The Three Mental Models I Use Nearly Every Day

Mental Models and Me

My introduction to mental models came many, many years ago. Still, they became a part of my daily thinking and routines after I read Poor Charlie’s Almanack by Charlie Munger. As I’ve grown older and spend more time reflecting and less time (hopefully) reflexing, it has become apparent how helpful mental models are in assisting me in making better, more consistent, more rapid, and higher quality decisions.

I thought I would introduce you to the three mental models that I use nearly every single day.

Think differently to live differently…

The Pareto Principle And Reductions

The Pareto Principle, or 80/20 Rule, is very commonly discussed but, in my experience, very often ignored in real applications. Stated simply, it means that in most cases (not all, but most), 80 percent of the output is created by 20 percent of the input. Examples include 80% of revenue being driven by a core 20% of customers, 80% of the project value being created by 20% of the effort, and 80% of the resource being consumed by 20% of the populace. These are excellent rules of thumb, and if you find the correct 20% to do/buy/stimulate, 80% of the desired outcome is likely in your grasp. Let’s face it, 80% of the outcome is much more than expected and needed in many things in life. That makes this an excellent mental model for everyday use.

The Reductions of Pareto are even more powerful. This is simply applying Pareto to itself. Thus, you get 64% of the output from 4% of the input and 51% from a measly 1% of the input!

Consider that. The next time you have this huge thing on your mind or a giant change you’d like to make — spend some time and find those Pareto leverage points. If you can get 51% of what you want from 1% of the effort, does it make it easier or more appealing? What changes would you make if you could change your life in some aspect by 64% of an ideal, with only 4% of the effort?

That’s the power of this mental model, which applies to many areas of life, from health to business and finance to parenting.

Compounding

My mother used to say, “It matters a little what you did today, but it matters a lot what you do every day.” Oh, how the…