These are some mental models I find useful. They’re rooted in decades
of experience of thousands of experts – a modern equivalent of folk
wisdom. Mental models are useful to quickly and correctly reason about
seemingly intractable problems. They require quite a bit of intuition
to properly internalize, but once you’ve internalized them they’re
relatively easy to apply. They’re also easy to forget in the moment –
use this post as a checklist when thinking about complex problems.

This is a living document. Instead of creating an exhaustive list on
day one, I will add models as they arise (and as I discover new ones).

Productivity

• The small-improvements method – the observation that
  psychologically frequently making small incremental improvements is
  a better approach than attempting to fix big looming problems once.
• The just-get-started method – Joel Spolsky’s observation that
  just starting to work on a small, concrete, finishable problem puts
  your consciousness in a productive state.
  Corollary: Just do something concrete. Anything. Do your
  laundry, or dust the counters, or add a single unit test. Just do
  something.
• The top-five-problems method – Richard Hamming’s algorithm for
  doing important work. Periodically ask yourself: “what are the top
  five most important problems in my field (and life), and why am I
  not working on them?”
  Corollary: What are the top five most important problems in your
  field (and life), and why aren’t you working on them?
• The LRU prioritization method – since you can only work on one
  problem at a time, it’s usually sufficient to pick the most
  important problem, work on that, and ignore everything else. This
  method also works with organizing most things (from email to
  physical possessions).
• The teaching method – Richard Feynman’s observation that teaching
  the basics is an excellent method for generating profound new ideas,
  and for putting consciousness in a productive state.
  Corollary: If you’re stuck, put yourself in a position where you
  have to teach someone the basics.
• Planning fallacy – the observation that humans are overly
  optimistic when predicting success of their
  undertakings. Empirically, the average case turns out to be worse
  than the worst case human estimate.
  Corollary: Be really pessimistic when estimating. Assume the
  average case will be slightly worse than the hypothetical worst
  case.
  Corollary: When estimating time, upgrade the units and double
  the estimate (e.g. convert “one week” to “two months”).
• Forcing function – an external, usually social, constraint that
  increases the probability of accomplishing a set of tasks.
  Example: Pair programming.

Hypothesis evaluation

• Efficient market hypothesis – the state of any given issue in the
  world is roughly as close to optimal as is currently possible.
  Corollary: It’s unlikely that the status quo can be easily
  improved without significant resources.
  Example: Cucumber juice probably doesn’t cure cancer.
  Example: The iPhone app you wrote in a weekend probably doesn’t
  double the phone’s battery life.
• Statistical mechanics – probabalistic systems that follow certain
  laws in the long run can have perturbations that diverge from these
  laws in the short run.
  Corollary: Occasionally the status quo can be easily improved
  without significant resources (but it is unlikely that you found
  such an occassion).
  Idiom: In the short run the market is a voting machine, but in
  the long run it is a weighing machine.
  Idiom: If an economist saw a $100 bill on a sidewalk they
  wouldn’t pick it up (because if it were real, it would have been
  picked up already).
• Base Rates – you can approximate the likelihood of a specific
  event occuring by examining the wider probability distribution of
  similar events.
  Example: You’re evaluating the probability of success of a given
  startup. Ask yourself, if you saw ten similar startups a year, how
  many of them are likely to succeed?
  Example: You caught an employee stealing, but they claim they
  need money to buy medication and it’s the first time they’ve ever
  stolen anything. Ask yourself, if you saw ten employee thefts a
  year, how many of them are likely to be first offences?
  Note: This method is especially useful to combat optimism and
  overconfidence biases, or when evaluating outcomes of events
  you’re emotionally close to.
• Emic vs etic (aka inside vs outside view) – two perspectives you
  can choose when evaluating persuasive arguments. The inside view is
  time consuming and requires you to engage with the arguments on
  their merits. The outside view only requires you ask “what kind of
  person does sincerely believing this stuff turn you into?”
  Corollary: You can usually predict correctness of arguments by
  evaluating superficial attributes of the people making them.
  Example: If someone is wearing funny clothes, purports to know
  the one true way, and keeps talking about the glorious leader, you
  can usually dismiss their arguments without deeper examination.
  Warning: This method usually works because most kooky people
  aren’t innovators, but will misfire in important situations because
  many innovators initially seem kooky.

Decision making

• Inversion – the observation that many hard problems are best
  solved when they’re addressed backward. In other words figure out
  what you don’t want, avoid it, and you’ll get what you do want.
  Corollary: Find out how people commonly fail doing what you do,
  and avoid failing like them.
  Example: If you want to help India, ask “what is doing the worst
  damage in India and how can we avoid it?”
  See also: Failure mode.
• Bias for action – in daily life many important decisions are
  easily reversible. It’s not enough to have information – it’s
  crucial to move quickly and recover if you were wrong, than to
  deliberate indefinitely.
  Idiom: One test is worth a thousand expert opinions.
  Idiom: The best thing you can do is the right thing, the next
  best thing is the wrong thing, and the worst thing you can do is
  nothing.
  Note: The best people do this naturally, without brooding, and
  with a light touch.
• Expected value – a simple model for evaluating uncertain events
  (multiply the probability of the event by its value).
  Corollary: Sometimes you’ll have to estimate probabilities when
  it feels really hard to do.
  Example: Chance of winning NY lotto is 1 in 292,201,338 per
  game. Let’s say the grand prize is $150M and ticket price is
  $1. Then the expected value is roughly $0.5. Since $0.5 < $1, the
  model tells us the game isn’t worth playing.
  Warning: Looking at expected value often isn’t enough. You
  need to consider utility to make good decisions.
  See also: Techniques for probability estimates, shut up and
  multiply, scope insensitivity.
• Marginal utility – the change in utility from the change in
  consumption of a good. Marginal utility usually diminishes with
  increase in consumption.
  Example: The first car in your garage improves your life
  significantly more than the second one.
  Example: Because utility loss from losing a dollar is negligible
  relative to utility gain from winning NY Lotto at ridiculously low
  odds, it might be worth buying a ticket even at negative expected
  value (but seriously, don’t).
  Corollary: Think through your utility function carefully.
• Strategy and tactics – empirically decisions tend to fall into
  one of two categories. Strategic decisions have long-term, gradual,
  and subtle effects (they’re a gift that keeps on giving). Tactical
  decisions are encapsulated into outcomes that have relatively quick
  binary resolutions (success or failure).
  Example: Picking a programming language is a strategic decision.
  Example: Picking a line of reasoning when trying to close a sale
  is a tactical decision.
  Corollary: Most people misuse these terms (e.g. “we need a
  strategy for this meeting”).

People

• IQ, RQ, and EQ – respectively, intelligence quotient
  (assessment of the mind’s raw horse power), rationality quotient
  (assessment of how well the mind’s models map to the real world; a
  measure of efficiency of the IQ’s application to real problems), and
  emotional quotient (ability to recognize and label emotions).
  Corollary: brilliant people can be jerks and kooks, empathic
  people can have wacky ideas about reality, and effective people can
  have average intelligence.
• Structure and agency – the observation that human behavior
  derives from a balance of internalized cultural patterns and
  capacity to act independently. The interaction of these two
  properties influences and limits individual behavior.
  Corollary: Pay attention to the need for structure and
  independence in each individual.
  Corollary: Put a structure in front of even the most
  independent-minded people, and they’ll internalize it.
  Corollary: People often behave the way they believe their role
  requires them to (as opposed to the actual requirements of the
  role).
  Corollary: Pay attention to how people perceive their own
  roles, and break their expectations with caution.
• Social status – the observation (particularly in improv) that
  social status is so important to humans, that modeling status alone
  results in extremely realistic performances.
  Corollary: Pay attention to how people perceive their own
  status, and break their expectations with caution.
  See also: Self-serving bias.
• Controlled vulnerability – the observation that humans are
  attracted to confidently expressed vulnerability in others but are
  scared to be vulnerable themselves.
  Corollary: Humans feel strong attraction towards others who
  confidently display vulnerability.
  Corollary: Humans feel a strong desire to reciprocate
  vulnerability. Vulnerability expression by others gives them a
  sense of safety to express themselves, followed by a feeling of
  relief and a strong bond with the counterpary.

Groups

• Mere-exposure effect – an observation that humans tend to develop
  a preference for things, people, and processes merely because they
  are familiar with them. This effect is much stronger than it
  initially seems.
  Corollary: Merely putting people in a room together repeatedly,
  giving them a shared direction, symbology, and competition will
  create a group with very strong bonds.
  See also: In-group favoritism.

Communication

• Story arc – human beings are wired to respond to storytelling. A
  story arc is a way to structure ideas to tap into this response,
  typically by describing a change in the world.
  Example: Once upon a time there was ___. Every day, ___. One
  day ___. Because of that, ___. Because of that, ___. Until
  finally ___.
• Writing well – use arresting imagery and tabulate your thoughts
  precisely. Never use a long word where a short one will do. If it’s
  possible to cut a word out, always cut it out. Don’t hedge – decide
  what you want to say and say it as vigorously as possible. Of all
  the places to go next, choose the most interesting.
• Charitable interpretation – interpreting a speaker’s statements
  to be rational and, in the case of any argument, considering its
  best, strongest possible interpretation. Charitable interpretation
  makes conversations (and relationships) go better.
• Nonviolent Communication (aka NVC) – a communication framework
  that allows expressing grievances and resolving conflicts in a
  non-confrontational way. Structuring difficult conversations as
  described in NVC makes the process dramatically less painful. NVC
  contains four components: (1) expressing facts, (2) expressing
  feelings, (3) expressing needs, and (4) making a request.
  Example: You didn’t turn in the project yesterday. When that
  happened I felt betrayed. I need to be able to rely on you to have a
  productive relationship. In the future, could you notify me in
  advance if something like that happens?

Policy

• Global utility maximization – our innate sense of fairness is
  often unsatisfied, and attempting to satisfy it can occasionally
  cause much grief in exchange for little gain. It’s much better to
  optimize for the needs of the many, not for an idealistic notion of
  fairness.
  Corollary: There are times when it makes sense to be unfair to
  the individual in the interest of the common good.
  Example: It makes sense to fire an underperforming employee who
  has valid excuses for their poor performance.
  Idiom: It is the greatest happiness of the greatest number that
  is the measure of right and wrong.
• Tragedy of the commons – a set of circumstances where individuals
  acting independently in a reasonable manner behave contrary to the
  common good.
  Example: Tourists taking small artifacts from popular
  attractions.
  Corollary: Governance is necessary to preserve the common good.
• Front page test – an ethical standard for behavior that
  evaluates each action through the lens of the media/outside world.
  Example: What would happen if HN found out we’re mining our
  users’s IMs?
  Warning: Incentivizes extreme risk aversion, often without
  appropropriate consideration for potential gain.
• Reasonable person principle – a rule of thumb for group
  communication originated in CMU. It holds that reasonable people
  strike a suitable balance between their own immediate desires and
  the good of the community at large.
  Corollary: Fire people that are offensive or easily
  offended. (It usually turns out that people who possess one of these
  qualities, possess both.)
  Note: unreasonable persons can be extremely valuable in greater
  society (e.g. journalists, comedians, whistleblowers, etc.), but
  usually not in small organizations.
• Overton window – the range of ideas a particular group of people
  will accept. Ideas range in degree of acceptance from policy, to
  popular, sensible, acceptable, radical, and unthinkable.
  Corollary: you need to be sensitive to the overton window when
  presenting the group with cultural changes.
• Political capital – the trust and influence a leader wields with
  other people. Political capital increases when you make other people
  successful and decreases when you make unpopular decisions.
  Corollary: Spend political capital carefully.

Product design

• Target market – a predicate that partitions new leads into
  opportunities and distractions. A good target market function is
  terse, has a discoverable domain, and has a well defined probability
  of close in a specific time bound.
  Example: Anyone who has a Cisco password has a 50% probability
  of close within 30 days.
• Internal press release – you start developing a product by
  writing an internal press release first, explaining to target
  customers why the product is useful and how it blows away the
  competition. You then test it against potential users (it’s much
  easier to iterate on the press release than the product).
  Corollary: If the press release is hard to write, then the
  product is probably going to suck.
• Quantum of utility – a rule of thumb for launching the product. A
  product possesses a quantum of utility when there is at least some
  set of users who would be excited to hear about it, because they can
  now do something they couldn’t do before.
  Note: “Launch” can be defined as a private beta, or even giving
  the product to a friend. The point is to get it into the hands of
  someone who’s not in the building as soon as possible.
• Worse is better – a design philosophy which states that solving
  the customer’s problem and leaving unpolished rough edges
  empirically outperforms “beautiful” products.
  Example: Lisp Machines vs C/Unix.
  See also: Worse is worse.
• Kano model – a model for categorizing possible features to
  optimize resource allocation. Essentially partitions the product
  into gamechangers, showstoppers, and distractions.
  See also: How to build great products.

Business

• Five forces – a model for analyzing the competitive intensity and
  therefore attractiveness of an industry. The five forces are: threat
  of new entrants, threat of substitutes, bargaining power of buyers,
  bargaining power of suppliers, and industry rivalry.
  Note: this is essentially a base rate estimation model for
  companies in an industry.
• Power of defaults – the observation that people favor the
  familiar over novel places, people, things, and processes.
  Corollary: Overcoming the familiarity heuristic at scale
  requires enormous activation energy unavailable to startups.
  Corollary: It is dramatically easier to capture mindshare before
  people’s minds are made up, than to change their mind later.
• Economies of scale – the advantages due to size or scale of
  operation, where cost per unit decreases with increasing scale.
  See also: Network effects, brand equity, first mover
  advantage.
• Price/performance curve – the observation that the price of
  important technology drops and performance improves over time.
  Example: Moore’s Law.

Collected from: http://www.defmacro.org/2016/12/22/models.html