Mental Models: Lessons for finance, economy, & human behavior. Book review of “Sapiens”: #69

Mental Models Podcast It's not a brain in a jar, that's the gist!

Brain and Investing lessons that we took from the book Sapiens by Yuval Noah Harari (2017). An excellent read covering many surprising insights about human behavior from individuals to global institutions. From a scientific standpoint this book highlights the unique cognitive capacity of Homo sapiens. We can imagine theoretical constructs that cannot actually exist. This tendency gave rise to our ability to create other fictions that we live by. These include monetary systems, corporations, and law structures. Group behavior and trust underlie many phenomena that we take for granted in our lives. The book discusses the development of money, a powerful fictional construct that works because we all believe in the fiction and agree upon its value. Money can be viewed as a contract that enables us to transact on the fly. For more depth on this topic, please listen to Episode #2 of this podcast “Value drives our lives” Another remarkably important development the book covers is the willingness of people to admit that they do not know something. Professing uncertainty serves as a driver for human progress. Admitting ignorance gives us a reason to explore the world and run experiments so that we find better answers. Our quest for learning enables us to fill in the blindspots that exist within our mental models of the world. Another fascinating feature of our lives is that we now imagine a better future filled with dramatic progress. This is a new phenomena relative to many prior civilizations that did not have reasons for optimism, since they were much more subject to disease, lack of progress, and stagnation. Trust leads to cooperation which leads to growth. This leads to greater optimism and even more trust, which can transform a society for the better. Chapter 16, The Capitalist Creed is likely the most interesting chapter for our audience. The insight that trust underlies credit is fundamental to progress. With credit, growth is possible in a nearly magical way. Paying back loans led to further extension of investment and this drove history forward, rather than the dictator model where a monarch determines that land should be acquired by conquest. History is not predetermined. Rather, it is a dynamic series of complex interactions that can take unexpected turns and is often only predictable in retrospect. Please see our previous episode #13 on the Hindsight Bias if you find this topic compelling and want to hear more. A final interesting point about human progress is asking the question “are we happier?” after all of the progress that we have made. This remains open for debate and may inspire new research aimed at addressing our core needs as our lives become further enmeshed within technology and widespread information availability. We end by touching upon the intriguing topic of “brain hacking”. Links: Sapiens by Yuval Noah Harari (2017) Read more on Amazon https://www.amazon.com/Sapiens-Humankind-Yuval-Noah-Harari-ebook/dp/B00ICN066A/ref=as_li_ss_tl?pf_rd_m=ATVPDKIKX0DER&pf_rd_p=fcaa6d12-8b2b-4ad7-b277-864b2da79f6e&pf_rd_r=6FFDPEP8Z6AEX1RBSPTF&pd_rd_wg=Rl5OI&pf_rd_s=desktop-dp-sims&pf_rd_t=40701&pd_rd_w=T017i&pf_rd_i=desktop-dp-sims&pd_rd_r=3fdfa333-966e-11e8-a126-fd3c94bb211d&pd_rd_i=B00ICN066A&psc=1&refRID=6FFDPEP8Z6AEX1RBSPTF&linkCode=ll1&tag=natsite-20&linkId=42ececba032ff9e0d90705e1943bacac&language=en_US