We are continuing on sharing notes from Think Twice by Michael J. Mauboussin.
From page 19:
“First, people reason from a set of premises and only consider compatible possibilities. As a result, people fail to consider what they believe is false. Consider a hand of cards, about which only one of the following three statements is true:
(1) It contains a king, an ace, or both.
(2) It contains a queen, an ace, or both.
(3) It contains a jack, a ten, or both.
Given these statements, can the hand contain an ace?
Johnson-Laird has presented this problem to many bright people, and most believe the answer is yes. But that is wrong. if there were an ace in the hand, the first two statements would be true. You can think of the premises and their alternatives as a beam of light that shines only on perceived possible outcomes, leaving lots of viable alternatives in the dark.”
“Second, and related, is the point that how a person sees a problem—how it’s described to him, how he feels about it, and his individual knowledge—shapes how he reasons about it.”
I have previously given the definition of a mental model but I feel it is important to do it again.
“Last, a mental model is an internal representation of an external reality, an incomplete representation that trades detail for speed. Once formed mental models replace more cumbersome reasoning processes, but are only as good as their ability to match reality. An ill-suited mental model will lead to a decision-making fiasco.”
I believe this book is vital in understanding your thought process in decision making and how you make decisions and where we all need improvement.
- Currently Rereading Think Twice By Michael J. Mauboussin (consilientinterest.com)
- Michael Mauboussin: Untangling Skill and Luck in Investing (zoneofcompetence.com)
- Mauboussin on ‘The Success Equation’ (ritholtz.com)
- Mauboussin: Three Steps to Effective Decision Making (ritholtz.com)
- Mental Models Trump Skills (ceoeffectiveness.com)