What are Cognitive Biases and Mental Models

October 25, 2019
min read
What are Cognitive Biases and Mental Models

Table of contents

Most of us hear about, read about and even fall for or use cognitive biases and mental models on our daily routine. You might just be new to this. That’s ok. It was new to me too but found the subject fascinating and decided to learn more about it. It used to play tricks with our minds before we even started working on the browser extension, that is why we wanted to make this subject easy and understandable for everyone. Keeping in mind we are new to these subjects, we realised that reading and researching made us understand how the biases and models work and help us improve our decision making. All the interest and research lead to an amazing project that brought us closer as a couple and so curious and hungry for more information. Don’t forget to share your thoughts, suggest new articles and books.

So what are biases and mental models and which is what?

Cognitive biases are experience-dependent brain developments and often can be confused with mental models. The term Experience-Dependent Brain Development refers to the way in which unique or individual experiences contribute to brain growth and refine existing brain structures.

They are different from mental models, we can theoretically understand their existence but we can’t always perceive them, and even reject them when confronted with them. Saying that mental models are not something we realise we have and sometimes they are consciously accessible. As with mental models, we can deduce the existence of cognitive biases by observing and measuring how people behave. Cognitive biases are examples of mental models.

In simple words, a Cognitive bias is when your brain starts telling little white lies. If you think about it, our brains are amazing complicated systems. With new information being bombarded to us on a daily basis we need to develop shortcuts (cognitive biases) in order to make decisions. A good example would be the Survivorship bias. How did this bias come into existence and what does it mean?

Survivorship bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility.

Survivorship bias - Abraham Wald planes

Hungarian statistician Abraham Wald took survivorship bias into his calculations when considering how to minimize bomber losses to enemy fire in WW II.

To summarise, he was tasked of increasing aircraft survivability without compromising flight range or maneuverability. The initial approach of the military (working with the Statistical Research Group) was to look at returning American bombers, note where they had taken the most fire. They would then apply more armor to these areas, which seems logical. Wald, however, suggested that extra armor should be placed in all of the places that had no bullet holes. Why? Because the only planes that thy were studying were the ones that made it back. The mistake they were making was to analyze only the sample that survived. You can read more about it here.

On the other hand, Mental models are a representation of how something works. Every single one of us uses the models every day by thinking, deciding and understanding the world around us. They are the best ways to learn to think for yourself, unlock your creative potential, and move from linear to non-linear results and by saying that we just described the First Principle Thinking model.

Aristotle defined the first principle as “the first basis from which a thing is known.”

More on this here.

In 1994, Charlie Munger gave a famous speech at USC Business School, California, USA, the full title of the talk is “A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business”.

He discussed his investment and business philosophy but he also gave a general framework on mental models and cognitive function. Munger is a walking encyclopedia and always knows when to inject timeless wisdom right when you need it most.

Read the speech transcript.

In Munger’s mental lattice, people who have a wide range of knowledge and understand diverse models make better decisions and in order to make better decisions in business and in life, you must find and understand the core principles from all disciplines - he calls this the Elementary Worldly Wisdom.

Another latticework of mental model is knowledge. There are actually two types of knowledge, the Planck knowledge, people who really know and have the aptitude and the Chauffeur knowledge where they’ve learned the talk and made a hell of an impression.

“The surest way of concealing from others the boundaries of one's own knowledge is not to overstep them.” ― Giacomo Leopardi

At the 2007 Commencement to the USC Law School, Munger explained it this way:

“I frequently tell the apocryphal story about how Max Planck, after he won the Nobel Prize, went around Germany giving the same standard lecture on the new quantum mechanics.

Over time, his chauffeur memorized the lecture and said, “Would you mind, Professor Planck, because it’s so boring to stay in our routine if I gave the lecture in Munich and you just sat in front wearing my chauffeur’s hat?” Planck said, “Why not?” And the chauffeur got up and gave this long lecture on quantum mechanics. After which a physics professor stood up and asked a perfectly ghastly question. The speaker said, “Well I’m surprised that in an advanced city like Munich I get such an elementary question. I’m going to ask my chauffeur to reply.”

Drawing the line and trying to get to a conclusion we'll end with yet another couple of good examples of cognitive bias that should make you understand why you should be aware of biases.

“To a man with a hammer, everything looks like a nail”. In life as in business you can apply Maslow's hammer mental model -  this means the opportunity at hand. Try to be aware of your own biases and how they may influence your point-of-view on a topic.

If you don’t practice you lose it.  Learn and implement the models every day and as Munger said: “One day look back and think, I am the most competent”. But don’t confuse competency with Self-serving bias. Make yourself a habit and recognise when to take credit for the outcomes in the case of words whether they are ambiguous, or contradictory.

“To be ignorant of what occurred before you were born is to remain always a child”. 

Marcus Tullius Cicero

Read, understand, ask questions, be kind, witty and don’t forget to apply.

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