19 Thinking Tools For Making Better Decisions
Concepts, mental models & frameworks i've found interesting
Heuristics help us make sense of the world, but when we fail to think—or worse—outsource it, we give away a little piece of our autonomy. It’s never been harder to tell fact from fiction, guru from novice, yet it’s never been so important.
Below are 19 more mental models, concepts and frameworks I use to help me make sense of the world and make informed decisions.
Skin in the Game
People should be held accountable for the decisions they make; reaping both the rewards of skill and bravery—and the punishments of their foolish actions.
Why it’s important to know: Too many people are better at explaining than doing, particularly concerning areas of influence. We have social media ‘influencers’ giving us wealth advice who are barely even old enough to go to the cinema and watch an 18; politicians sending our troops to war who haven’t so much as had a bout of fisticuffs in their 50 years of being; and middle management—who aren’t brave enough to risk their own career, reputation or capital, trying their damned hardest to make sure that the staff below them don’t get “too big for their boots” and challenge their mediocrity.
The Lindy Effect
A model predicting that non-perishable things (ideas, technologies) will continue to exist proportionally to their current lifespan. If a book (the Bible) has been around for over two thousand years, it will more than likely be around for another two thousand.
Why it’s important to know: Not every new trend deserves your attention and fixation. There is first-mover advantage for those that actively seek the next hot thing (YouTube education channels, Bitcoin, NFTs), but most fads are just a temporary distraction. If you’re undecided on what to read, you’d be better off reading the classics over new novel “best sellers”.
The Map is Not the Territory
A model recognising that representations of our world (maps, plans, models) are always simplifications that can differ from actual reality. A breaking news event might be condensed into a 12-word headline or a 3-minute video, whereas the days, weeks, months or years leading up to the event may have involved billions of small interactions to make it happen.
Why it’s important to know: The world is complex, so we need to find ways to make it less complex. This is why we love to read books on Richard Feynman or famous entrepreneurs: we want the insights without the complexity of having to have actually studied PhD physics or turned a bootstrap company into a trillion-dollar behemoth.
Thought Experiment Framework
A structured method for exploring hypothetical scenarios and their consequences without real-world implementation. The Stoics practised Premeditatio Malorum, where they imagined negative events for themselves and loved ones to prepare for that eventuality. Charlie Munger’s book, Poor Charlie’s Almanack, also has a chapter on a hypothetical thought experiment.
Why it’s important to know: It’s not living in la-la land to sometimes sit there and deliberately daydream about something that’s important to you. That could be an acquisition you’re mulling over, moving to a different country, or deciding if the person you’re with is somebody you can imagine spending the rest of your life with.
Via Negativa
A model centred on improving knowledge through subtraction rather than addition. The strategy involves determining what doesn’t work to help reveal what is.
Why it’s important to know: It’s easy to want to find a solution to your problem by adding something to it—even if you think it’s helping. The problem with adding things to existing problems or systems that aren’t already working is that it will take time for the information to trickle back to you. If you want to lose weight, a good starting place is to cut your calories before you spend thousands on memberships, gym attire and personal trainers.
The Principal-Agent Problem
People who have their own capital, reputation or expertise at risk are more likely to behave in a manner that is beneficial to their business—even at times when it’s detrimental to them personally. These are called principals. People who don’t risk reputation, the clothes on their back or financial distress are more likely to professionally behave in a manner that is to their single benefit. These are called agents.
Why it’s important to know: Not everybody in a business can be an owner, but they can behave like one. It’s easy for personnel to be unmotivated and uninspired by their work, so it’s up to the owners to actively keep those employees who act more in keeping with a principal and remove those acting more like an agent.
The Search-Inference Framework
The search-inference framework states that all thinking can be modelled into a two-step process of search and inference:
Search – Involves scanning through potential ideas or solutions when seeking a desired outcome (goal) to a question at hand. You search through options, drawing on past experiences, knowledge and available resources. These are the possible solutions to the original question in service of achieving the goal.
Inference – Once the potential options have been gathered, the inference step involves evaluating each option and looking for any evidence that will either help or hinder you in trying to achieve your goal. To do this, you could use simple reasoning such as pros and cons for each option, or predict potential outcomes and weigh these against your desired goal. The quality of your decision hinges on how well you search in the first instance.
Why it’s important to know: This systematic approach might sound like something you already do, but often we take shortcuts when making decisions and lean on our schemas and biases to ease the cognitive load. We don’t like doing all of the nitty-gritty thinking—hence our AI usage—but this skill is now more important than ever.
The Sunk Cost Fallacy
The Sunk Cost Fallacy refers to the irrational decision to continue investing time, money, or effort into something simply because you’ve already invested resources into it, even when it no longer makes sense to do so.
Why it’s important to know: People cling to past commitments because of a psychological bias to avoid admitting failure or loss, even though the rational course of action would be to cut their losses and move on. This could fall under Charlie Munger’s Inconsistency-Avoidance Tendency or Simple, Pain-Avoiding Psychological Denial Tendency.
Mean Reversion
Mean reversion is the idea that extreme swings tend to move back toward average over time. If something shoots way up, or drops way down, it’s likely to eventually return closer to its normal level.
Why it’s important to know: It helps you avoid overreacting to unusual events. A basketball player who scores 50 points one game will probably score closer to their average next game. A stock that crashes might recover. Understanding this prevents you from assuming extreme situations will continue forever and helps you make better predictions about what happens next.
Mean reversion is the moving back towards equilibrium.
Anti-Library
Umberto Eco was a writer with a personal library of over 30,000 books. When people visited his library, they typically fell into a class of people who were impressed by his collection and asked him, “How many of these books have you read?” But a small few understood that a library is a research tool.
Why it’s important to know: There is far more to be learned from the unread books on your bookshelf than the ones you have already read. Books cost £5–£25 and have people’s entire life workings in them. It’s about as low-cost, high-payoff as you can get.
Anti-Knowledge
Anti-knowledge is the concept of understanding that there is more to be gained from what you do not yet know than what you do. Black Swans are inherently unpredictable, but by acknowledging their existence you can position yourself to positively benefit from them through small stakes but high-payoff trial and error.
Why it’s important to know: The concept of anti-knowledge teaches us that there is more to be lost (and gained) from the things we do not know. It’s not a case of predicting Black Swans, but of ensuring that when they do come along, your harm is kept to a minimum. This is similar to the unknown unknown quadrant from The Rumsfeld Matrix concept, where not knowing that there is an IED on the other side of the door you’re trying to kick down can blow you into a thousand pieces.
Creative Destruction
Creative destruction is when new innovations destroy old industries and jobs while creating new, better ones to replace them. Netflix destroyed Blockbuster video stores but created new jobs in streaming technology and content production. Cars destroyed the horse-and-buggy industry but created the automobile industry.
Why it’s important to know: It explains how economies progress and why change can be both painful and necessary. Old jobs disappear, which hurts people in those industries, but new opportunities emerge that often make society better off overall. Understanding this helps you adapt to change rather than resist inevitable progress.
Competition Neglect
Competition neglect is when people underestimate how many other people are thinking the same way they are, leading them to ignore how much competition they’ll actually face.
Why it’s important to know: It helps explain why people enter overly crowded markets, apply for long-shot opportunities without backup plans, and overestimate their chances in competitive situations. Over 90% of startups fail. Recognising this helps you make more realistic plans by remembering: if something looks like a great opportunity to you, it probably looks that way to many others too.
Goodhart’s Law
Goodhart’s Law says that when a measure becomes a target, it stops being a good measure—because people start gaming the system instead of actually improving what matters. You move from publishing one essay a week to two. If nothing has changed other than your appetite to release more content, then something has to give, and quality often has the biggest target on its back.
Why it’s important to know: It explains why so many well-intentioned rules and metrics backfire. Test scores, performance reviews, social media likes—once you make any of these the goal, people find ways to boost the number without actually achieving the underlying purpose. It reminds us to focus on what truly matters, not just what’s being measured.
Inside vs Outside View
The Inside vs. Outside View is about how you make predictions and judgements. The inside view focuses on the unique details of your specific situation—your plan, resources and circumstances. The outside view looks at what typically happens in similar situations by using statistical data and historical patterns from comparable cases.
Why it’s important to know: The inside view makes you overly optimistic because you focus on what makes your situation special while ignoring base rates. Most people naturally default to the inside view (”our project is different”), which is why projects run over budget and startups fail at predictable rates. Using the outside view helps you make more accurate predictions by grounding your estimates in reality rather than hope.
Prisoner’s Dilemma
The prisoner’s dilemma is a situation where two people can either cooperate with each other or betray each other, and the best outcome for both happens when they cooperate—but each person is tempted to betray because it could give them an even better individual result.
The classic example: Two prisoners are questioned separately. If both stay silent (cooperate), they each get 1 year in jail. If both betray each other, they each get 3 years. But if one betrays while the other stays silent, the betrayer goes free while the silent one gets 5 years.
Why it’s important to know: It explains why people and countries sometimes don’t cooperate even when cooperation would benefit everyone—because the fear of being betrayed or the temptation of individual gain gets in the way. It applies to everything from business competition to climate change agreements.
Second Order Consequences
When making decisions, it’s important to consider the ripple effects that your decision could have in the future. If you decide to spend all of your money on a new car but fail to consider the consequences that having no savings could potentially have in the future, you’re asking to be blindsided when something unexpected happens.
Why it’s important to know: It’s not that you have to overanalyse every decision to death, but you should at least think about how your decision today could impact events tomorrow. In business, a failure to think about the second order consequences of your decisions is the equivalent of playing Russian roulette.
Intellectual Humility
The concept of recognising the limits of one’s knowledge and remaining open to new information. Our brains are hard drives, and we often muddle up previous versions of our stories with the last time we told or remembered them.
Why it’s important to know: If you think you’re the smartest person in the room—great, good for you—but sad is the person who thinks there’s not a single person they can learn something from. Everybody has something to learn from somebody: even if that’s how not to do something.
De Bono’s Six Thinking Hats Framework
Edward de Bono’s Six Thinking Hats is a practical decision-making and problem-solving framework that encourages parallel thinking by having participants adopt specific roles or “hats,” each representing a different thinking style or perspective:
White Hat: Neutral, factual thinking (data and information).
Red Hat: Emotional, intuitive thinking (gut feelings and emotions).
Black Hat: Critical thinking (risks and caution).
Yellow Hat: Optimistic thinking (benefits and positive outcomes).
Green Hat: Creative thinking (ideas and alternatives).
Blue Hat: Organisational thinking (managing the thinking process itself).
Why it’s important to know: Making decisions—especially with others—can be difficult. If you’re a creative person but the boardroom meeting you’re sat in is being dominated by a black hat who mostly looks for risk, you will be disheartened. This framework offers a logical sequence of events whereby most of the human psychology that comes into play when making decisions gets its chance to communicate.
Until next time, Karl (The School of Knowledge).
Thinking is not about collecting mental models, but about taking responsibility for judgment.
Heuristics can guide, AI can accelerate but neither should decide for you without costing something essential: your intellectual autonomy.