The Exchanges

Q And we all have mental models, whether we're conscious about it or not. How did, how did you land on this approach?

A So What the approach is, is this, is that, you know, when I was trained in, in school, I mean, even though it's starting in sixth, seventh, eighth grade, you learn a bunch of very simple models, like force equals mass times acceleration, or PV equals K, you know, in physics, and in economics, you learn things like S equals D, supply equals demand, and these models are very simple, and sort of the, the whole idea was, I can explain patterns in the real world, or I can sort of make sense of the variation we see in the real world using, A single, simple equation. Then what happened is, sometime in about the 19 nineties, I went and visited, it's 1993, I went and visited the Santa Fe Institute, which is the think tank on complexity, and this is a place where they've been trying to encourage my advisors at the time who were, um, Very good game theorists. Roger Meyerson won the Nobel Prize in game theory, along with Leo Hurwitz, who's another of my advisors, and Stan Ryder was in that group as well, and they were sort of the, these people who studied rational choice and how do people sort of optimize in social situations, and the Santa Fe Institute was all about the fact that the world was so complex that it was going to be hard to optimize, and so I wouldn't say that I had some sort of intellectual crisis. It was more the case that I just found this intellectually fascinating. There …

AI assessment note: “sometime in about the 19 nineties, I went and visited, it's 1993, I went and visited the Santa Fe Institute”

Q So to what extent is it fair to say that cognitive diversity is then a group of people who have different models in their head about how the world works?

A It is. I think that, you know, this is where I occupy kind of this strange voice, because the book I wrote before this was called, uh, The Diversity Bonus, and that book talks about the value of having diverse people in a room, and the reason you want diverse people in the room is because different people bring different basic assumptions about how the world works, they construct different basic, um, you know, mental models of how the world works, and they're going to see different parts of a problem. So if you want to Like, just look at this, you know, if you look at sort of fluctuations in the stock market, or if you look at the valuation of any particular company, there's so many dimensions to a company like Amazon or Disney, right, that there's no way any one person can understand it, and so what you want is you want cognitive diversity, and what that cognitive diversity means is people who have different, you know, literally different sets of models or different information, right? So one of the things that sort of leads off the book, and I use a lot when I Teach this to undergraduates or general audiences, something called the wisdom hierarchy. And you want to think at the bottom out there is all this data, right? All this, you know, just whether you want to call it a fire hose of data or a hairball of data, you know, choose your favorite metaphor. It's all just floating …

AI assessment note: “It is. I think that, you know, this is where I occupy”

Q Okay, there's so much I want to dive into there. Let's start with, um, in the hierarchy from data to information to knowledge to wisdom, it sounds like we're applying sort of mental models at the knowledge stage, and then wisdom is discerning which models are more relevant than not. Is that an accurate view of that? And if not, correct me.

A You know, I puzzle over this a lot. Every time I think I have an accurate view of it, I then reframe how I think about it. So I was giving a talk the other day and someone said, I think the real space for mental models come in is in this move that's very subtle between data and information, which is true, right? Because when you think about, you know, how I might think about, like, if I visit a city for the first time and somebody says, you know, well, tell me about Stockholm, you know, I immediately start putting it in categories. They might say, well, you know, it's a lot like London or something, right? Or you might, you know, you might sort of say, well, the people are, you Um, friendly, but reserved or something. So again, you're taking all these sort of experiences and putting them in boxes. So there is a sense in which just the act of going from your raw experiences into the information does, it's almost leaning on the models you already know. And so this is the thing that I've been puzzling over the last few weeks, which has been fun to think about is that if I have a set of like models in my head that we think of at that knowledge space, does that then bias how I filter The data into information probably does.

AI assessment note: “the real space for mental models come in is in this move that's very subtle”

Q then you know that I will apply, you know, uh, this equation to this problem. It's almost an algorithm, right? I know what the, the variables are that the school is going to give me the variables and I'm just going to apply this. And we're taught with this sort of like one model view of the world. Um, why are we taught that way? And why is that wrong?

A I think it was right when we had a much simpler world, right? I think it was right when we thought, let's, let's take it in the context of a business decision. Like you might think, okay, here's how you make it a business decision. You figure out what the cost is going to be, and then you think about the net inflow of, you know, profits, right? And you think, okay, do the, do the profits outweigh the cost, right? Do the revenue, the revenues outweigh the cost, right? So is it going to be positive cashflow? Then, now, when you make a business decision, there's a recognition that there's environmental impact. There's, you know, understanding that it's going to affect your ability to attract talent, right, because it's going to be an interesting problem. There's a question of how does that position you strategically for the long run. There's a question of what it does for your capacity. There's a question of what it does for your brand. And so these decisions are just so much more complex than they were. There's so much, just an increased awareness of the complexity of all these decisions that there's no, no single model is going to work. So when you're, when you're in seventh grade, we're teaching you very simple things and we're trying to teach you that there's some structure to the, to the world. And so we want to say, look, here's the power of, you know, these physics models. …

AI assessment note: “these decisions are just so much more complex... no single model is going to work.”

Q dive into some of those in a little bit, but before we get there, I just want to, I want to talk a little bit more about acquiring mental models. Like how do you pick which models to learn if you're You're working in an organization, or you're a student, or how, how would you go about having a conversation with somebody about which mental models to prioritize and why?

A Yeah, so I think one of the first things you want to ask is, who are the relevant actors, right? So is this a single actor who's sort of just making a decision, or is this a strategic situation where someone is taking an action And they've really got to take into account what the action is of someone else, what strategy, what choice somebody else is going to take, right? So if you're thinking of like, what action I'm going to take in a soccer game, I'm going to take it in investing. I've got to think a lot about what other people are doing. Or you might want to ask, is it the case that I'm taking some sort of action and I'm embedded in a much larger structure where things are sort of moving and I'm taking cues from that larger social system. So suppose I'm thinking about like, which book do I buy? You can think of that as like, or which album do I download? You can think of that as like, oh, it's just me making a decision. But it's not because you're really making that within a much larger sort of social, cultural, economic milieu where you're not even maybe aware of the fact that you're drawing signals about what other people are doing, right? So you want to think about what am I modeling? I'm not like a person. I'm not like making an individual sort of isolated choice by modeling, um, a strategic situation or remodeling something that's much more sort of social, ecological li…

AI assessment note: “one of the first things you want to ask is, who are the relevant actors”

Q Do models become a way of surfacing assumptions?

A Oh, absolutely. No, I think models are, models force you, they force you to get the logic right. They force you to sort of say, what really matters here in terms of driving people's behaviors or firm's behaviors, how do those behaviors interact, right, in terms of, you know, how do they aggregate, and then how should people respond to that? There's a famous quote by Murray Gelman where he said, imagine how hard physics would be if electrons could think, right, and I'd written that in a paper, and I, um, it was attributed to Murray, and I, And someone said, I don't think Murray's ever said that. And so I went to Murray and I said, Murray, have you ever said this? And he read it. And so then he just said, imagine how difficult physics would be if electrons could think, right? And so he goes, there, I've said it, you're safe. Um, but one of the things about modeling it, especially like, I think in the space, a lot of your listeners are in, because they're people who, who in some sense define the world is imagine how difficult physics would be if electrons could think. And if electrons could decide on their own laws of physics, right? So if you're running a large organization, or if you're a secretary of the treasury, or if you're, you know, if you're in any sort of policy position, you get to decide the laws of physics. You get to decide what's legal, what's not legal, what the st…

AI assessment note: “Oh, absolutely. No, I think models are, models force you, they force you”

Q and how to, how to, how do you teach your kids about complexity? Like, how do you teach your kids, uh, not, not necessarily university students, but them as well, but like, how do you teach them, hey, the world isn't really this simple place, and, you know, Here are some general thinking concepts that you need to learn about, and how do you go about instilling that in children?

A It's such a fascinating question. I think that especially, you know, there's an article in the New York Times last week about how the upper, you know, the sort of upper quintile is spending so much more money on their children than those below, with the idea of them being economically successful. So let's go back to a question you asked earlier about, like, sort of, in school you learn more equals mass times acceleration. In the economy of a hundred years ago, You, it almost depended, it depended a lot more on sort of you yourself being really, really good. Like you're a really good lawyer. You're a really good furniture maker. Go back 200 years ago. Like you were successful if you ran your farm well, right? So it was all about your individual ability and hard work, right? So I was reading this fabulous book called The Rise of the Meritocracy, which is an old book like 50 years ago. So it talks about sort of like, you know, success is intelligence plus effort, right? And it's It's actually where the word meritocracy came from. If you imagine the world as a collection of individual silos and the, you know, and sort of this, the amount of grain in your silo depends on sort of how intelligent you are and how hard you work. Then it is all kind of about like your ability, work hard, get A's right in class, develop these skills. And that's a very instrumental view of the world, but i…

AI assessment note: “It's such a fascinating question. I think that especially, you know, there's an article”