Core mental models to make clearer, higher-quality decisions.
Opportunity cost
The best alternative you give up when you choose something else.
Second-order effects
Downstream consequences beyond the immediate, first effect.
Inversion
Solve by asking: "How could this fail?" then avoid those failure modes.
Circle of competence
Areas you understand well enough to make reliable judgments; expand deliberately.
Expected value
Probability-weighted average outcome; compare options by EV (and risk).
Base rates
Start with the typical frequency for similar cases before using case-specific details.
Bayesian updating
Update beliefs by weighting new evidence against prior probability.
Marginal thinking
Decide by the next unit: marginal cost vs marginal benefit.
Compounding
Small gains repeated over time grow faster than linear improvement.
Leverage
A small input that produces a disproportionately large output (tools, code, capital, people).
Feedback loop
A cycle where outputs influence future inputs (reinforcing or balancing).
Bottleneck
The single most limiting constraint that caps system throughput.
Incentives
People respond to what is rewarded, not what is said.
Principal-agent problem
Misaligned incentives between decision-maker (agent) and stakeholder (principal).
Trade-off
Improving one dimension often worsens another; name what you are optimizing for.
Reversibility
Reversible decisions can be made fast; irreversible decisions require higher certainty.
Optionality
Keeping paths open has value when the future is uncertain.
Asymmetry
Outcomes are not equal; focus on choices with limited downside and meaningful upside.
Antifragile
Gets stronger from stress/volatility (not just resilient).
Map vs territory
Models are simplifications; do not confuse them with reality.
Systems thinking
Look for interactions and dynamics, not isolated parts.
Pareto principle (80/20)
A minority of causes often drive a majority of results; find the leverage points.
Tragedy of the commons
Shared resources get overused when individuals optimize privately.
Pre-mortem
Assume a future failure and list plausible causes to prevent them now.
Decision journal
Record context, assumptions, and expected outcome; review later to calibrate judgment.