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Mental Models

Charlie Munger Mental Models (A partial list of some Mental Models used by Charlie Munger, compiled from many sources by Tren Griffin)

Business:

Accounting:

Economics:

Specialization

Management Science:

Computer Science:

  • Abstractions
  • Algorithms
  • If-statements
  • Recursion

Engineering:

  • Breakpoints
  • Feedback loops
  • Margin of Safety
  • Redundancy

Mathematics, Probability and Statistics:

  • Agent Based Models
  • Bayes Theorem
  • Central Limit Theorem
  • Complex Adaptive Systems Wikipedia
  • Correlation versus Causation
  • Combinations
  • Compounding
  • Decision Trees
  • Inversion
  • Kelly Optimization Model
  • Law of Large Numbers
  • Mean, Median, Mode
  • Normal Distribution
  • Permutations
  • Power Law Wikipedia
  • Regression Analysis
  • Return to the Mean
  • Scaling
  • Sensitivity Analysis

Law:

  • Burden of Proof
  • Common law
  • Due Process
  • Duty of care
  • Good Faith
  • Negligence
  • Presumption of Innocence
  • Reasonable doubt

Philosophy, Literature and Rhetoric:

  • Metaphors
  • Similes
  • Abduction
  • Pragmatism
  • Realism
  • Reductionism

Charlie Munger's 18 Biases

Charlie Munger Investing Bias of the Day via Tren Griffin

A16Z Metrics

Business and Financial Metrics

Product and Engagement Metrics

  • 9 Active Users
  • 10 Month-on-month (MoM) growth, CMGR
  • 11 Churn Rate Wikipedia
  • 12 Burn Rate Wikipedia (Monthly cash burn, Net burn, Gross burn) (See also Fred Wilson)
  • 13 Downloads (Vanity Metrics) (Engagement, ideally expressed as cohort retention on metrics that matter for that business — for example, DAU (daily active users), MAU (monthly active users), photos shared, photos viewed, and so on.)

Presenting Metrics Generally

  • 14 Cumulative Charts (vs. Growth Metrics)
  • 15 Chart Tricks
  • 16 Order of Operations

Business and Financial Metrics

  • Total Addressable Market (TAM) (Bottom Up/Top Down)
  • ARR (annual recurring revenue) ≠ Annual Run Rate
  • Average Revenue Per User (ARPU)
  • Gross Margins
  • Sell-Through Rate & Inventory Turns (Also: “close rate”, “conversion rate”, and “success rate”)

Economic and Other Defining Qualities

  • Network Effects
  • Virality (viral coefficient or k-value)
  • Economies of Scale (“Scale”)

Other Product and Engagement Metrics

  • Net Promoter Score (NPS)
  • Cohort Analysis
  • Registered Users
  • Active Users (MAUs (monthly active users), WAUs (weekly active users), DAUs (daily active users), and HAUs (hourly active users)), (uniques, visits, time on site, repeat visits)
  • Sources of Traffic (direct traffic, organic traffic, (SEO, SEM)
  • Customer Concentration Risk

Presenting Metrics Generally

  • Truncating the Y-Axis
  • Cumulative Charts, Again

Clay Christensen: The Church of Finance, “Thou shalt measure success by… “

Ellen Chisa HBS Fin2

More Models

Miscellaneous Metrics

General

Statements

Return

Accounting

Financial

Time Value of Money

Working Capital Management

Analysis

Business Model

Entrepreneurship and Intrapreneurship

Ops

Programming

Office

Topics

Laws, Theories, Logic

Network Science, Social Network, Systems Science

Interesting

Probability and Statistics

Graph and Schema- General (See also Facebook Open Graph)