In support of my argument below that the more, and more accurate, mental models you hold in your head, the easier it is to remember facts and make connections, a reader sent me to the first chapter of a book called Investing: The Last Liberal Art by Robert G. Hagstrom. It starts off with a talk given by Charlie Munger, who is the brains behind the brains at Berkshire Hathaway. Warren Buffet's vice chairman, Munger told USC students:
Rather than discussing the stock market, he intended to talk about "stock picking as a subdivision of the art of worldly wisdom." ... He challenged the students to broaden their vision of the market, of finance, and of economics in general; to see them not as separate disciplines but as part of a larger body of knowledge, one that also incorporates psychology, engineering, mathematics, physics, and the humanities.
In this broader view, he suggested, each discipline entwines with, and in the process strengthens, every other. From each discipline the thoughtful person draws significant mental models, the key ideas that combine to produce a cohesive understanding. Those who cultivate this broad view are well on their way to achieving worldly wisdom, that solid mental foundation without which success in the market - or anywhere else - is merely a short-lived fluke.
To drive his point home, Charlie used a memorable metaphor to describe this interlocking structure of ideas: a latticework of models. "You've got have models in your head," he explained, "and you've got to array your experience - both vicarious and direct - on this latticework of models." So immediate is this visual image that latticework has become something of a shorthand term in the investment world, a quick and easily recognized reference to Munger's approach...
This makes us not only better investors but better leaders, better citizens, better parents, spouses, and friends.
Well, I'm certainly not living evidence that this approach makes you a better investor! But I do like to think I'm a better citizen because I try to look at events through a variety of fairly simple models. For example, I've noticed that, generally speaking, it's easier to select individuals of a desired type than to social engineer random individuals into the desired type, so it's easy to see that much of the conventional wisdom -- e.g., going to Harvard makes you smart -- is bollocks.
Striving to find simple, broadly applicable models opens me up to charges that I believe in stereotypes, I'm a bigot, yada yada yada. Worse, it violates the key maxim of professional intellectuals: KICS: Keep It Complicated, Smartie. If there really are simple, broadly applicable truths, does the world need to pay for so many professionals devoted to making up and elaborating complicated lies?