Thinking Frameworks | 2021
Sharing out the best meta-thinking tools I’ve learned this year
God forbid you spend two seconds in my head, you’ll realize how much I overthink everything, and with overthinking comes wasted time, anxiety, and decision fatigue. My entire life, I’ve always been overthinking everything, but this year I decided to try something else: thinking frameworks!
What’s a Thinking Framework?
For me, a thinking framework is first and foremost a tool that helps me process a mental challenge that I’m currently facing. It’s something that tells me how to think—as opposed to what to think.
In addition, a thinking framework is a tool that reduces decision fatigue because it helps me make decisions faster. Through using a framework, I am able to see things more clearly and effectively.
Finally, a thinking framework is a tool that reduces the time I spend overthinking. If you overthink, you know just how unstructured and never ending it is. You just keep thinking of all the possibilities, and you end up not making a decision. With a thinking framework, you get more easily focused on what matters and tackle the problem from that angle.
This year, I decided to pay closer attention to how I think, and throughout the books I read and the interactions I’ve had in my life this year, I decided to document the main frameworks I’ve either discovered or started using. This blog is a documentation of the main frameworks that I’ve thought were life changing.
There are many definitions of what compassion is, but the one I heard from episode #15 of the Well Connected Relationship Podcast resonated with me. In it, the guest equates having compassion to thinking in the following way: “you as a human being, I wish for you to be peaceful and free from suffering because if you were, you wouldn’t act that way”. In a different segment, the guest also asserts that “every unskilled behavior comes from an unmet need”.
For me, compassion means getting outside of my own shoes and trying my best to see things from the perspective of the person I’m speaking to or the person or people my decision will affect. It means trying my best to see past how someone else hurt (or tried to hurt) me and instead realizing that there is a why that is not about me.
How I use compassion as a thinking framework is by asking the questions:
- How can I be more compassionate in this situation?
- How can I see things from the perspectives of others involved?
Being compassionate is a value just like many others (e.g., honesty, kindness, politeness, etc), but one thing that sets compassion apart is that it helps people live better together because it helps people understand each other. I’ve decided that I wanted to be more compassionate, and having this as a thinking framework puts compassion more at the forefront of my life.
How I Learned About Compassion
Over the past year, I’ve been exposed to this value multiple times. The first time was through a friend who cited a quote from the Bible verse John 8:7: “He that is without sin among you, let him cast the first stone at her.” This way of looking at compassion forces me to acknowledge that I’m not perfect, so I shouldn’t be judging others.
The second time was through the podcast above, which my therapist recommended that I listen to. I found this podcast really valuable because it gave me a more actionable way to be more compassionate. It tells me to try to see observe the suffering of others or of myself, which in turns helps with being compassionate.
Finally, I’ve observed compassion in myself and in the people I talk to. When I am more compassionate, I find that I have better relationships. I judge people less, and I find myself giving more. I found that the people I admire practice being compassionate every day (as far as I can tell), and I can see how those around them truly value being in that position (including me).
Incentives are ways that people are pushed to act or actions that people are drawn to take. If you’re familiar with calculus, you can think of incentives as the first derivative function of the actions that people take—if such a function could be defined.
Where incentives are helpful is that it helps cut through the unimportant reasons for why something was or is about to be done. Incentives help cut through BS reasons. You’ve probably heard of a very colloquial way of thinking through incentives: the common “follow the money” phrase. Incentives, most of the time, can explain why people take certain actions, and being able to see the incentives really helps with being more prepared to handle the situation.
Here are the questions I ask myself when using incentives:
- What incentives does this decision create in me or in other people?
- What incentives does this policy create?
- What incentives do these people have?
- How can I incentivize the behavior/action that I want in my life?
Thinking through incentives is generally helpful when thinking about rules (could be laws, office policies, public policies, etc) and when thinking about actions that affect other people. It also help cut through the BS because sometimes people might give you many reasons for why they are doing something when looking merely at the incentives will tell you why—sometimes even they themselves aren’t aware that that’s what they’re doing.
How I Learned About Incentives
I learned about incentives through reading the book Basic Economics by Thomas Sowell. If I were to take an educated guess, incentives are probably one of the key lessons that that book tried to instill in its readers because I felt like there were countless examples of the trope of “people/politicians want this economic policy because it will help society, but here are the incentives it creates in society that actually makes things worse”.
After finishing up the book, I started applying this line of reasoning to more than just economic policies. I applied it to my own behaviors and actions. Sometimes, you can work backward. I wanted to read more, so I asked myself, “how can I incentivize myself to do so?”, and through that I decided to put the books I’m reading on top of my table and put a bookshelf with want-to-read books in the middle of my living room. I also asked myself, “how can I incentivize myself to workout?”, so I bought some dumbbells and other workout equipments and similarly put them in a very visible area of my living room.
3. Cost vs. Price
Cost and price and the idea that these two are completely different has helped me see things through a different lens. While the two words are obviously related, the difference is subtle and important:
- Price is what you pay for an item or what it’s sold for. It’s directly tied to a currency. It is a clear and easy number to get (you can Google it, or it’s displayed at the store in front of you). The price of a given item can fluctuate.
- Cost is the effort and sacrifices that went into making an item that you pay for or that is sold. It’s NOT tied to any currency. It is a practically impossible to measure. Given an item that’s been made (say, a purse), the cost of making that item is set in stone—it doesn’t fluctuate after it’s been made.
A common misconception is that price tries to estimate the cost of an item, but that is often not the case. A manifestation of this misconception is whenever people say “this is overpriced” or “it wasn’t worth paying for”, because it logically follows that if something is overpriced, it’s been priced well above what its value is and that its value is proportional to what it costs to make. The reality is, there is no such thing as value. Here’s a quote from Basic Economics by Thomas Sowell that puts this beautifully:
The most fundamental reason why there is no such thing as an objective or “real” value is that there would be no rational basis for economic transactions if there were. When you pay a dollar for a newspaper, obviously the only reason you do so is that the newspaper is more valuable to you than the dollar is. At the same time, the only reason people are willing to sell the newspaper is that a dollar is more valuable to them that the newspaper is. If there were any such thing as a “real” or objective value of a newspaper—or anything else— neither the buyer nor the seller would benefit from making a transaction at a price equal to that objective value, since what would be acquired would be of no greater value than what was given up.
With all of that said, here’s how I use this concept as a thinking framework when facing a particular decision or situation. I ask myself these questions:
- What’s the cost?
- What do other similar things cost?
- What’s the price?
- What’s the price of other similar things?
Why this helps is because it gives me more context on the situation which helps me make a better decision. This is also particularly useful for political conversations with people because the cost is often ignored.
How I Learned About Cost and Price
I learned this actually through Basic Economics by Thomas Sowell as well, and that’s a book I would recommend to everyone to read. The book has helped me see things for what they are in many ways, and Thomas Sowell is probably one of the smartest people alive. Since I already talked about this book in the previous section, I want to instead list a couple of other blogs I wrote that were directly inspired by it (either directly or indirectly):
The Bigger Picture About What Money Is
A refreshing reminder and something good to remember whenever one is diving into the weeds of money and the financial…
Rethinking the U. S. Minimum Wage
The U.S. minimum wage laws were first enacted in the 1938 Fair Labor Standards Act. This act set a few things down for…
Mind Wandering: The Beauty of Price
This is just me spending time in my head, wondering and wandering in my thoughts.
4. Skin in the Game
Skin in the game is a simple concept that goes really far in explaining the incentives in a system or a person. For the math folks out there, if incentives are a first derivative of actions, skin in the game would be a second derivative of actions. In simpler terms, skin in the game is made up of the following 3 key ideas.
(#1) Skin in the game is something one has, and to have skin in the game means that you are exposed to the risks of a situations (and often the benefits). A classic example of where one has skin in the game is when one invests in a stock. If the price of that stock goes up, they make money, and if the price of it goes down, they lose money. A classic example of where one does not have as much skin in the game is when a politician spend the never ending supply of taxpayer money to do things that benefit them or their own re-election.
(#2) The second key idea in skin in the game is that it’s a continuous spectrum: some people have more skin in a game than others. Going back to the stock example, the person that has invested 10 stocks in a company has a lot less skin in the game than the person who has invested 1000 stocks—by a factor of 100. If the price goes down $1, one loses $10 while the other loses $1,000.
(#3) Finally, the last concept in skin in the game is the idea that some people may have “soul in the game”, which is when they have skin in the game of others. The classic example of this is when you have an activist leader—someone like Martin Luther King Jr.—that basically sacrifices themselves for the sake of others. Another example of that is the CEO of a company. A CEO essentially has skin in the game of their employees, their customers, their investors, and of their stockholders.
The way that skin in the game acts as a second derivative of actions is that skin in the game affects the incentives. Just saying that you support a particular presidential candidate is different from saying that you support that candidate AND betting money on them winning. By betting money, you’ve increased your skin in the game by putting your own money on the line (the risk), and this incentivizes you to be more active in making sure that this candidate wins.
Here’s another example of skin in the game. If you define “efficiency” as not having unnecessary losses of money, then it makes sense why the private sector is much more efficient than the public sector: the private sector has skin in the game of the money that they’re spending (if they spend too much they go out of business) whereas the public sector doesn’t (if they spend too much money, more money will keep coming from the tax payers). Overall, how much skin in the game one has directly influences their incentives which influences their actions.
Here’s how I use skin in the game to make decisions:
- How much skin in the games do I have in this? What about others?
- How much money are you willing to bet on this?
- How can I put more of my skin in the game to gain more credibility? Am I willing to do that?
- Why am I not willing to put more skin in the game?
Here’s an example of this coming directly from my own personal life. Recently a friend of mine was doing a super long layover in NYC (from 1pm to 12am), so I asked her to come over so we can hang out—i.e., leave the airport and come to Manhattan so we can hang out. My friend has never been to NYC, so taking the subway here was a daunting thing to do for her. If I just expected her to go out of her way to come to NYC, I would be having little to no skin in the game in the request I made (i.e., asking her to come over). To improve on that, I decided to go to the airport and pick her up—taking the subway to and from. This way, I’m taking out my own time to make this request of mine happen and thus putting in more skin in the game, and the result is that this led to us having a great day!
How I Learned About Skin in the Game
I learned about this concept through reading the book Skin in the Game by Nassim Nicholas Taleb—in fact the definitions I gave above are roughly paraphrased or inspired from it. This is one of the best books I’ve read over the past year, and the concept of skin in the game has elevated my life and thinking patterns a lot more. I feel like I’m making better decisions now, and I want to live a life where I have skin in the game in the things that I do or ask for. The last question I asked above, “Why am I not willing to put more skin in the game?”, is particularly important to me because it has helped me uncover deeper things about myself and some of my relationships that I didn’t know of. I would also recommend this book to everyone to read, and finally, here’s an article I wrote about it from this book:
5. Broad Framing
Broad framing, ironically, is the broadest of these frameworks. Broad framing has a general definition, but it can be applied in many different ways. Before I go through the ways I’ve found to apply broad framing, let me first define what broad framing is.
Whenever we’re making a decision, we’re usually looking at the decision through a certain frame. For instance, if I’m deciding whether to go out to a bar with friends tonight, my frame might be something like, “I’m deciding whether to spend the next 2–3 hours of my day to go to this bar, get drunk a little, and maybe have some fun.” From that frame, I can ask myself multiple questions, like “will I actually have fun?”, “could I be doing something else?”, etc. With that said, given a frame broad framing is a meta-thinking technique that expands the frame through which you’re looking at a decision or choice.
That definition above is still kind of broad (pun intended), but let me make it more concrete with some examples of broad framing (and these are, by the way, how I would use broad framing myself)—some of which you’re probably familiar with:
- Expanding the Time Horizon: Asking, “would this matter in 5 years?” or “would I regret taking this action?” This would be a good question to ask in the bar example for instance.
- Playing Devil’s Advocate: Asking, “what’s the strongest possible counterargument to this point I’m making?”, “what would someone who believes the opposite say?”
- Base Rates: Asking, “with the absence of any other information, what are the ratios of the different values in this scenario/case?” (answering this question gives you the “base rates”)
- Regression to the Mean: Asking, “how much are the effects we’re seeing an anomaly?” “Things tend to regress to the mean, how could we account for that in our predictions?”
- The Outside View: Asking, “how did other people who are trying to do what we’re doing perform? How are we different from them?”
- Explaining Failures Exercise: Asking, “imagine that we are a year into the future. We implemented the plan as it now exists. The outcome was a disaster. Please take 5–10m to write a brief history of that disaster.” (NOTE: this is a direct quote from the book I’ll talk about below)
- Risk Policies: Asking, “what’s our risk policy — what we do when we’re facing heightened risk in the options we have in order to mitigate risk — here?”
- Reframe Through a Different Lens: Asking, “how can I reframe the scenario to look at it from a different lens (e.g., ‘think like a trader’, ‘think like a politician’)?”
How I Learned About Broad Framing
Broad framing encompasses so many different things that there’s just no way I can come up with examples of each of these. However, one thing thing I can give for sure is where I formally learned about this concept: the book Thinking Fast and Slow by Daniel Kahneman. If you’ve read the book, you’ll recognize some of these examples of broad framing—everything from the 3rd one until the end come from Thinking Fast and Slow.
This book can be dry at times, but the lessons you learn from it are super invaluable. The concept of broad framing is just one of those; another concept was learning about human biases (something that made me question my own rationality). Another one is the famous System 1 and System 2 thinking that people often colloquially refer to—they came from this book if I’m not mistaken. Overall, I would recommend anyone to read this book who wants to think better.
I wrote one blog about this as well, and here it is:
Personally, I feel elevated ever since I started focusing more on how to think rather than what to think. Through these thinking framework, I have enhanced the decisions I make in my life, and I feel a lot less guilty about what I end up choosing to do. I also tend to spend less time overthinking things, so this has overall been a great positive in my life.
At the same time, the journey isn’t completed. I still tend to get into patterns of overthinking, and sometimes my emotions get the better of me. For next year, I plan on reading a lot more in order to learn about or discovered more thinking frameworks.