Mental Models

I’ve recently finished reading – Investing: The Last Liberal Art by Robert Hagstrom. The book is derived from a talk Charlie Munger did in the early nineties about learning in a multidisciplinary manner, using the big ideas from multiple disciplines and bringing them together into what Charlie calls a latticework of mental models.

Charlie believed true learning and lasting success comes to those who make the effort to first build a latticework of mental models and then learn to think in an associative, multidisciplinary manner.

The topics covered in the book include Physics, Biology, Sociology, Psychology, Philosophy, Literature, Mathematics and Decision Making. The book does a good job of bridging the gap between each discipline and helping the reader understand the link between each subject.

An example of this is how physics and the laws of equilibrium relate to economics. Equilibrium is a state of balance, this contributes to how the planets stay in orbit (dynamic equilibrium) or how a bathtub full of water stays full (static equilibrium) – they’re in a balanced state.

We can apply this same thinking to economics. There is a natural tension between supply and demand for the goods and services we use everyday and when these forces intersect they reach a state of equilibrium and thus the price we pay for the goods and services are set by the balancing of the forces acting upon each other.

The prices we pay aren’t set by any one individual but are set by the market and people’s own self interests acting within it. This is what Adam Smith was talking about when he describes the ”Invisible Hand” within society.

In biology Darwin discussed natural selection and the theory that the struggle for survival was occurring not only between species but between individuals within the same species. If having a longer beak increased a bird’s chances of survival, then more bird’s with long beaks would be more likely to pass this advantage on.

Darwin’s theory can be used to describe the creative destruction that occurs between businesses within our economy. Businesses that provide continual value to society will continue to survive and thrive and the businesses with weaker adaptations will eventually encounter the natural entropy within the system, this paves the way for innovation and entrepreneurship to challenge the status quo.

By applying Charlie’s multidisciplinary approach using a latticework of mental models to learning and life we can bridge the gaps in our knowledge and give ourselves a better understanding of how the world works.

Discovering Charlie’s approach to learning has been a real joy for me and I hope his ideas and processes can be inspiring for you as well.

”I believe in the discipline of mastering the best that other people have figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.” – Charlie Munger

Thank you for reading.

J.H.Repetto