A mental model is an explanation of a thought process about how something works in the real world. Mental models help shape our behaviour and define our approach to solving problems (akin to a personal algorithm) and carrying out tasks. Mental models have been studied by cognitive scientists as part of efforts to understand how humans know, perceive, make decisions, and construct behavior in a variety of environments. Charles Munger provides a concept of “Elementary, Worldly Wisdom” which consists of a set of mental models framed as a solving problems of business, finance and investing. According to Munger, only 80 or 90 important models will carry about 90% of the freight in making you a worldly-wise person.
Articles on Evolutionary Psychology as a Mental Model for Investing
Evolutionary psychology applies the same thinking to psychology, arguing that the mind has a modular structure similar to that of the body, with different modular adaptations serving different functions. Evolutionary psychologists argue that much of human behavior is the output of psychological adaptations that evolved to solve recurrent problems in human ancestral environments (link).
“All I Really Need to Know I Learned at a Tupperware Party” by Michael J. Mauboussin and Kristen Bartholdson. The Consilient Observer, vol. 2, issue 4. 2003. Credit Suisse
“In Praise of Vagueness; Malleability of Vague Information as a Performance Booster” by Himanshu Mishra, Arul Mishra and Baba Shiv
“Modularity & Decision Making” by Robert Kurzban, University of Pennsylvania