Three mental models for better decision-making

Mental models improve decision making, even for experienced decision-makers in leadership positions. And although universities and colleges teach us the specifics of our industries and disciplines, very few of us learn how to think. Even fewer of us receive specific tools that we can use to make better decisions. In this article, we explain how to make better decisions using a new set of tools called mental models and offer some third-party resources to get you help you along.


Mental models

Mental models comprise a set of principles designed to help you think better. They incorporate logic principles from the sciences, mathematics, and other fields, like economics and statistics.

Most mental models are cross-disciplinary; wisdom gained in one field or setting can apply equally in others.

Mental models lead to better thinking, better decision-making, and more effective and more thoughtful strategizing. Mental models help us understand the world around us, so that we can make decisions more likely to bring us the outcomes we want.


A few helpful mental models

1. Second-order thinking

Most of us forecast consequences when we make decisions, at least when we make strategic decisions at work. Imagining consequences helps us set goals, make plans and strategies, and act on them. But very few people go to the next level, to so called second-order thinking.

Second-order thinking anticipates not just the consequences of your actions, but the consequences of those consequences. Doing so puts you in a league above most people, who typically only anticipate the first level of consequences. Second-order thinking can also help you avert disaster as secondary and tertiary consequences are often much worse.

An example of second-order thinking

A province has a rabbit problem, so the government offers a reward for anyone who hands in a dead rabbit, believing that this policy will incentivize locals to go out hunting, thereby decreasing wild rabbit populations.

A good idea, maybe, but spend a while thinking about the nature of financial incentives and you realize that humans almost always try to exploit financial incentives. The rabbit reward could result in people breeding rabbits and killing them for the reward, creating even more of a problem.

Thinking beyond the consequences of your actions and hypothesizing about the consequences of those consequences helps anticipate secondary and tertiary outcomes. Doing so helps you design more comprehensive strategies and makes better outcomes far more likely.



2. Inversion

Most of us think about problems progressively: we start at the root and head towards the solution.
But sometimes the fastest way to solve a problem is to turn it upside down. Looking at a problem from the opposite end, or flipping your usual way of approaching something, can reveal answers, show patterns, and generate insights you might never have discovered going about it in standard, front-forward order.

An example of inversion is Charlie Munger’s approach to success. (Munger is widely regarded as the modern father of mental models.) Rather than thinking about what you want to achieve, Munger suggests thinking about what you want to avoid. This will often yield different and more effective strategies to go about achieving the same end goal or, help you figure out what exactly it is you do want.


3. Occam’s Razor

Occam’s Razor explains that the simplest answer is most likely to be true in any given situation. Why? Well, not all things in life are simple, but when faced with multiple possible answers to a given problem, the answer most likely to be true is the simplest answer, because it’s the one with the fewest moving parts.

If fewer variables need to line up for a given answer to prove true, then simple probability states that the simplest answer—the one that requires fewer variables to be true—most likely represents the truth.
Doctors use Occam’s Razor frequently. For example, say you have a headache. A quick Google search reveals several possible causes: either you have a brain tumour, you suffered a head injury you can’t remember, or you’re a little dehydrated.

In this instance, we factor in frequency. The simplest answer (and therefore the one most likely to be true) is the most common one. Brain tumours and head injuries are complicated, uncommon answers. The most likely reality? Not enough water.

Of course, Occam’s Razor won’t apply in every situation—sometimes the answer really is the more complex. But when faced with multiple possible solutions, it’s worth thinking about which one is most likely to be true based on simplicity.


Learn more about mental models

Mental models deserve to get more traction in the business and strategy worlds. Here are a few of our favourite resources on mental models:

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