I finished this book in August 2021. I recommend this book 9/10.
This is my first book diving into the topic "Mental Models." I enjoyed the book; each section holds a lot of practical wisdom, though it feels like a lot is thrown at you quickly.
Get your copy here.
My notes and thoughts:
P42-Mere Association-Keep in mind:
Evaluate things, situations, and people on their own merits.
Individuals are neither good nor bad merely because we associate them with something positive or negative.
Encourage people to tell you bad news immediately.
Merely because you associate some stimulus with earlier pain or pleasure doesn't mean the stimulus will cause the same pain or pleasure today. Past experiences are often context-dependent.
Create negative emotions if you want to end a certain behavior. If you want someone to stop smoking, one way could be to show them what they stand to lose. Terrifying pictures may cause them to associate smoking with death.
P48-Reward and Punishment-Keep in mind:
American statesman, scientist and philosopher, Benjamin Franklin tells us that: "A spoonful of honey will catch more flies than a gallon of vinegar." Praise is more effective in changing behavior than punishment. It is better to encourage what is right than to criticize what is wrong.
Set examples. Michel de Montaigne said: "It is a custom of our justice to punish some as a warning to others. For to punish them for having done wrong is to stop them from repeating the same mistake or to make others avoid their error. We do not improve the man we hang: we improve others by him."
Don't over-learn from your own or others bad or good experiences. The same action under other conditions may cause different consequences.
Separate between skill and chance. Charles Munger says, "As you occupy some high-profit niche in a competitive order, you must know how much of your present prosperity is caused by talents and momentum assuring success in new activities, and how much merely reflects the good fortune of being in your present niche.
American novelist Upton Sinclair said: "It is difficult to get a man to understand something when his salary depends upon not understanding it." Since people do what works, be sure to make the incentives right. Tie incentives to performance and to the factors that determine the result you want to achieve. Make people share both the upside and downside. And make them understand the link between their performance, their reward, and what you finally want to accomplish. For example, tie a manager's compensation to gain in business value (of the unit under his control) minus cost factor for capital that is used to produce this value.
Reward individual performance and not effort or length in an organization and reward people after and not before their performance.
Install systems and rules that encourage the behavior you want. Never let it pay someone to behave in a way you don't want. Have systems that make it hard for people to get away with undesirable behavior. Make undesirable behavior costly. The painful consequences of undesirable behavior must outweigh its pleasurable consequences. For example, the consequences of spending time in jail ought to be more painful than the pleasure of getting away from the burglary.
Decision-makers should be held accountable for the consequences of their actions. Charles Munger said:" An example of a really responsible system is the system of Romans used when they built an arch. The guy who created the arch stood under it as the scaffolding was removed. It's like packing your own parachute.
P54-Self-interest and Incentives-Keep in mind:
Don't automatically trust people who are something at stake from your decision. Ask: What are your interests? Who benefits?
Understand people's motivations. Money, status, love of work, reputation, position, power, envy? What are they rewarded or punished for? Are they benefiting or losing from the present system?
People's interests are not only financial. They could also be social or moral. For example, public embarrassment, social exclusion, conscience, shame, or guilt may cause people to stop some undesirable behavior. For example, by requiring restaurants to post hygiene quality scores in their front windows, the LA health department caused a dramatic improvement in restaurant hygiene and reduction in food-related illnesses.
The ancient Greek philosopher Plato said: "Do not train boys by learning by force and harshness, but lead then by what amuses them, so that they may better discover the bent of their minds." Pressuring people or giving them orders often doesn't work. It is better to convince people by asking questions that illuminate consequences. This causes them to think for themselves and makes it more likely that they discover what's in their best interest.
P58-Self-serving Tendencies and Optimism-Keep in mind:
German missionary Dr.Albert Schweitzer said: "An optimist is a person who sees a green light everywhere, while the pessimist sees only the red stoplight. The truly wise person is colorblind."
Overconfidence can cause unreal expectations and make us more vulnerable to disappointment.
Recognize your limits. How well do you know what you don't know? Don't let your ego determine what you should do. Charles Munger says, " It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying: "It's the strong swimmers who drown."
Warren Buffet says: "We won't do anything that we don't think we understand ourselves."
Focus on what can go wrong and then the consequences. Build-in some margin of safety in decisions. Know how you will handle things if they go wrong. Surprises occur in many unlikely ways. Ask: How can I be wrong? Who can tell me if I'm wrong?
By developing only a handful of strengths, we have an impoverished toolbox-only hammer. We need a full toolkit. Since problems don't follow territorial boundaries, we must compensate for the bias of one idea by using important ideas from other disciplines.
Consider people's actual accomplishments and past behavior over a long period of time rather than first impressions. Since people leave track records in life, an individual's paper record is often predictive of future performance and behavior.
When comparing records or performance, remember that successes draw for more attention than failures.
P59-Self-Deception and Denial-Keep in mind:
In his famous 1974 commencement address at Caltech, American physicist Richard Feynman warned against self-deception: "The first principle is that you must not fool yourself - and you are the easiest person to fool."
Austrian philosopher Ludwig Wittgenstein said in Culture and Value: "Nothing is so difficult as not deceiving oneself." We have to see the world as it is. Not for what it was or for what we want it to be. Refusing to look at unpleasant facts doesn't make them disappear. Bad news that is true is better than good news that is wrong.
Denial must be weighed against social, financial, physical, and emotional costs. When the cost of denial is worse than the benefit of facing reality, we must face reality.
P62-"The task of man is not to see what lies dimly in the distance, but to do what lies clearly at hand." We try to respond intelligently each day, each week, each month, each year to the information and challenges at hand - horrible assaults that have to be deflected, things that have to be scrambled out of, the unusual opportunities that come along - and just do the best job we can. But that's not very far. But if you respond intelligently and diligently to that challenges before you, we think you'll tend to end up with a pretty good institution.
P65-Consistency-Keep in mind:
A decision must be active. Lucius Annaeus Seneca said: "There is nothing wrong with changing a plan when the situation has changed." Irish writer Jonathan Swift said: "A man should never be ashamed to own that he has been in the wrong, which is by saying, in other words, that he is wiser today than he was yesterday." J.M.Keynes said: "When somebody persuades me that I am wrong, I change my mind. What do you do?" Sometimes things don't go the way we believe they will. The solution is to face it and act. Charles Munger says: "We've done a lot of that — Scrambled out of wrong decisions. I would argue that that's a big part of having a reasonable record in life. You can't avoid wrong decisions. But if you recognize them promptly and do something about them, you can frequently turn the lemon into lemonade."
If we can get people committed in advance, they tend to live up to their commitment. For example, make people take a voluntary and public position on some issue.
Don't force people to publicly make commitments that you don't later want the opportunity to change.
When you are asked to perform a future action bit are uncertain, ask yourself: Would I do this if I had to do it tomorrow?
Warren Buffett says, "The most important thing to do when you find yourself in a hole is to stop digging." Merely because you've spent money or time on some project or investment doesn't mean you must continue to spend it in the future. Time, effort, and money spent is gone. Decisions should be based on where you want to be. Not where you've been. Base decisions on the present situation and future consequences. What happened in the past may be a guide for estimation how likely something is to happen in the future. Ask: What do I want to achieve? What causes that? Considering what I know today and what is likely to happen in the future, how should I act to achieve my goal? Will new money and time invested achieve my goal? Assume I never invested in this, and it was presented to me for the first time. Would I invest in it today? If not, then stop and do something about it.
P72-Status Quo and Do-Nothing syndrome-Keep in mind:
Deciding to do nothing is also a decision. And the cost of doing nothing could be greater than the cost of taking an action.
Remember what you want to achieve.
P83-Liking and social acceptance-Keep in mind:
Don't depend on the encouragement or criticism of others. Marcus Aurelius said: "How much time he gains who does not look to see what his neighbor says or does or thinks."
Benjamin Franklin wrote: "Love your enemies, for they tell you your faults."