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MENTAL MODELS
The first rule is that you can't really know anything
if you just remember isolated facts and try and
bang 'em back. If the facts don't hang together on
a latticework of theory, you don't have them in a
usable form.
— Charlie Munger
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NAVAL
Naval Ravikant is one of the greatest
multidisciplinary thinkers of our time.
He thinks from mental models.
In his famous thread "How to Get Rich (without
getting lucky)" he uses various mental models.
If you want the PDF version of the posts related to
this thread, you can download it by clicking here.
In the next few pages we will see the most
important mental models that Naval uses.
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SCALE
Society will pay you for creating what it wants and
delivering it at scale.
— Naval
Don't work on anything that doesn't scale. It is the
way to disassociate time and work.
The Internet allows you to create value and scale it
to deliver it at a massive level.
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NICHES / POWER LAW /
PARETO
The Internet allows you to scale any niche
obsession.
— Naval
The Internet allows you to find your audience. It is
the long tail.
Markets have gone from mass to niche as tech has
become democratized and the cost of production
and distribution has decreased.
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LEVERAGE
Product and media are the new leverage.
— Naval
The old leverage is labor and capital, for which you
need permission.
The new leverage is software and media, it allows
you to create systems that work for you while you
sleep and does not require permission.
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INCENTIVES /
PRINCIPAL-AGENT PROBLEM
If you can work on incentives, don’t work on
anything else.
— Naval
Incentives are what move people and companies.
Think like an owner (principal), not an employee
(agent), and align the incentives so that everyone
goes in the same direction.
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COOPERATION
We use credits and debits to cooperate across
genetic boundaries.
— Naval
Capitalism is intrinsic to human beings.
The market is a huge cooperation system, through
what we offer and consume.
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SPECIALIZATION /
CIRCLE OF COMPETENCE
Specialize in being you.
— Naval
Acquire specific knowledge and specialize in
being you.
Offer what only you can offer. Based on your skills,
interests, experiences and curiosity.
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SKIN IN THE GAME
Accountability is reputational skin in the game.
— Naval
Accountability gives us credibility, responsibility
for our work, irreplaceability, and finally equity.
It includes risk, but the downside scenario in the
current era is limited, while the upside is not.
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COMPOUND INTEREST
All returns in life come from compound interest in
long-term games.
— Naval
The greatest returns in life come from compound
interest, whether in health, relationships, wealth,
or knowledge.
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TALEB
Nassim Taleb Taleb is a skeptical empiricist.
He argued that scientists and financiers
overestimate the value of rational explanations of
past data and underestimate the weight of
randomness in that data.
He has been the author of three of the most
important mental models of our era.
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ANTIFRAGILITY
Antifragility is beyond resilience or robustness.
The resilient resists shocks and stays the same;
the antifragile gets better.
— Nassim Taleb
The technological revolution and the virus have
shown that industries that we believed strong are
actually fragile: retail, airlines, auto, energy.
On the contrary, technology has proven antifragile,
it has benefited from this situation: e-commerce,
online communications.
FRAGILE ROBUST ANTIFRAGILE
Harmed by uncertainly Dealing with uncertainly Leveraging uncertainly
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BLACK SWAN
The central idea in the Black Swan is that: rare
events cannot be estimated from empirical
observation since they are rare.
— Nassim Taleb
The era of globalization and technological
democratization exponentially increases the
number and impact of negative Black Swans such
as terrorism, viruses, etc.
But also positive ones such as unicorns startups
such as Airbnb or Coinbase
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SKIN IN THE GAME
Avoid taking advice from someone who gives
advice for a living, unless there is a penalty for
their advice.
— Nassim Taleb
There has never been so much power
accumulated in people who have no skin in the
game.
The governing authorities control the world without
really risking their position, if they fail they will
continue to collect their salaries and pensions.
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100 MENTAL MODELS
If you want to think in a disciplinary way, get
100 Mental Models clicking here.
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