In a fixed mindset, you believe if you’re romantically compatible with someone, you should share all of each other’s views, and everything should just come naturally.

In a growth mindset, you believe a lasting relationship comes from effort and working through inevitable differences.


In a fixed mindset, it’s all about the outcome. If you fail, you think all effort was wasted.

In a growth mindset, it’s all about the process, so the outcome hardly matters.”


Wisdom: “Children given praise such as “good job, you’re very smart” are much more likely to develop a fixed mindset, whereas if given compliments like “good job, you worked very hard” they are likely to develop a growth mindset.”


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Cobra Effect -Mental Model 087

What Happened When The British Government Offered A Bounty For Every Dead Cobra?

When an attempted solution to a problem actually makes the problem worse.


Example: The term ‘Cobra Effect’ comes from the British rule of colonial India. There were a large number of venomous cobra snakes in Delhi. So the concerned British government offered a bounty for every dead cobra. Initially, the strategy succeeded.


However, enterprising individual’s began breeding cobras for income. When the government found about about the breeders, they scrapped the reward program. Since the breeders cobras were now worthless, they let them back into the wild, and as a result, the overall cobra population increased.


Wisdom: “We cannot solve our problems with the same level of thinking that created them” ― Albert Einstein


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Consequence vs Conviction -Mental Model 086

When Should You Delegate Decisions? 

When making a decision, if there are low consequences and you have a weak conviction, you should delegate the decision. You can let employees make their own mistakes and learn.


If there are high consequences and you have a strong conviction, you must make the decision.


Example: Keith Rabois was an executive at Square, a payment system startup in Silicon Valley. He wrote about weighing up the consequences and convictions of his decisions. One of his employees wanted to run a new marketing program where a truck would sit outside the stores of existing customers offering their Square payment devices. That way, when people used the device in-store and wanted one for themselves, they could grab one for free outside.


The Squares didn’t cost much money and the idea would help spread the word about Squares. The consequences were low. But, as Rabois writes, “At that time, my ten years of experience said it was not going to work on a meaningful enough scale for our metrics and I preferred not to do it.” ‘Preferring’ is hardly a strong statement, so his conviction could be considered weak.


Rabois let him go ahead with the program. As a result, his employee learned, “That when you measure this thing, it’s not massive. It doesn’t create massive value for the company.” In the end, Rabois believed that, “It was totally worth letting him make the ‘Mistake’.


Wisdom: “I have a fantastic team of people who run the Virgin companies, who have a lot of freedom to run the companies as if they were their own companies, I give them the freedom to make mistakes.” — Richard Branson


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Evolutionarily Stable Strategy -Mental Model 085

When It Is Better To Have Daughters Than Sons 

A behavioural strategy which, if adopted by a population in a given environment, natural selection alone is sufficient to prevent alternate strategies from invading.


Example: Richard Dawkins said, “A well known example is the sex ratio, where any departure from the stable sex ratio is penalised by natural selection. If there are too many males, an individual is better off having daughters. And if there are too many females in the population, an individual is better off having sons. And so the stable ratio is 50-50. Or strictly speaking, it’s 50% economic investment in sons and 50% economic investment in daughters.”


Wisdom: “Extinction is the rule. Survival is the exception.” ― Carl Sagan


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