Warren Buffett or Ray Dalio are not necessarily smarter than you. They are more efficient

A person’s raw intelligence level, as measured by aptitude tests such as IQ scores, is generally stable for most people throughout their adulthood. While it is true that there are things you can do to hone your natural abilities, such as doing brain exercises, solving puzzles, and sleeping optimally, the amount of gross brainpower you have is difficult to increase significantly or permanently.

For those of us who constantly strive to be top performers in our fields, this sounds like bad news. If we can’t increase our processing power, how can we solve life’s biggest problems as we move up the ladder?

The key: mental models

The good news is that while raw cognitive skills are important, it’s how you use and leverage those skills that really makes the difference.

The most successful people in the world, from Ray Dalio to Warren Buffett, are not necessarily far above the rest of us in raw intelligence, but simply develop and learn to apply better mental models of how the world works, and use these principles to filter your thoughts, decisions, strategies and execution.

Successful author and entrepreneur Michael Simmons has collected more than 650 mental models through his work. Examples of mental models

Example 1: Pareto Principle (80/20 rule for prioritization)

In a recent Simmons post on Medium, he highlights a well-known mental model that is the perfect breadcrumb to start with.

The 80/20 rule (Pareto principle) is named after the Italian economist Vilfredo Pareto, who was probably the first person to notice the 80/20 connection in an 1896 paper.

In short, it shows that 20% of inputs (work, time, effort) often lead to 80% of outputs (performance, sales, revenue, etc.), creating an extremely vivid frame of mind for making prioritization decisions.

The 80/20 rule represents a power law distribution that has been empirically shown to exist throughout nature, and it also has huge business implications.

By focusing your effort on these 20% of tasks first and making the most of them, you can generate results much more efficiently than wasting time on the 80% “long tail” shown below.

Example No. 2: Metcalfe’s Law (networking)

Metcalfe’s Law is one of the network effects, which states that the value of a network is proportional to the square of the number of nodes in the network.

From a mental model perspective, this is a useful way to understand how certain types of technology-driven companies realize value.

If you have a smart grid that’s only connected to one power source that’s fine, but one connected to many different power sources and potential consumers is much more useful to everyone on the network. Each additional node provides value for the rest of the connections.

This mental model can also be applied outside of strict technology or business terms.

For example, if you build a personal network of connections, each additional relationship can provide more value to the other people in your network. It’s the same principle that Harvard or other prestigious universities operate by: the more value a student can get from the alumni network, the higher the price they can charge for tuition.

It is difficult to compete with a fully formed network at scale as they create massive economic moats for the owner. Modern social media and messaging apps like Facebook, Instagram, LinkedIn, TikTok, WhatsApp, and Snapchat work with this in mind.

The power of mental models

These are just two examples of how powerful mental models can be effective in making you think more clearly and work smarter.

If you want to be a top performer, it’s worth looking for other mental models as well. They can help you better frame reality, so that you can harness your intelligence and effort in the most effective way possible, and they will allow you to get results along the way.

Source: Own – VC’s Jeff Desjardins.