The Great Mental Models: Economics and Art

The Great Mental Models #4

by Shane Parrish

Brought to you by Penguin.

A cult bestseller in the US, available around the world for the first time, The Great Mental Models introduces the simple tools we all need to see the world clearly.

Time and time again, great thinkers like Warren Buffett and Charlie Munger have credited their success to mental simple representations of how the world works that can be applied in a wide array of contexts. Mastering a small number of these concepts enables you to rapidly grasp new information, identify patterns others don’t, and better anticipate outcomes.

The Great Mental Models introduces the most powerful models that anyone can use right away to improve decision making and productivity. In this volume, Shane Parrish introduces the universal concepts that underpin better thinking,

Creative New innovations must sometimes come at the cost of the maintaining the status quo. The depiction of an idea can be visual, but it can also rely on symbols or other ideas. A form of communication with socially constructed norms developed collaboratively over time. Building a latticework of mental models is one of the most powerful things you can do to become a better thinker, leader, or creator. The Great Mental Models is the accessible guide you need to unlock this ability.

Genres: Nonfiction, Science, Economics, Business, Psychology, Self Help, Philosophy

Audible Audio

Published October 17, 2024

About the author

Shane Parrish is the founder, curator and wisdom seeker behind Farnam Street (www.fs.blog).

What started as a personal blog where Shane could explore what others have discovered about decision-making, purposeful living, and how the world works, quickly blossomed into one of the fastest-growing websites in the world.

With over 600,000 subscribers, consistently sold-out workshops, and over 10 million podcast downloads, Farnam Street has become the go-to resource that CEOs, athletes, professional coaches, and entrepreneurs rely on to find a signal in a world of noise.

Shane's work has been featured in nearly every major publication, including the New York Times, The Wall Street Journal, Huffington Post, and The Economist.

Reviews

[Sarah Cupitt · Rating 4 out of 5]

part of an ongoing series in which the authors look at various concepts, from physics and mathematics to general thinking models like Occam’s Razor, to see how they apply to our day-to-day lives

none of these concepts is either good or bad. On their own, they’re value-neutral. It all depends on how they’re put to use – which is part of what makes the worlds of economics and art so interesting

Notes Part One:
- scarcity. Much is based on the fact that while human desires are limitless, our resources are finite. Picture a single pizza at a large party: its limited quantity boosts its value, and to make the most of it presents a number of challenges. How do we decide the best way to allocate limited resources like time, money, or materials? Scarcity often drives innovation as people find ways to stretch resources or curb demand, but it’s worth noting that technology rarely erases scarcity entirely.
- scarcity, supply and demand, optimization, and trade-offs provide a framework for understanding economic decisions. These interconnected principles reveal how individual choices drive broader trends and influence how we allocate resources, showing that each decision we make has an impact
- Specialization, often equated with efficiency, allows individuals and economies to focus on areas of strength rather than attempting to excel in everything. By choosing depth over a broad but shallow range of skills, we can maximize productivity. However, relying too heavily on specialization can make us vulnerable when circumstances shift and new skills are required. Balancing specialized expertise with openness to learning from adjacent areas helps maintain adaptability.
- Specialization naturally leads to interdependence, as no person or company can meet every need alone, and few companies can produce a product all on their own. Leonard E. Read’s famous essay "I, Pencil" illustrates this through the layers of collaboration needed to create even a simple pencil.
- Interdependence is not just an economic principle; it’s also personal. We rely on others in ways we often overlook, and acknowledging this interconnectedness can help us build stronger support systems. Mutual reliance allows us to harness each other’s strengths and reminds us that we’re all in this together.
- Balancing efficiency with some degree of flexibility is essential to prepare for the unexpected.
- Without rivals, monopolists can raise prices because consumers have nowhere else to go. Over time, such control reduces diversity and adaptability, restricting the innovation that competition fosters. When a monopoly becomes absolute, whether in a market or even in political power, it often weakens resilience and long-term success
- human behavior, psychology, and incentives create both growth and risk. Markets are complex, emotional, and ever-changing, and understanding these dynamics will help us better navigate them in an uncertain future.

Notes Part Two:
- When we consider the audience, we see that art is a two-way relationship. The audience isn’t just a passive observer
- Recognizing the role of the audience reminds us that we’re often performing, even if subtly, for at least one other person. This awareness can refine our own communication, making it more intentional and significant.
- Contrast is a model essential for grabbing attention and making ideas stand out. Contrast involves placing opposites together – like calm before chaos or quiet after loud – to create focus and engagement. In visual art, contrast is light against dark; in music, it’s a shift from soft to loud. By highlighting differences, contrast draws attention and brings depth to our understanding. Beyond art, contrast shapes our experiences, helping us appreciate warm, sunny days more because of the cold, gray ones.
- in art, every choice means something. This is why representation is a key concept. Representation helps us look beyond appearances and dive into purpose. Representation isn’t about creating a perfect likeness; it’s about creating something with meaning.
- Plot gives us a meaningful sequence of events rather than a random series of things happening. Looking at the mental model of a plot, we can see it as a very human thing. We like things to make sense. But this can lead to biases, like mistaking random occurrences for causally linked events. This is why plot is a mental model, because life doesn’t always unfold in a perfect sequence. So, while being aware of the power of a strong narrative can help us find meaning and direction, it can also help us to avoid the trap of assuming false connections.
- Characters drive stories, but they also give us someone to connect with. What’s more, they provide different perspectives and emotions, allowing us to step into different lives.
- Great characters don’t go through the motions; they evolve through conflicts and choices. They both shape events and are shaped by them.
- Since settings define our constraints and influence our choices, it stands to reason: If we want to change our behavior or achieve different results, there’s a good chance we need to change our environment, too.

[Tyler · Rating 4 out of 5]

Like the previous volumes in this series I found this book intriguing, although in my opinion some chapters are much more interesting, useful, and a bit better written than others. Overall, I learned a lot and I think it is a useful and good book. I appreciate what I've learned from reading and thinking about the whole series. I would recommend this book and this series to friends.

[Jung · Rating 5 out of 5]

In this fourth volume of "The Great Mental Models" series, Shane Parrish and Rhiannon Beaubien invite readers to delve into the worlds of economics and art to uncover the underlying principles that shape how we think, act, and interact. The book bridges two seemingly distinct fields, showing how both economics and art offer valuable mental frameworks that influence our choices and perceptions in daily life. By combining these perspectives, the authors encourage readers to think more critically and creatively, fostering a deeper understanding of the forces that drive behavior and decision-making.

The economics section begins by introducing fundamental concepts such as scarcity, supply and demand, trade-offs, and optimization. At its core, economics grapples with the challenge of infinite desires in a world of finite resources. Scarcity drives human innovation, compelling individuals and societies to find ways to maximize limited resources. However, scarcity also creates tension, as seen in the disruptions caused by supply chain crises or hoarding during the COVID-19 pandemic. Supply and demand, the natural balancing act of markets, play a key role in resource distribution, shaping prices, accessibility, and production priorities.

Trade-offs are another critical component, as every decision involves sacrifices. Whether it’s choosing between time and money or risk and reward, understanding opportunity costs helps align choices with long-term goals. Specialization and efficiency, explored in later chapters, further illuminate how focusing on strengths can drive productivity, but at the cost of adaptability. These interconnected principles reveal how individual decisions ripple outward, influencing larger systems in both predictable and unforeseen ways.

The authors then delve into specialization and interdependence, emphasizing the power of collaboration and mutual reliance. Specialization allows individuals and organizations to excel in specific areas, but it also fosters interdependence, as no one entity can meet all needs alone. This concept is beautifully illustrated through Leonard E. Read’s essay "I, Pencil," which traces the intricate web of cooperation behind producing a simple pencil. Efficiency, closely tied to specialization, is about minimizing waste and maximizing output, but the authors caution against over-optimization, which can lead to inflexibility during crises. Balancing efficiency with resilience is essential for both individuals and systems.

The economic section concludes with discussions on monopolies and creative destruction. While competition is generally seen as beneficial for innovation and diversity, monopolies sometimes emerge as a necessary evil in specific contexts, such as public utilities. Creative destruction, a term coined by economist Joseph Schumpeter, highlights how progress often requires letting go of outdated systems to make way for new ones. From horse-drawn carriages to smartphones, this cycle of change underscores the importance of adaptability and embracing discomfort as a catalyst for growth.

Shifting from economics to art, the book explores how artistic mental models like audience, genre, contrast, and storytelling impact our interactions and understanding of the world. Audience is a central concept, emphasizing the relationship between creator and observer. In art and communication, considering the audience’s perspective shapes the effectiveness of a message. This interplay extends to everyday interactions, reminding us to tailor our actions and words to resonate with others.

Genre, as another model, provides structure and sets expectations. While genres create a framework for understanding, they are not static; they evolve with cultural shifts and societal changes. Experimenting with genre boundaries fosters creativity and challenges preconceived notions, allowing for fresh interpretations and innovations.

Contrast, a key tool in art, draws attention and creates impact by juxtaposing opposites. In visual art, it’s the interplay of light and dark; in music, it’s the shift between loud and soft. Beyond artistic expression, contrast enhances our appreciation of experiences, teaching us to value the highs and lows that bring depth to life. Together, these models demonstrate how art reflects and shapes our reality, offering insights into communication, problem-solving, and emotional connection.

The section on storytelling highlights the power of framing, representation, plot, and character. Framing shapes how we perceive and interpret information, whether in news, conversations, or artistic works. Being aware of what’s included or excluded in a frame helps us question biases and uncover hidden truths. Representation, on the other hand, focuses on meaning-making. Every choice in representation conveys a message, reflecting cultural values and beliefs. However, representation can also distort reality, serving as a tool for propaganda or manipulation.

Plot and character provide the foundation for narrative, guiding us through events and emotions. A compelling plot connects cause and effect, giving order to chaos, while dynamic characters allow us to empathize and explore different perspectives. These storytelling models extend beyond fiction, shaping how we understand history, communicate ideas, and make sense of our own lives.

The book concludes with mental models of setting and performance, offering practical insights into how environments and interactions influence outcomes. Setting is not just a backdrop; it defines constraints and possibilities, shaping actions and decisions. By altering our environment, we can influence behavior and create conditions for success. Performance, meanwhile, emphasizes adaptability and presence. Whether on stage or in daily life, performance is about responding to feedback, connecting with others, and refining our approach. These final models highlight the importance of flexibility, awareness, and continuous improvement.

Through its exploration of economics and art, "The Great Mental Models, Volume 4" equips readers with tools to navigate complexity, adapt to change, and approach problems with fresh perspectives. The book reveals that the principles governing markets and creativity are not confined to their respective fields—they permeate every aspect of our lives. By embracing these models, we can better understand the world, make informed decisions, and unlock our potential to innovate and connect. This thoughtful synthesis of economics and art serves as a reminder that diverse perspectives and interdisciplinary thinking are essential for growth and resilience in an ever-changing world.

[Tapesh · Rating 1 out of 5]

Very basic idea . Good for beginners not for advanced

[Charlie · Rating 4 out of 5]

Metacognition (thinking about our thinking) is a skill that we aren't taught, but that can help us become better people. Shane Parrish's Great Mental Models Series provides a broad swath of tools with which to approach this crucial, and underdeveloped skill. Joining the likes of Warren Buffet and Charlie Munger of Berkshire, Parrish adds to the chorus of people singing the praises of mental models as a guiding light on the road to more efficient work, more enjoyable use of our time, and perhaps most importantly, balancing our cognitive loads in a time of information overload. Mental models help us categorize and best use the Niagara Falls-like velocity of knowledge we have access to and are required to use on a daily basis. Parrish mines the fields of economics and art in this, Volume 4, to offer readers expertly crafted outlines of how we might be able to think about all the things we are required to think about in a day, whether we are at home, at work, or elsewhere in between.

Parrish brilliantly fills the book with expansions on the mental models. He loads each chapter to the veritable brim with content you don't want to gloss over in one section on the way to the next. The chapters are a little bit like nesting dolls of content within content within content that weaves back to the beginning. It reads the way you might hope that your peanut butter spreads on morning toast: smooth, and just enough. The entire series (I'm reviewing this book, but I've read all of the previous books) is also written in a very approachable way. Despite some of the otherwise down-the-rabbit-hole-of-theory concepts, there isn't a trace of any pretension or inaccessibility. No one would fault Parrish for broaching the cerebral starched shirts of the academic pages he no doubt pulled from to bring together the series, but he writes for people, plain and simple.

When it comes to places this book might be useful, I could very easily recommend that businesses or specific departments with a lot of strategy building power use it in a book club format, taking on a chapter every other week. It won't fix organizational issues, or provide easy answers. It does something better. Rather than solving for a single n or x, it gives people tools to know that they're solving for n and x, while considering the webs of complexity people and organizations face. It also helps people understand what they don't know or at least see that they don't know. Each mental model details a way of thinking about or thinking with a subject, and illuminates the far reaches of a model that might constitute a deficit in our considerations or strategy. I could equally see this as a professional development tool that helps create a more compassionately engaged workforce. It may be a bold statement, but I stand by it: it is difficult to read this and other volumes in the series without feeling incredibly humbled by how much more efficiently you could be thinking, how little you know about what you know, and how much more compassion you could lend when thought processes can vary so much, across so many different fields.

I am taking the last leg of this final volume in the series very slowly; Much slower than I would normally read, because I don't want to part with it just yet. I like the feeling of knowing that there's yet-uncharted-territory of a book in the world that won't make me smarter, but that will help me be a more reflexive, compassionate human. No doubt there are many books like this, but few are written as well, and as insightfully as Shane Parrish's Great Mental Models series.

[Evan Micheals · Rating 5 out of 5]

This is the final volume of the Mental Model’s series. This may be the best Mental Models book yet, as I see the flow of concepts one building on the other in the Economics section (less so in the Art section). I religiously listen to ‘The Knowledge Project’ and a lot of the Model’s contained have been internalised so I did not find much in the work remarkable. I also co-read this whilst completing Poor Charlie’s Almanac and Charles Munger’s influence on Shane Parrish can be found through out all the Mental Model’s books. Thus, I do not have an exhaustive list of quotes that inspired me.

Parrish quotes Hannah “Arendt writes often of totalitarianism seeking to ‘atomize’ people to achieve control: atomization means to deprive of meaningful ties to others’. When your actions have no impact on your experience, when you could just be shot just as easily for what you did not do as for what you did, your ability to trust others and build social ties collapses. Random terror is thus a means of preventing the development of any credible alternative to the totalitarian state” (p 115). My thought was that our individualistic western capitalist societies are doing equally well at atomizing people, depriving people of meaningful ties to others. We have a loneliness epidemic and I believe economic independence is a factor in emotional separation. It is easy to understand why economically dependant people create ‘meaningful (emotional) ties to others’. They need to create the emotional symbioses required for economic dependence. In societies where we can achieve economic independence with relative ease, it is not hard to understand why people do not do the difficult work of engaging in emotionally supportive relationships. Rampart loneliness is a means of reinforcing the consumer culture of dissatisfied capitalism, thus further atomizing people. It seems to me that whilst Totalitarian states may atomize people from the top down, ‘Free’ societies do it from the ground up. It has parallels with Erich Fromm’s ‘Escape from Freedom’.

In Parrish’s section on ‘Framing’ he quotes Camilie Paglia which I was pleased about given how much her thought and work has influenced me. I am glad her work Sexual Personae, whilst over 30 years old, has not been forgotten by smart people sure as Parrish. I love the work on Parrish and how he thinks about thinking. It is applied ontological philosophy in action. He never attempts to tell you what to think about anything, and I have no idea where his politics lie. The aim of his work is to have one become a slower, more deliberate and clearer thinker. They are works I regularly return to, to sharpen my thinking. Highly recommended.

[Daniel · Rating 5 out of 5]

After learning Newton's laws of Gravity and Action-Reaction in physics, which will help you survive (not get killed easily at least), I think the most important concept one needs to learn to thrive in our world is this law in economics: Supply & Demand!

Why?

Because if you know how supply and demand works, and use at as a mental model, you can make significantly better decisions compare to the majority of the population.

It gives you an edge, a competitive advantage in a world in which most people don't know how to think.

- Which career path makes the most sense in the next 10 years?
- Which asset class will have the biggest ROI in the next 5 years?
- Which skills will worth more than others in the next 2 years?
...

You can find pretty good answers, solid answers, to these questions if you think in terms of supply and demand.

This book was the last book (sadly 🥺) in The Great Mental Models series by Shane Parrish.

It delves into fundamental principles/laws/aspects of economics and art.

And it presents them not only as laws, but as mental models to use in our day-to-day life.

I loved the economics part more than art part.

I got wiser by reading all 4 books in the series and would recommend it to anyone who likes to get closer to the reality of the world we live in and learn how to work with this reality in a much better way to get what he/she wants.

Happy reading! 📙

[Johan Monge · Rating 3 out of 5]

As I finish this series, two main criticisms come to mind; First, Parrish clings to a cookie-cutter chapter format where he introduces a model and gives two (sometimes unconvincing) examples from niche books he's read. Too often was I left rolling my eyes at the author's blatant attempts to flaunt the variety of books he's read.

Secondly, the earlier volumes of this series did a great job in introducing concepts I was unfamiliar with, but this last volume seemed far more simplistic. Perhaps my bar was higher due to my existing focus on economics, but even the section about art seemed rudimentary.

Overall, this series was a good refresher on many important concepts, and I suspect I will find myself returning to these notes often. 3.75/5 for the series as a whole

[Ariada Woods]

Volume 4 of The Great Mental Models is a very interesting book to read up on Economics and Art. The book is broken into 2 parts based on subject and then each chapter shares a topic within the subject. Each chapter shares real-world examples and quotes from books/experts on the particular topic.

This author does a good job at describing things for a basic level of understanding, but if you are looking for more detail into either economics/art, then I'd dive into different books. Certain chapters of this book were more interesting to follow than others, and some were explained better than others, but overall, I gained a lot of insight into these subjects.

[Dale · Rating 4 out of 5]

fourth

Fourth book in an incredible series that is a must read for those of us that work in an industry or career field that calls for the transfer of information in ways to shape decision makers’ perception. Some useful approaches here.

[Peter Sandwall · Rating 4 out of 5]

Decent Volume. Excellent series of books. Disappointed by the new format, still pleased with the content.

[Ravi Gangwani · Rating 3 out of 5]

Disappointed with book design like everyone. The book had good examples only in bits and pieces - weakest book of the series.

[Felipe]

This was just an elongated dictionary for like 5 economics terms and 5 art concepts. No insight was gained.

[Zane Davis · Rating 4 out of 5]

As someone with both economics and art degrees, this was a fun volume in this series.

[Tré · Rating 4 out of 5]

I'm going to need to review this entire series periodically.

[Di Xu · Rating 4 out of 5]

too shallow for me

[Klaire Hoang · Rating 5 out of 5]

Got so many excellent insights from this book!