Model Behavior – How Mental Models Define our Destiny
Close your eyes and think of some things you did yesterday. Maybe you strolled around town, visited a few stores, attended a business meeting, bought stock, performed open-heart surgery, or cooked a three-course meal. You might not have been aware of it, but the way you handled those events was determined by guidelines unique to you. Those guidelines are part of a set called your brain’s mental models.
Mental models affect, not just how we navigate life, but how we make decisions, and how we see ourselves and other people. Together they form a reservoir of blueprints that experts call our “circle of competencies.” We could make few important decisions without foraging in that reservoir, and the more good models it contains the better our decisions are.
Not all mental models, however, are beneficial. The good ones help us make positive decisions. The rest nudge us to make either neutral decisions – ones that are neither beneficial nor detrimental to us – or bad decisions. Obviously having models that prompt us to make bad decisions is a problem. A bigger problem, though, is that many people don’t realize they have those models in the first place, and so don’t realize that they are being influenced by them. In fact, many people are barely aware that they have any kind of mental models. They just go through life mechanically following preprogrammed paths and think they’re fully in control, when, in fact, they’re traveling on autopilot.
We can trace many of our models to childhood. They start to form very early in life. Those “subconscious” models are based on a child’s limited experience of the world. As we get older, we construct more sophisticated models based on skills we acquire and new information we accumulate. In that way our circle of competencies expands. Those of us who are especially inquisitive and studious build many additional good mental models that ease our journey through life and make success more likely.
Over time the reservoir of good models gets larger as we refine our existing good models and construct new ones. In that way, we become continually more adept at solving problems. Experts sometimes refer to this reservoir as a “latticework” of mental models. That label is important because it explains that our mental models, though distinct, are interlinked, and that we can use them individually or in almost unlimited combinations. That greatly increases our capacity to creatively address problems, especially ones we never encountered before. This heuristic thinking is transformative in all areas of life from having good personal relationships and profitable businesses to carrying out successful surgical operations and making profitable investment decisions.
Even good mental models can be hazardous because they can make us mentally lazy. We can slip into a rut and follow an existing routine without giving a problem enough creative thought. That’s more likely if using that model in the past yielded successful results. That syndrome is called “domain dependence.” It’s a trap investors frequently fall into: They base a current investment decision on the past performance of a stock in the same industry category. Instead of studying market data from numerous different sources, they use the other stock’s earlier results as a template into which they shoehorn the new situation.
It’s easy to become prisoners of our mental models. In April 2017, Eric Jackson highlighted that problem in a Forbes article. He recalled Anthony Scaramucci on CNBC’s program Fast Money some years before saying that he didn’t believe Apple’s market capitalization would pass $500 billion because other big tech companies like Microsoft and Cisco had come close to doing so but quickly fell back. The rest is history, as they say.
To overcome the trap of domain dependence, we must constantly study new information and be willing to question even good models in order to establish if they still provide the best way to address a specific problem and are not just a convenient shortcut. “Black Swan” author, Nassim Taleb, gives wise advice on this subject: “You can only become intellectually an adult, so to speak, if you break through domain dependence.”
The more mental models we have in our reservoir the more likely we are to be successful in life. So we must constantly expand our circle of competencies. Some good and bad models happen by default – we develop many patterns of behavior by copying other people, like our peers, parents, and teachers. Good models form the latticework of good skills, and the most obvious way to acquire those skills is through study and practice. Study includes long and short courses, targeted reading, and constant inquisitiveness.
In short, our life should be a lifetime of learning. In his amusing and insightful book, How To Think: A Survival Guide for a World at Odds Alan Jacobs, the author and humanities professor, says that if you really want to find the truth you must “seek out the best – the smartest, most sensible, most fair-minded – representatives of the positions you disagree with.” The words “positions you disagree with” are the key here because true learning means opening our minds to the ideas not only of smart people we agree with, but also of smart people we disagree with. Their arguments might not validate our current beliefs, but occasionally they might convince us to change them and that’s real learning.
Businesspeople use mental models to help them deal with the myriad challenges they face daily. They acquire the models through learning in all its forms and through experiences both good and bad. Some of the most useful mental models grow from the ashes of mistakes and failures. Many highly successful businesspeople failed in earlier ventures.
Mental models are the tools that help us tackle our daily problems both big and small. The more tools we have the more successful our problem solving will be, so we should constantly be looking out for new ones. We would do well to take the advice of Warren Buffett’s long-time business partner, Charlie Munger: “Spend each day trying to be a little wiser than you were when you woke up.” It certainly worked for him.
Wishing everybody a happy, healthy and prosperous 2018.
Jeff Robinson and the IBR Team