II · 32 models
Risk
What could go wrong, and what will I do if it does?
Acting when you cannot know what happens next, and protecting yourself in case it goes wrong.
Thinking in odds
Treat the future as a range of chances, not one forecast.
Expected Value
A choice is worth its average result across all the ways it could turn out.
Fat-Tailed Distributions
In some areas, extreme events are far more common than the bell curve says.
Foxes vs Hedgehogs
Some minds know many things, others one big thing, and each has its blind spot.
Law of Large Numbers
Luck is wild in small samples and predictable in large ones.
Lindy Effect
For things that do not wear out, every year survived predicts more years to come.
Monte Carlo Simulation
When odds are too tangled to calculate, play the future many times and count.
Prediction Market
When people must pay for being wrong, their forecasts get sharper.
Probabilistic Thinking
The future is a spread of possible outcomes, each with its own odds.
Randomness
Much of life is chance, and our minds invent patterns that are not there.
Super Forecasters
Good prediction comes less from genius than from habits anyone can learn.
Misreading chance
The ways our instincts get probability wrong.
Availability Bias
What comes to mind easily feels likely, whether or not it is.
Conjunction Fallacy
Every added detail makes a story more convincing and less likely.
Gambler’s Fallacy
Chance keeps no score, so nothing is ever due.
Hot-Hand Fallacy
A winning streak feels like momentum, but it is often luck on a good run.
Monte Carlo Fallacy
A roulette wheel has no memory, however long the streak.
Mr Market
The market is a moody partner: use its offers, never its moods.
Prospect Theory
Losses hurt about twice as much as equal gains please, and that bends our choices.
The unexpected
Surprises, slow drifts and tiny causes with large effects.
Black Swan Event
What matters most is often what nobody saw coming.
Boiling Frog
The most dangerous changes are often the slowest ones.
Butterfly Effect
In a complex system, a tiny change at the start can grow into a huge difference at the end.
Chaos Theory
Some systems follow exact rules yet still cannot be predicted far ahead.
Murphy’s Law
If something can go wrong, given enough time and people, it eventually will.
Peak
Most rises top out, and the top is the hardest place to see it from.
Unknown Unknowns
The biggest risks are often the ones missing from your list.
Protecting yourself
Buffers, options and recovery, so a bad day is never the last one.
Antifragility
Some things break under stress, some resist it, and some grow stronger from it.
De-Risking
You can keep most of the upside while cutting the risk of ruin.
Margin of Safety
Build in a buffer, so that being wrong is not a catastrophe.
Moral Hazard
People take bigger risks when someone else will pay if things go wrong.
Preserving Optionality
When the future is unclear, the right to choose later is worth paying for.
Resilience
Setbacks are certain; collapse is not, if you prepare to recover.
Scenario Analysis
Rehearse several futures, so whichever one arrives feels familiar.
Stop the Bleeding
When losses mount, halt them first and plan the recovery after.