We Study Billionaires - The Investor’s Podcast Network TIP554: Mental Models for Successful Investing w/ John Jennings
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May 21, 2023 John Jennings, President and Chief Strategist of St. Louis Trust & Family Office, shares his insights on navigating the complexities of investing. He discusses why humans are hard-wired to avoid uncertainty and how that affects investment behavior. Jennings emphasizes the importance of mental models for making smarter decisions and the common pitfalls of confusing correlation with causation. He also highlights how behavioral biases, like loss aversion, can mislead investors, and explores the role of luck in the unpredictable world of finance.
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Discomfort with Uncertainty
- Humans are inherently uncomfortable with uncertainty, a primary human motive.
- This stems from an evolutionary need to recognize patterns for survival.
Shock Experiment and Dentist Analogy
- People experience more stress when they can't recognize patterns, like in a shock experiment.
- This is similar to the anxiety of an unpredictable dentist visit versus a predictable flu shot.
Mental Models
- Mental models are how the world works in specific instances.
- A latticework of mental models helps make better decisions, as championed by Charlie Munger.
