the circle of competence
the law of diminishing returns
the Pareto principle – the 80/20 rule
5 great books about mental models
If you want to read more about mental models, here are some books to further explore the topic. Not only I found these books useful, but I’ve seen them recommended over and over again on Hacker News and other places.
- Thinking, Fast and Slow (Daniel Kahneman)
- Influence: The Psychology of Persuasion (Robert Cialdini)
- Metaphors We Live By (George Lakoff)
- Predictably Irrational: The Hidden Forces That Shape Our Decisions (Dan Ariely)
- The Art of Thinking Clearly (Rolf Dobelli)
The Psychology of Human Misjudgement. He reviewed many causes of human misjudgement.
He used an example of open outcry auctions to explain the same. Let’s have a look at it –
There are four tendencies when participants of open auction are pushed to bid.
Reciprocity is a social pattern of responding to a positive action with another positive action. So, the participants feel entitled to buy something just because they were invited to the auction. ‘I must buy something because I am invited by the host.’
It refers to a thought process when an individual does not want to break a chain. For example, if the participant is famous for liking a particular type or a product, they feel obligated to buy it. ‘I am known to buy such products. I must buy this one for the record.’
- Commitment Tendency
If the participant is bidding in the outcry auction, they feel a tendency to continue bidding just because they started with it. ‘I must continue because I am already bidding.’
- Social Proof
Humans have a habit to try and find a way to fit in a social crowd to validate themselves. Social proof is a tendency where the participant does something just because a group of social peers are doing the same. ‘I should buy such pieces because my peers are buying it.’