Mental Models Archives - New Trader U

Three Keys To Achieve Anything In Life, According to Charlie Munger

Charlie Munger, Mental Models, Success / Steve Burns

Charlie Munger was not a man who settled for surface-level thinking. Munger, the late longtime partner of Warren Buffett at Berkshire Hathaway, built his extraordinary success on a foundation of deep mental models, relentless self-examination, and an obsessive drive to eliminate stupidity from his own decisions. If you want to understand how he achieved everything, […]

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7 Signs of High-IQ People According to Charlie Munger

Charlie Munger, Intelligence, Mental Models / Steve Burns

Charlie Munger spent decades studying the way the smartest people think, and his conclusions were not what most expected. He believed that raw intelligence alone was nearly worthless without the right mental habits. In his view, a high IQ without rationality was like a sports car with no steering wheel. Munger documented his thinking over

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Insert Charlie Munger quotes in italics into each H2 header section to back up the teachings and attribute the quotes to Charlie Munger.

Charlie Munger On the Power Of Silence: 5 Things You Should Keep Private For A Happy Life

Charlie Munger, Mental Models, Success / Steve Burns

Charlie Munger spent decades studying human psychology, and one pattern kept surfacing: most people say far too much. They broadcast their opinions, advertise their finances, and announce their plans long before they become real. Munger believed this habit quietly destroys both clear thinking and personal happiness. The solution, in his view, was discipline over the

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The 7 Mental Models Rich Traders Understand (That Retail Traders Never Learn)

Mental Models, Trading / Steve Burns

The gap between professional and retail trading performance isn’t just about access to information or capital—it’s primarily about how traders think. While the average retail trader loses money consistently, professional traders at hedge funds and prop firms generate profits through different market cycles. This difference stems mainly from the mental models they use to interpret

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How We Make Choices Using Heuristics (Cognitive Bias) and Decision-Making Processes

Mental Models / Steve Burns

We make countless decisions daily, from what to wear to complex professional choices. Understanding how we make these decisions is crucial for improving our decision-making processes. This article explores the concept of heuristics, their role in our cognitive processes, and how they influence our choices, both positively and negatively. Understanding Heuristics and Their Role in

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The Iceberg Model for Systems Thinkers

Mental Models / Steve Burns

Diving into the world of systems thinkers, the concept of an iceberg often emerges as a pivotal model that encapsulates the essence of understanding complex structures and behaviors. This metaphorical iceberg isn’t floating in the cold waters of the Arctic but rather in the sea of our mental modeling, where the most significant parts of

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30 Cognitive Biases & Psychological Misjudgments (Do You Know Thyself?)

Mental Models / Steve Burns

Cognitive biases and psychological misjudgments are inherent ‘faults’ in our thinking process that can affect our decision-making abilities and perceptions. They have deeply embedded patterns of human thought and behavior that can lead us to perceive reality inaccurately and make irrational choices. Cognitive biases are systematic errors in thinking that can occur when we process

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People Who Like To Be Alone Have These 12 Special Personality Traits

Mental Models / Steve Burns

Being alone can often carry a negative connotation, as society tends to value extroversion and being surrounded by others. However, being alone can be a source of strength, creativity, and personal growth for those who embrace it. People who like to be alone often have special personality traits that allow them to thrive in solitude

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People with a Strong Success Mindset Don’t Waste Time on These 5 Limiting Beliefs, According to Psychology

Bayes Theorem, the Geometry of Changing Beliefs

Mental Models / Steve Burns

Bayesian thinking is successfully applied to professional fields requiring statistics and also to those considered outside of traditional statistics like education, computer programming, software, philosophy, economics, medicine and the practice of law. Bayesian thinking is a mental model which allows us to adapt our thinking reactively to new evidence as it arises and adjust our

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Mental Models: The Best Way to Make Smart Decisions

Mental Models / Steve Burns

Mental models are a theoretical or scientific framework used for making decisions based on how someone believes the world works. Mental models start with internal beliefs and can be based on many factors like opinions, beliefs, facts, history, science, data, or patterns. The best mental models correlate with reality and give users a pathway to

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Ethos Pathos Logos Meaning

Mental Models, Thinking / Steve Burns

It is important to know what persuades us to make the decisions we do in life whether it is in our investments, personal finance, relationships, beliefs, or politics. Aristotle is believed to have explained the three modes of persuasion that we can experience as: Ethos, Logos, and Pathos. We can think more clearly in situations

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Law of Small Numbers

Mental Models, Probabilities / Steve Burns

The law of small numbers is a fallacy that leads people to believe that a small sample size of data will be enough to resemble the normal data of the whole and determine the probabilities of future sample sizes. In trading this error would lead someone to backtest one year’s worth of price action signals

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Sturgeon’s Law: 90% of Everything Is Crap

Mental Models / Steve Burns

Sturgeon’s law states “Ninety percent of everything is crap.” The saying came from the science fiction writer Theodore Sturgeon. Sturgeon came to the conclusion that even though science fiction was criticized at the time (1951) for its low quality it was true for all fields. The majority of work in all professions were also low

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Recency Bias: Recency Effect

Mental Models, Trading Psychology / Steve Burns

Recency bias is a cognitive based bias that gives more meaning to the most recent events that have happened versus older and more distant ones. It is a type of memory bias giving the most weight and importance to things more easily remembered due to the short time frame from occurrence. This can be seen

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The Cognitive Bias Codex

Mental Models / Steve Burns

A cognitive bias is a mental pattern that breaks from logic, reason, and the ability to rationally judge something through the filter of facts and reality. It is when an individual’s thinking is so clouded by their own subjective reality, memories, and experience that they are unable to interpret new information correctly. A cognitive bias

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Creating A Regret Minimization Framework

Mental Models, Self Help / Steve Burns

Mental models are used as frameworks and filters and a way to think about the world and make the right decisions based on principles. Mental models are not always correct but they can raise your probability of having success with how you think and the decisions you make based on robust principles. Jeff Bezos used

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Mental Models Cheat Sheet

Mental Models / Steve Burns

Mental models are tools used to explain the process and theory a person uses to understand how something works in the real world. It represents a system of principles that tries to explain the interrelated cause and effect of actions and results. A mental model represents the relation between intuition and reality and beliefs about

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Inductive Reasoning Definition

Mental Models, Psychology / Steve Burns

There are two different methods for reasoning, inductive and deductive. While deductive reasoning looks for certainties, inductive reasoning is used when a circumstance is seen as supplying evidence that a conclusion could be true. The belief in a conclusion based on inductive reasoning is highly probable and based on evidence that can be seen and

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7 Mental Models for Traders

Mental Models / Steve Burns

A mental model is an explanation of someone’s thought process about how something works in the real world. It is a representation of the surrounding world, the relationships between its various parts and a person’s intuitive perception about his or her own acts and their consequences. – Wikipedia Backtesting uses the scientific method to determine

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