Shane Parrish on Mental Models – Making Sense with Sam Harris

Check out the Making Sense Episode Page & Show Notes

Key Takeaways

  • It’s critical to set aside the time to walk around a problem in a three-dimensional way
    • You might ask yourself:
      • What does this problem look like for me?
      • What does it look like to other people?
      • What does it look like through different lenses?
  • “You don’t need to have more cognitive horsepower than other people to make better decisions, you just have to think through a wider variety of situations and circumstances”
    • Think:
      • What are the extent of the possible outcomes?
      • Where am I likely to end up on a probabilistic basis?
      • And are there outcomes I want to avoid?
        • If you can avoid all the bad outcomes, you’re more likely to obtain a preferable outcome
  • Mental models describe the way the world works – they shape how we think, how we understand, and how we form beliefs
    • It’s important to develop a wide variety of mental models – this allows you to think about problems through different lenses
  • Important Mental Models:
    • The map is not the territory
      • Like in online dating – the map (someone’s profile) doesn’t match the overall person 
    • First principles thinking
      • This model is all about breaking things down to their core, asking “Why?” until you get to a concrete answer that can’t be broken down further
    • Try to apply concepts outside the domains in which they’re presented
    • Understanding base rates
      • Our view is often clouded by ego, which makes us think we can beat the statistics
    • Taking advantage of compound interest
  • The best podcast interviews are the result of a totally open-ended conversation with no time limit
  • The internet facilitates the hardening of our own beliefs
    • Why? – We tend to only expose ourselves to people who have the same opinions as us

Books Mentioned

Intro

The Origins of the Farnam Street Blog

  • In 2001, Shane started working for an intelligence agency (the Canadian version of the NSA)
  • In 2008, he went back to school (while maintaining his job at the intelligence agency) to get his MBA with the sole goal of learning how to make better decisions, but he ultimately found it to be pretty worthless
    • Around this time, Shane started a website called “68131.blogger.com” to document his quest at becoming a better decision-maker
      • 68131 is the zip code for Berkshire Hathaway
      • “The website was a homage to Charlie Munger and Warren Buffet and their way of thinking”
      • “It wasn’t mean for anyone else’s consumption…it was more like a personal online notepad for connecting ideas”
      • The original website was all anonymous
        • Shane was still working full time for the intelligence agency, and just wanted to be careful
      • In 2013, Shane changed the name of the site to “farnamstreetblog.com”
        • Why? – Farnam Street is the street in Omaha, Nebraska where Warren Buffet lives and works (it’s where the headquarters for Berkshire Hathway is)
    • Today, Shane’s blog/podcast is very popular among the following groups:
      • People who work on Wall Street
      • People who work in Silicon Valley
      • Professional athletes

How to Get Better At Making Decisions

  • “Cognitive biases are really great at retrospectively explaining  how we go astray, but not so great at helping us avoid pitfalls”
    • The problem – the smarter you are, the better story you’re going to tell yourself about why something doesn’t apply in a certain situation (you’ll create overconfidence in your decision/your range of outcomes)
      • “It’s egos over outcomes….we’re unconsciously trying to protect our view of the world and our interpretation of the world as being correct”
  • “I rarely make a decision on the spot. I rarely feel the need to sit down and decide something to demonstrate to other people that I’m in control or I’m a ‘decision-maker'”
  • It’s critical to set aside the time to walk around a problem in a three-dimensional way
    • You might ask yourself:
      • What does this problem look like for me?
      • What does it look like to other people?
      • What does it look like through different lenses?
  • “You don’t need to have more cognitive horsepower than other people to make better decisions, you just have to think through a wider variety of situations and circumstances”
    • Think:
      • What are the extent of the possible outcomes?
      • Where am I likely to end up on a probabilistic basis?
      • And are there outcomes I want to avoid?
        • If you can avoid all the bad outcomes, you’re more likely to obtain a preferable outcome

What are mental models?

  • Mental models describe the way the world works – they shape how we think, how we understand, and how we form beliefs
  • As we get older, we begin to specialize in a certain field
    • One side effect of this is that we start to see the world only through that particular lens
  • It’s important to develop a wide variety of mental models – this allows you to think about problems through different lenses

Mental Model – The Map is Not the Territory

  • Like online dating
    • The “map” (someone’s profile) doesn’t match the overall person – they’ll often be completely different
  • The size of your email list is a map, but it doesn’t tell you about the territory
    • It doesn’t tell you about the open rates, the engagements, or whether people care if they receive the emails
  • Business targets/projections are another example
    • For one, they’re often pulled out of thin air
      • The growth target doesn’t, in fact, indicate what’s possible
      • “If you could 10x something, why would you be happy with 5x, and if 5x’ing something is, in fact, impossible, why would you be disappointed with 4x?” – Sam
    • One more way projections are dangerous – you might start working solely for the projection, rather than taking the best long-term course of action
      • Instead – just do the best job you can, rather than aiming for an arbitrary target
    • Another point – “We don’t make projections on our happiness”
      • So why do we do it with business and finance?

Mental Model – First Principles Thinking

  • This model is all about breaking things down to their core. asking “Why?” until you get to a concrete answer that can’t be broken down further
    • Much of this involves really rethinking what’s possible, rather than solving problems they way they’ve been dealt/solved before (Elon Musk does a good job of this)
      • (Rethinking the problem vs. improving upon what already exists)
  • Also related to this:
    • Finding a way to apply a mental model from something like biology, to business, that you would never think to apply
      • Many people think too domain specifically
        • Think broadly – think how what you learn in physics, math, chemistry whatever, might apply in other areas
        • Try to instead, apply concepts outside the domains in which they’re presented

Mental Model – Doing No Harm (Via Negativa)

  • People have a bias towards action/being seen as always “doing something”
    • Because of this, we tend to solve the most visible problem that exists, not the most fundamental problem

Mental Model – Understanding Base Rates

  • For example, when starting a restaurant, it’s common to put on blinders and forget that the success rate of restaurants, especially on a 5-year period, is fairly low
    • Our view tends to be clouded by ego
  • Same thing with marriage and the 50% divorce rate
    • Everyone thinks they’ll beat the statistics and stand the test of time, but it just isn’t true

The Value of Thought Experiments

  • Thought experiments are useful for finding where your opinion lies with a certain issue
    • But the problem – it’s becoming harder and harder to have public discussions/thought experiments without facing some sort of backlash 
  • Sam and Shane give some examples:
    • If you’re running into a burning building to save a child and you discover there’s a Picasso painting on the wall, should you grab it and run?
      • Just know – you could use the money from selling the painting (around $75 million) to save the lives of many, many more children
    • One of Shane’s favorites: he’ll ask himself – “What would the world have to look like for me to have done X?”
      • For example – “What would my view of the world have to look like for me to grab that painting instead of saving the baby?”

Mental Model – Hanlon’s Razor

  • Never attribute to malice what can be attributed to something else
  • For example – when someone cuts us off in traffic, we tend to think they’re an asshole and in turn we take offense 
    • We don’t consider the fact that they might have had a good reason for their action

Mental Model – Compounding

  • We tend to think of compounding only applying to finances, but it also applies to learning 
    • By focusing on going to bed smarter every single day, your knowledge compounds – eventually you’ll see a meaningful result
  • We can also compound our reputation and relationships
  • As Naval Ravikant has said – “All the benefits in life come from compound interest”
    • Whether it’s in relationships, life, your career, health, or learning

Podcasting and Farnam Street

  • Sam doesn’t run ads on his podcast
  • Shane is moving away from the advertising model 
    • Why? – A few reasons, mainly for difficulties with sponsorship deals (like clauses dictating the CEO of a sponsor be on the podcast – which Shane won’t do if it’s not someone he wouldn’t have on anyway)
  • Both Sam and Shane have noticed that there’s a massive difference in the conversation quality on their podcasts when there’s no time limit vs. when there is
    • For this conversation, only the start time was set – Shane and Sam didn’t bring up an end time when they were setting up the interview
  • The Knowledge Project started in 2015
  • The Farnam Street blog has 4 people working on it (besides Shane) (2 of those people are full-time, who are focusing on Shane’s mental model book series)
    • The first just came out as an audiobook (the Kindle edition will be available in October)
    • All the books in the series will eventually be free
  • Farnam Street has a Learning Community
    • With financial support, you get access to extra content
      • “I think that’s the future, not sponsorships”
  • For email and post sponsors, Shane prices based on page views
    • He doesn’t guarantee a certain number of hits

Shane’s Big Concern for the Future

  • “One of my concerns is how we’re being manipulated without our awareness to it and how availability of material shapes what we see”
    • We don’t follow people on Twitter we don’t agree with 
    • We don’t actively seek out information which disconfirms our belief
    • “The internet facilitates the acceleration of more of what you are and more of what you think”
      • Shane thinks we may see a day where two people read the same New York Times article online, but each person will see a slightly different version based on their browser history
    • The meta-problem – we’re becoming more hardened in our own beliefs
      • “It’s almost like people who think differently than use are a virus, and we don’t want to be infected so we don’t hang around them”

Your Environment Doesn’t Just Consist of the Physical World

  • Your environment has an effect on your decisions, habits, and quality of life
    • But what’s key – your environment is not only physical, it’s also online
      • So be careful what you expose yourself to on the internet

Rapid Fire Questions

  • One piece of advice for someone who wants to succeed in Shane’s field:
    • Delay gratification
  • What does Shane wish he had done differently in his 20s?
    • Spent more time developing meaningful relationships
    • “People don’t tell you that the relationships you make early in life tend to be your lifetime friendships” – Sam
      • It’s much harder to develop great friendships later in life
  • 10 years from now, what does Shane think he’ll regret doing too much or too little of?
    • Shane says he’ll probably regret becoming well-known/famous
      • He’s more conscious of tying his name to anything Farnam Street related now
  • What books should everyone read?
    • Meditations by Marcus Aurelius (the Gregory Hays translation)
  • What negative experience has most profoundly changed Shane for the better?
    • Divorce (Shane has two kids – aged 8 and 9
  • If Shane could solve one mystery, what would it be?
    • Climate change – what should we be doing today to dampen/reverse it?
    • How to equalize opportunity for everyone all over the world
  • If Shane could resurrect one person from history and put them in the world today, who would it be?

Farnam Street Events

  • They do 3 events per year (learn more about them here):
    • An event focused around decision-making 
      • Only 50 tickets are sold
    • An event focused around innovation
      • This event is also capped at 50 people (to encourage intimate conversations getting to know one another)
    • An intimate event with only 10 people (they do two of these per year – one private and one public) where you bring a problem to the table and get to discuss it with the group for 1 hour
      • These events start on Thursday with dinner, 5 sessions are held on Friday + Saturday, concluding with a goodbye brunch on Sunday

Random

  • Shane only does 6 speaking engagements per year 
    • His fee is pretty high, and thus many companies/groups opt out right away after hearing his price (this is partly on purpose – pricing a little higher than normal allows Shane not to have to make so many decisions related to accepting speaking engagements)

These notes were edited by RoRoPa Editing Services

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