Innovative Ideas Require Worldly Wisdom
“The limits of my language mean the limits of my world.” — Ludwig Wittgenstein, Philosopher and Logician
How we think determines if our business succeeds. As Charlie Munger said, “You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and life. You’ve got to hang experience on a latticework of models in your head.”
Munger continued, “The models have to come from multiple disciplines—because all the wisdom of the world is not to be found in one little academic department.”
Knowledge comes from understanding your own domain well. Wisdom comes from understanding the key principles of many domains.
As Charles Chu of Market Mediations writes, “The world is too complex for our brains to deal with. Every second, we are bombarded with millions of bits of information in the form of sights, sounds, tastes and thoughts. We can’t process it all, so our brains simplify. Some of this happens automatically, some of it can be trained.”
Our own brain forms mental models by noticing patterns in our experience. Our brains are pattern recognition machines. However, the patterns that we recognize are often inaccurate.
Mental models are tools to help us correct our faulty patterns, to understand reality as it is, rather than as it appears to be. They help us understand how the world really works by providing a framework for thinking about problems and ideas.
Let’s look at some mental models that improve our thinking, combined with some worldly wisdom from Peter Thiel, Daniel Kahneman, Confucius, Isaac Asimov and more.
Humanities best ideas were once unknown. There are many more great ideas that are secret, but only the most relentless searchers will find them.
Example: The Airbnb CEO, Brian Chesky, tells the story of when he shared their Airbnb concept with his investor, Paul Graham. “People are actually doing this?” Graham said. “Yeah,” Chesky replied. “What’s wrong with them?” Graham asked.
In his book Zero to One, Peter Thiel writes, “Great companies can be built on open but unsuspected secrets about how the world works. Consider the Silicon Valley startups that have harnessed the spare capacity that is all around us but often ignored. Before Airbnb, travelers had little choice but to pay high prices for a hotel room, and property owners couldn’t easily and reliably rent out their unoccupied space. Airbnb saw untapped supply and unaddressed demand where others saw nothing at all.”
The idea that the extra space in people’s homes could be rented to casual visitors was a secret. Nobody thought people would willingly let strangers stay in their home, in their bedsheets. Or that people would be willing to stay there.
Airbnb discovered a $30 billion secret.
Wisdom: “Every one of today’s most famous and familiar ideas was once unknown and unsuspected. The mathematical relationship between a triangle’s sides, for example, was secret for millennia. Pythagoras had to think hard to discover it.” — Peter Thiel
How it can improve your ideas: Relentless researching will most likely not lead to any revolutionary secrets. But it is the only way to find them. And while you’re looking for revolutionary secrets you will find smaller insights.
2. High-context vs Low-context Culture
In a higher-context culture, many things are left unsaid, letting the culture explain them. In a low-context culture, communication is more explicit.
Example: Higher-context cultures are more likely to be found in Asia, where the group is valued above the individual. Low-context cultures are more likely to be found in America, where the individual is valued above the group.
For example, in Western Culture people express their emotions across their entire face, including eyebrows and mouth, while in Eastern Cultures people use their eyes to express most of the emotions, especially by changing the direction of their gaze.
Wisdom: “It pays to be obvious, especially if you have a reputation for subtlety.” — Isaac Asimov
How it can improve your ideas: Words and word choice become more important the higher-context the culture, as a few words can communicate a complex message very effectively to an in-group.
3. First Principles
We remove all assumptions and look only at what is proven. What is true. We reason up from facts, rather than reasoning down from commonly held beliefs.
Example: Elon Musk used first principles thinking when planning to build his electric car company Tesla:
“Somebody could say, ‘Battery packs are really expensive and that’s just the way they will always be… Historically, it has cost $600 per kilowatt hour. It’s not going to be much better than that in the future.’
With first principles, you say, ‘What are the material constituents of the batteries? What is the stock market value of the material constituents?’
It’s got cobalt, nickel, aluminum, carbon, some polymers for separation and a seal can. Break that down on a material basis and say, ‘If we bought that on the London Metal Exchange what would each of those things cost?’
It’s like $80 per kilowatt hour. So clearly you just need to think of clever ways to take those materials and combine them into the shape of a battery cell and you can have batteries that are much, much cheaper than anyone realizes.”
Wisdom: Reasonable minds often disagree when an underlying premise differs.
How it can improve your ideas: Thinking with a first principles mindset allows you to reach original conclusions. But the most valuable thing of first principles is not that our ideas will be different, but they will be based on facts, and more likely to be true.
4. Confirmation Bias
The tendency to search for, interpret, favor, and recall information in a way that confirms one’s preexisting beliefs or hypotheses, while giving disproportionately less consideration to alternative possibilities.
Example: During psychic readings, listeners who believe in the power of psychics apply confirmation bias.
By making many ambiguous statements, the psychic gives the client more opportunities to find a match. It is the matches and not the misses that the client remembers, thus giving the feeling that the psychic has special powers.
Michel de Montaigne and his infamous Essays written during the French Renaissance provide a second example. Montaigne wrote of Plutarch that his writing is filled with pointers indicating ‘where we are to go if we like’.
Montaigne’s writing had the same effect as Plutarch’s; readers could interpret his words as they wanted to see them. Stoic readers saw a romantic version of the Essays. Romantic readers saw a romantic version. Even the English saw an English version of the Essays. They all perceived Montaigne’s Essays so it confirmed their preexisting beliefs.
It is perhaps a philosopher who was born only 28 years after Montaigne’s death that explains the phenomenon best, Blaise Pascal. He wrote, “It is not in Montaigne but in myself that I find everything I see there.”
Wisdom: “People put a lot less effort into picking apart evidence that confirms what they already believe.” ― Peter Watts
How it can improve your ideas: By recognising our own fallibility for confirmation bias, we are reminded to ask ourselves, is this really true? Or do I simply want it to be true?
5. Lateral Thinking
Solving problems through an indirect and creative approach, using reasoning that isn’t obvious and involving ideas that are not obtained through step-by-step logical thinking.
Example: A graduate student was trying to get into Investment banking, but couldn’t get a single interview. He Googled the names of the senior executives at the firms he wanted to work at and spent $14 on Google ads that were shown when the executives searched for their own names. The ad said, “Hi, (Executive name), Googling yourself can be profitable. Hiring me is profitable too.”
He now makes a 7 figure income on Wall Street.
Wisdom: “Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new things.” — Steve Jobs
How it can improve your ideas: If we think using step-by-step thinking, we are only going to reach the same conclusions and ‘insights’ as everybody else. By thinking laterally, we are using our own unique perspective to discover new ideas.
6. Maslow’s Hammer
If all you have is a hammer, everything looks like a nail.
Example: If you had $1 million to spend, a real-estate agent would tell you property is the best investment, a stock broker will tell you purchasing stocks is wisest, and a gambler would tell you horse 7 in race 2 is a sure thing.
Wisdom: “We become what we behold. We shape our tools, and thereafter our tools shape us.” ― Marshall McLuhan
How it can improve your ideas: We must expand our toolkit. We do this by reading widely, exposing ourselves to contrarian ideas and building new skills.
7. Appeal To Emotion
The manipulation of emotions in order to win an argument, especially in the absence of factual evidence.
Example: In The Simpsons, the character Helen Lovejoy pleaded, “Won’t somebody please think of the children!”. This was a satiric reference by The Simpsons to the 1964 Disney film Mary Poppins, when the character Mrs Banks pleaded with her departing nanny not to quit and to “Think of the children!”
Simpsons writer Bill Oakley said the motivation for the show was “to emphasize how ‘think of the children’ was used in debate; irrelevant, it sidetracked discussion from the original issues”.
Wisdom: “Let’s not forget that the little emotions are the great captains of our lives and we obey them without realizing it.” — Vincent Van Gogh
How it can improve your ideas: Appealing to emotions is crucial for the art of storytelling. It makes people care. But we must remember to combine our emotional appeals with clear reasoning. We want to lead, not mislead.
8. Planck’s Principle
A new scientific truth does not triumph by convincing its opponents and making them see the light. It triumphs because its opponents eventually die and a new generation grows up that accept the new scientific truth.
Example: Does Science Advance One Funeral at a Time? That’s the name of a research paper that shows that the premature deaths of elite scientists affect the dynamics of scientific discovery.
The study shows that following the death of elite scientists, other scientists who were not collaborators with the deceased star became more visible. They were more able to get funding, get published and advanced their novel ideas—ideas that often went against the ideas the elite scientists had espoused.
Wisdom: “Science advances one funeral at a time.” ― Max Planck
How it can improve your ideas: Recognising this principle allows us to persist. When older people, even those we admire, condemn our new ideas, we must recognize that they may be too inflexible to see the value new ideas provide. That gives us the courage to persist.
However, we must be careful to remember the quote from John Wooden, “Although there is no progress without change, not all change is progress.”
9. Thinking Fast vs Thinking Slow
A dichotomy between two modes of thought: ‘System 1’ is fast, instinctive and emotional; ‘System 2’ is slower, more deliberative, and more logical.
Example: System 1 is used to complete the sentence “war and …”, solve 2+2=?, and localize the source of a specific sound. It’s used when we react.
System 2 is used to point your attention towards a clown at a circus, dig into your memory to recognize a sound, and park in a tight parking space. It’s used when we consciously concentrate.
Wisdom: “Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance.” — Daniel Kahneman
How it can improve your ideas: When we are writing our first draft, whether it’s a business plan or PR statement, we are thinking fast. Ideas come and we put them down. We write with instinct. That is system 1 at work. Later, when we edit, we are more deliberate and judgemental. We are using system two.
The key is to recognize there is benefits to both systems of thinking, fast and slow, and to consciously apply them at different times.
10. Anecdotal Evidence
Using an isolated example or personal experience to determine that something is true, false, related or unrelated.
Example: The site, yourlogicalfallacyis.com, notes the danger of anecdotal reasoning. For example, you may think it’s fine to smoke because your grandpa smoked and lived to be 102. Thus you ignore all the evidence linking smoking and premature death and disease.
Wisdom: “Anecdotal thinking comes naturally; science requires training.” — Michael Shermer
How it can improve your ideas: Anecdotal stories help us communicate. They personalize ideas and make abstract concrete ideas. But if we want to persuade people (or at least those that think logically), we must combine anecdotes with evidence.
11. Parkinson’s Law
Work expands to fill the time available for its completion.
Example: Parkinson’s Law is named after Cyril Northcote Parkinson, a British historian. During his time with the British Civil Service, he noted that as bureaucracies expanded, they became more inefficient.
Wisdom: “Delay is the deadliest form of denial.” — Cyril Northcote Parkinson
How it can improve your ideas: By setting deadlines for ourselves we don’t waste time questioning yourself. We work.
12. Perfect Is The Enemy Of Good
You may never complete a task if you decide not to stop until it is perfect.
Example: When Steve Jobs was a boy, his Dad taught him the importance of perfection in craftsmanship. When building a cabinet, he would tell him that the inside of the cupboard should be as detailed and beautiful as the outside. Even if no one else would see it. He preached perfection.
Steve Jobs took this attitude to Apple, where he revolutionized the aesthetics of the tech industry. For example, an engineer at Apple said to Jobs, “Who cares what the PC board looks like? The only thing that’s important is how well that it works. Nobody is going to see the PC board.” Jobs responded, “I’m gonna see it! I want it to be as beautiful as possible, even if it’s inside the box. A great carpenter isn’t going to use lousy wood for the back of a cabinet, even though nobody’s going to see it.”
Yet, even Jobs knew that perfect could be the enemy of good. If the first iPhone were to be shipped, it would not have a ‘copy & paste’ function. Jobs was willing to accept this. He could accept the first iPhone wouldn’t be perfect because Jobs also recognized that “Real artists ship.”
Wisdom: “Better a diamond with a flaw than a pebble without.” — Confucius
How it can improve your ideas: Our ideas will never be perfect, and this can cripple us if it stops us from releasing them to the world. Yes we should make sure they’re excellent, yes we should check our facts, correct our grammar and focus on the details, but we must recognize that perfection is a mirage we can never reach.
We must publish. We must ship. We must launch.
When you’re coming up with your ideas you don’t want to be thinking of whether they fit any mental models. Let your ideas flow when you’re writing.
But when you begin editing, mental models help you evaluate your ideas. They’re steroids for your own judgment.
The most inspiring thing about mental models is anyone can use them. You don’t have to be a genius to use them, but using them will make your ideas more ingenious. In that spirit, I’ll leave you with a quote from the man who popularized mental models, Charlie Munger;
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.”