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Farnam Street (Principles (Live Deliberatly (- (Set time aside today to…

- - - - Set time aside today to pursue your dreams.
      - Start today to learn the things you’d like to know
      - Reach out today to repair that strained relationship.
      - Today, jettison the dead weight that’s holding you down.
- - - - The great investor and teacher Benjamin Graham explained it best:
        You can get in way more trouble with a good idea than a bad idea, because you forget that the good idea has limits.
        
        More About Mental Models
        
        The overarching goal is to build a powerful “tree” of the mind with strong and deep roots, a massive trunk, and lots of sturdy branches. We use this tree to hang the “leaves” of experience we acquire, directly and vicariously, throughout our lifetimes: the scenarios, decisions, problems, and solutions arising in any human life.
        
        The Farnam Street Latticework of Mental Models
        
        General Thinking Tools
        
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        Numeracy
        
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        Systems
        
        Scale
        
        One of the most important principles of systems is that they are sensitive to scale. Properties (or behaviors) tend to change when you scale them up or down. In studying complex systems, we must always be roughly quantifying – in orders of magnitude, at least – the scale at which we are observing, analyzing, or predicting the system.
        
        Law of Diminishing Returns
        
        Related to scale, most important real-world results are subject to an eventual decrease of incremental value. A good example would be a poor family: Give them enough money to thrive, and they are no longer poor. But after a certain point, additional money will not improve their lot; there is a clear diminishing return of additional dollars at some roughly quantifiable point. Often, the law of diminishing returns veers into negative territory – i.e., receiving too much money could destroy the poor family.
        
        Pareto Principle
        
        Named for Italian polymath Vilfredo Pareto, who noticed that 80% of Italy’s land was owned by about 20% of its population, the Pareto Principle states that a small amount of some phenomenon causes a disproportionately large effect. The Pareto Principle is an example of a power-law type of statistical distribution – as distinguished from a traditional bell curve – and is demonstrated in various phenomena ranging from wealth to city populations to important human habits.
        
        Feedback Loops (and Homeostasis)
        
        All complex systems are subject to positive and negative feedback loops whereby A causes B, which in turn influences A (and C), and so on – with higher-order effects frequently resulting from continual movement of the loop. In a homeostatic system, a change in A is often brought back into line by an opposite change in B to maintain the balance of the system, as with the temperature of the human body or the behavior of an organizational culture. Automatic feedback loops maintain a “static” environment unless and until an outside force changes the loop. A “runaway feedback loop” describes a situation in which the output of a reaction becomes its own catalyst (auto-catalysis).
        
        Chaos Dynamics (Butterfly Effect)/ (Sensitivity to Initial Conditions)
        
        In a world such as ours, governed by chaos dynamics, small changes (perturbations) in initial conditions have massive downstream effects as near-infinite feedback loops occur; this phenomenon is also called the butterfly effect. This means that some aspects of physical systems (like the weather more than a few days from now) as well as social systems (the behavior of a group of human beings over a long period) are fundamentally unpredictable.
        
        Preferential Attachment (Cumulative Advantage)
        
        A preferential attachment situation occurs when the current leader is given more of the reward than the laggards, thereby tending to preserve or enhance the status of the leader. A strong network effect is a good example of preferential attachment; a market with 10x more buyers and sellers than the next largest market will tend to have a preferential attachment dynamic.
        
        Emergence
        
        Higher-level behavior tends to emerge from the interaction of lower-order components. The result is frequently not linear – not a matter of simple addition – but rather non-linear, or exponential. An important resulting property of emergent behavior is that it cannot be predicted from simply studying the component parts.
        
        Irreducibility
        
        We find that in most systems there are irreducible quantitative properties, such as complexity, minimums, time, and length. Below the irreducible level, the desired result simply does not occur. One cannot get several women pregnant to reduce the amount of time needed to have one child, and one cannot reduce a successfully built automobile to a single part. These results are, to a defined point, irreducible.
        
        Tragedy of the Commons
        
        A concept introduced by the economist and ecologist Garrett Hardin, the Tragedy of the Commons states that in a system where a common resource is shared, with no individual responsible for the wellbeing of the resource, it will tend to be depleted over time. The Tragedy is reducible to incentives: Unless people collaborate, each individual derives more personal benefit than the cost that he or she incurs, and therefore depletes the resource for fear of missing out.
        
        Gresham’s Law
        
        Gresham’s Law, named for the financier Thomas Gresham, states that in a system of circulating currency, forged currency will tend to drive out real currency, as real currency is hoarded and forged currency is spent. We see a similar result in human systems, as with bad behavior driving out good behavior in a crumbling moral system, or bad practices driving out good practices in a crumbling economic system. Generally, regulation and oversight are required to prevent results that follow Gresham’s Law.
        
        Algorithms
        
        While hard to precisely define, an algorithm is generally an automated set of rules or a “blueprint” leading a series of steps or actions resulting in a desired outcome, and often stated in the form of a series of “If → Then” statements. Algorithms are best known for their use in modern computing, but are a feature of biological life as well. For example, human DNA contains an algorithm for building a human being.
        
        Fragility – Robustness – Antifragility
        
        Popularized by Nassim Taleb, the sliding scale of fragility, robustness, and antifragility refers to the responsiveness of a system to incremental negative variability. A fragile system or object is one in which additional negative variability has a disproportionately negative impact, as with a coffee cup shattering from a 6-foot fall, but receiving no damage at all (rather than 1/6th of the damage) from a 1-foot fall. A robust system or object tends to be neutral to the additional negativity variability, and of course, an antifragile system benefits: If there were a cup that got stronger when dropped from 6 feet than when dropped from 1 foot, it would be termed antifragile.
        
        Backup Systems/Redundancy
        
        A critical model of the engineering profession is that of backup systems. A good engineer never assumes the perfect reliability of the components of the system. He or she builds in redundancy to protect the integrity of the total system. Without the application of this robustness principle, tangible and intangible systems tend to fail over time.
        
        Margin of Safety
        
        Similarly, engineers have also developed the habit of adding a margin for error into all calculations. In an unknown world, driving a 9,500-pound bus over a bridge built to hold precisely 9,600 pounds is rarely seen as intelligent. Thus, on the whole, few modern bridges ever fail. In practical life outside of physical engineering, we can often profitably give ourselves margins as robust as the bridge system.
        
        Criticality
        
        A system becomes critical when it is about to jump discretely from one phase to another. The marginal utility of the last unit before the phase change is wildly higher than any unit before it. A frequently cited example is water turning from a liquid to a vapor when heated to a specific temperature. “Critical mass” refers to the mass needed to have the critical event occur, most commonly in a nuclear system.
        
        Network Effects
        
        A network tends to become more valuable as nodes are added to the network: this is known as the network effect. An easy example is contrasting the development of the electricity system and the telephone system. If only one house has electricity, its inhabitants have gained immense value, but if only one house has a telephone, its inhabitants have gained nothing of use. Only with additional telephones does the phone network gain value. This network effect is widespread in the modern world and creates immense value for organizations and customers alike.
        
        Black Swan
        
        Also popularized by Nassim Taleb, a Black Swan is a rare and highly consequential event that is invisible to a given observer ahead of time. It is a result of applied epistemology: If you have seen only white swans, you cannot categorically state that there are no black swans, but the inverse is not true: seeing one black swan is enough for you to state that there are black swans. Black Swan events are necessarily unpredictable to the observer (as Taleb likes to say, Thanksgiving is a Black Swan for the turkey, not the butcher) and thus must be dealt with by addressing the fragility-robustness-antifragility spectrum rather than through better methods of prediction.
        
        Via Negativa – Omission/Removal/Avoidance of Harm
        
        In many systems, improvement is at best, or at times only, a result of removing bad elements rather than of adding good elements. This is a credo built into the modern medical profession: First, do no harm. Similarly, if one has a group of children behaving badly, removal of the instigator is often much more effective than any form of punishment meted out to the whole group.
        
        The Lindy Effect
        
        The Lindy Effect refers to the life expectancy of a non-perishable object or idea being related to its current lifespan. If an idea or object has lasted for X number of years, it would be expected (on average) to last another X years. Although a human being who is 90 and lives to 95 does not add 5 years to his or her life expectancy, non-perishables lengthen their life expectancy as they continually survive. A classic text is a prime example: if humanity has been reading Shakespeare’s plays for 500 years, it will be expected to read them for another 500.
        
        Renormalization Group
        
        The renormalization group technique allows us to think about physical and social systems at different scales. An idea from physics, and a complicated one at that, the application of a renormalization group to social systems allows us to understand why a small number of stubborn individuals can have a disproportionate impact if those around them follow suit on increasingly large scales.
        
        Spring-loading
        
        A system is spring-loaded if it is coiled in a certain direction, positive or negative. Positively spring-loading systems and relationships is important in a fundamentally unpredictable world to help protect us against negative events. The reverse can be very destructive.
        
        Complex Adaptive Systems
        
        A complex adaptive system, as distinguished from a complex system in general, is one that can understand itself and change based on that understanding. Complex adaptive systems are social systems. The difference is best illustrated by thinking about weather prediction contrasted to stock market prediction. The weather will not change based on an important forecaster’s opinion, but the stock market might. Complex adaptive systems are thus fundamentally not predictable.
        
        Physical World
        
        Laws of Thermodynamics
        
        The laws of thermodynamics describe energy in a closed system. The laws cannot be escaped and underlie the physical world. They describe a world in which useful energy is constantly being lost, and energy cannot be created or destroyed. Applying their lessons to the social world can be a profitable enterprise.
        
        Reciprocity
        
        If I push on a wall, physics tells me that the wall pushes back with equivalent force. In a biological system, if one individual acts on another, the action will tend to be reciprocated in kind. And of course, human beings act with intense reciprocity demonstrated as well.
        
        Velocity
        
        Velocity is not equivalent to speed; the two are sometimes confused. Velocity is speed plus vector: how fast something gets somewhere. An object that moves two steps forward and then two steps back has moved at a certain speed but shows no velocity. The addition of the vector, that critical distinction, is what we should consider in practical life.
        
        The Biological world
        
        Human Natre & Judgement
        
        Microeconomics and strategy
        
        Military and War
- - - - Before Reading
        
        Choose Your Books Wisely
        
        Get Some Context
        
        Know Why You’re Reading the Book
        
        Skim the Index, Contents, and Preface
        
        Match the Book to Your Setting or Situation
      - While Reading
        
        Make Notes
        
        Stay Focused
        
        Mark up The Book
        
        Stop And Build a Vivid Mental Picture
        
        Make Mental Links
        
        Keep Mental Models in Mind
        
        Mental models enable us to better understand and synthesize books. Some of the key ways we can use them include:
        
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        Confirmation bias: Which parts of this book am I ignoring? Does this book confirm my opinions? (Okay, but does it actually affirm your beliefs or are you just seeing what you want to see? If you cannot think of a single point in the book that you disagreed with, confirmation bias is perchance distorting your reasoning.)
        
        Bayesian updating: What opinions should I change in light of this book? How can I update my worldview using the information in it? Keep in mind the words of John Maynard Keynes: “When the facts change, I change my mind. What do you do, sir?”
        
        Pareto principle: Which parts of this book are most important and contain the most information? If I had to cut 99% of the words in this book, what would I leave? Many authors have to reach a certain word or page count, resulting in pages (or even entire chapters) containing fluff and padding. Even the best non-fiction books are often longer than is imperative to convey their ideas. (Note that the Pareto principle is less applicable for fiction books.)
        
        Leverage: How can I use lessons from this book to gain a disproportionate advantage? Can I leverage this new knowledge in a tangible way?
        
        Incentives: What motivates the characters or the author? What are they seeking? What is their purpose? Here’s how Kurt Vonnegut described the importance of incentives in books: “When I used to teach creative writing, I would tell the students to make their characters want something right away – even if it’s only a glass of water. Characters paralyzed by the meaninglessness of modern life still have to drink water from time to time.”
        
        Availability bias: Are the books I have recently read affecting how I perceive this one? How are my neoteric experiences shaping my reading? Am I assigning undue importance to parts of this book because they are salient and memorable?
        
        Stereotyping tendency: Am I unconsciously fitting the author, characters, or book in general into a particular category? Or is the author stereotyping their characters? Remember, there is no such thing as a good stereotype.
        
        Social proof: How is social proof — the number of copies sold, bestseller status, the opinions of others — affecting my perception of this book? Is the author using social proof to manipulate readers? It is not unusual for authors to buy their way onto bestseller lists, providing social proof which then leads to substantial sales. As a result, mediocre books can end up becoming popular. It’s a classic case of the emperor having no clothes, which smart readers know to look out for.
        
        Narrative instinct: Is the author distorting real events to form a coherent narrative? This is common in biographies, memoirs, and historical texts. In The Value of Narrativity in the Representation of Reality, Hayden White explains our tendency to meld history into a narrative: “So natural is the impulse to narrate, so inevitable is the form of narrative for any report of the way things really happened, that narrativity could appear problematical only in a culture in which it was absent… narrative is a metacode, a human universal… Narrative becomes a problem only when we wish to give to real events the form of story… This value attached to narrativity in the representation of real events arises out of a desire to have real events display the coherence, integrity, fullness, and closure of an image of life that is and can only be imaginary. The notion that sequences of real events possess the formal attributes of the stories we tell about imaginary events could only have its origin in wishes, daydreams, reveries. Does the world really present itself to perception in the form of well-made stories, with central subjects, proper beginnings, middles, and ends, and a coherence that permits us to see “the end” in every beginning? Or does it present itself more in the forms that the annals and chronicle suggest, either as mere sequence without beginning or end or as sequences of beginnings that only terminate and never conclude? And does the world, even the social world, ever really come to us as already narrativized, already “speaking itself” from beyond the horizon of our capacity to make scientific sense of it? Or is the fiction of such a world, a world capable of speaking itself and of displaying itself as a form of a story, necessary for the establishment of that moral authority without which the notion of a specifically social reality would be unthinkable?”
        
        Survivorship bias: Is this (non-fiction) book a representation of reality or is the author failing to account for base rates? Survivorship bias is abundant in business, self-help, and biographical books. A particular case of a successful individual or business might be held as the rule, rather than the exception.
        
        Utility: If a book offers advice, does it have practical applications? At what point do diminishing returns set in?
        
        Put It Down If You Get Bored
        
        As a general rule, people who love reading never, ever finish a crappy book.
        
        Nancy Pearl advocates the Rule of 50. This entails reading the first 50 pages of a book and then deciding if it is worth finishing. The Rule of 50 has an interesting feature: once you are over the age of 50, subtract your age from 100 and read that many pages. Pearl writes:
      - After Reading
        
        Most people think that consuming information is the same as learning information. This idea is flawed.
        
        The Feynman Technique
        The Feynman technique is named after the Nobel Prize-winning physicist Richard Feynman. You can think of it as an algorithm for guaranteed learning. There are four simple steps: choose a concept; teach it to a toddler; identify gaps and go back to the source material; and review and simplify.
        
        Think About What You Can Apply
        So, you’ve finished the book. Now what? How can you use what you have learned? Don’t just go away with a vague sense of “oh yeah, I should totally do what that author says.” Take the time to make a plan and decide how to implement key lessons from the book.
        Reading alone is not enough. We have to contextualize the knowledge. When does it work? When doesn’t it work? Where can I apply it? What are the key variables? The list goes on. If you can take something you’ve read and apply it immediately, it will reinforce the learning and add context and meaning.
        
        Teach What You Have Learned
        Teaching others is a powerful way to embed information in your mind. This is part of the Feynman technique.
        Upon completing a book, grab the nearest (willing) person and tell them about what you have learned. You’ll have to remove or explain the jargon, describe why this information has meaning, and walk them through the author’s logic. It sounds simple. After you try it the first time, you’ll realize it’s not easy.
        If there is no one around who is interested, try talking to yourself. That’s what I do … but maybe I’m crazy.
    - - Quality matters more than quantity. If you read just one book a week but fully appreciate and absorb it, you’ll be far better off than someone who skims through half the library without paying much attention.
      - Speedreading is bullshit. The only way to read faster is to actually read more.
      - Book summary services miss the point. I know a lot of companies charge ridiculous prices for access to summaries written by some 22-year-old with zero life experience, but the point of reading for fluency is to acquire a repository of facts and details. Nuance, if you will. In this sense, you understand a bit more about why things work.
      - Fancy apps and tools are not needed. A notebook, index cards, and a pen will do just fine. (For those of you wanting a simple and searchable online tool to help, Evernote is the answer.)
      - We don’t need to read stuff we find boring.
      - We don’t need to finish the entire book.
      - — Matt Haig, Reasons to Stay Alive
        
        Every time I read a great book I felt I was reading a kind of map, a treasure map, and the treasure I was being directed to was in actual fact myself.
        
        But each map was incomplete, and I would only locate the treasure if I read all the books, and so the process of finding my best self was an endless quest. And books themselves seemed to reflect this idea. Which is why the plot of every book ever can be boiled down to ‘someone is looking for something’.”