Introduction In the realm of decision-making, our thought processes are often influenced by various mental models. One such intriguing concept is Ergodicity, a mental model deeply rooted in human psychology. Ergodicity refers to the assumption that time-averaged behavior in a system is representative of individual behavior within that system. This model holds significant relevance in […]
Introduction In the realm of decision-making, understanding the mental models that shape our choices is invaluable. One such powerful model is the Kelly Criterion. This concept provides a systematic approach to managing risk and maximizing long-term growth. Anchored in human psychology, the Kelly Criterion influences our day-to-day lives, from personal decisions to business strategies and […]
Introduction In the realm of decision-making, there exists a mental model known as Gresham’s Law. Coined by economist Sir Thomas Gresham in the 16th century, this concept states that bad money tends to drive out good money from circulation. Gresham’s Law highlights how individuals and societies, driven by self-interest, often prioritize inferior or counterfeit currency […]
Introduction In the realm of decision-making, the mental model of diversification plays a significant role. Diversification refers to the practice of spreading one’s resources, efforts, or investments across a range of options or areas. It is a strategy employed to reduce risk, increase opportunities, and achieve a sense of security. Anchored in human psychology, this […]
Introduction Within the intricate realm of decision-making, the Arbitrage mental model stands as a captivating concept that explores the pursuit of risk-free gains through exploiting price discrepancies. Anchored in human psychology, this model reveals our innate desire for profit and the tendency to make irrational decisions when faced with opportunities that seem too good to […]