30 Days to Becoming a Better Investor – Day 5

In addition to preparing your mental toughness, it is important to develop a good set of mental models for evaluating various business scenarios. Charlie Munger, Warren Buffett’s investment partner, recommends that you develop a set of mental models that you can call no to analyze various situations. Developing an ability to utilize a wide array of mental models in an interdisciplinary fashion can help you become a better investor.

I’m not going to recommend that you try to learn all the mental models that could help you become a better investor in one day. Instead, I’m going to recommend that you start by taking a few hours to explore some of the fundamental models in the field of economics.

Arnold Kling posted an good basic primer on economics that he calls the Best of Economics. I recommend that you spend some time reading studying it. Even if you never had economics in school (especially if you never studied economics), I think that this online text targeted for high school students will help you develop some core mental models associated with opportunity cost, consumer utility, supply and demand, and inflation just to name a few. You might want to consider skipping over the efficient market and portfolio theorem chapter. If you want to know why, read the Whitney Tilson’s notes of Charlie Munger’s speech to the University of California, Santa Barbara Economics Department in 2003.

Once you finish going over the basics of economics, you might want to dive deeper into a particular aspect of economics. I recommend that you visit the MIT Economics Department OpenCourseWare offerings. These top quality courses are free to the public. They cover both undergraduate and graduate courses. I plan on expanding my collection of mental models by going though the graduate game theory course in the near future. If you are interested in studying one of these course together, we can try to organize study groups here.

You can follow the 30 Days to Becoming a Better Investor community event here. For details on how to participate, please visit the original article announcing the 30 Days to Becoming a Better Investor series.

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