If I am asked to write down my most important learnings during my two decades of education and two years of corporate world, Mental Models would be among the top.
Our Life moves a lot (if not entirely) based on numerous Big and Small decisions we & people we rely on, make thoroughout our lives. And those decisions are influenced a lot by Mental Models.
Those decisions go a long way in detemining where we end up....
Making/ Losing money in the stock market is just a small result of our decision making process affected by Mental models. Belief in God, Marriage, Education, Occupation etc etc all can (to a some extent) be explained by the Interaction of Mental Models.
Let me give an example-
After Satyam Fraud all other IT stocks also fell. Why? Big part of the reason is Social Proof, Pavlovian Misassociation and Representativeness Bias and Vividity.
Belief in presence of God is also nothing but Social Proof, Survivalship Bias, Confirmation Bias and Vividity.
The decisions we take will improve if we are aware of the Mental Models that are affecting us consciously and sub-consciously. And the tragedy of the wrong decisions is not just that we get the wong things, but we lose out on the good things. Always analyze Opportunity Cost before making a big decision.
And to understand the real picture, Zooming Out is necessary.
Wish you all the best for your decisions and Life!!
Our Life moves a lot (if not entirely) based on numerous Big and Small decisions we & people we rely on, make thoroughout our lives. And those decisions are influenced a lot by Mental Models.
Those decisions go a long way in detemining where we end up....
Making/ Losing money in the stock market is just a small result of our decision making process affected by Mental models. Belief in God, Marriage, Education, Occupation etc etc all can (to a some extent) be explained by the Interaction of Mental Models.
Let me give an example-
After Satyam Fraud all other IT stocks also fell. Why? Big part of the reason is Social Proof, Pavlovian Misassociation and Representativeness Bias and Vividity.
Belief in presence of God is also nothing but Social Proof, Survivalship Bias, Confirmation Bias and Vividity.
The decisions we take will improve if we are aware of the Mental Models that are affecting us consciously and sub-consciously. And the tragedy of the wrong decisions is not just that we get the wong things, but we lose out on the good things. Always analyze Opportunity Cost before making a big decision.
And to understand the real picture, Zooming Out is necessary.
Wish you all the best for your decisions and Life!!
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