We tend to hold onto a belief and want it to be right in every possible circumstance. Life is not that simple unless the concept you hold is broad and high-level. When it comes to understanding or analyzing everyday human behaviors, we need several mental models to do the job effectively.

One model can be a specialized tool for a specific set of conditions in a large toolbox, but I have to be a Swiss Army knife if it’s a single-player game against the world. Combining two seemingly conflicting methods is the most enjoyable part of expanding my perspective.

Here are three pairs of examples:

1a. Index fund: Provides the surest bet (Monty Hall Problem proof by contradiction) with an average return.

1b. Stock picking: For the potential >3x returns, although very few people can consistently achieve above-average returns in this game.

2a. Deep value investing: To find underpriced gems. Some babies are thrown out with the bathwater — keep the treasure hunt process slow and take time to shop around.

2b. Great compounders: Companies that may be overpriced at the moment but hold long-term value.

3a. Boring or predictable businesses: Using historical performance to project future results is applicable.

3b. New or disruptive businesses: These should be treated as venture startups; existing financials and comparative analysis may not apply.

With these contrasting ideas, I allocate only 10% to 20% to “treasure hunt” investments. This suits my personality and capacity for risk control.

‘To the man with a hammer, the world looks like a nail.’ — Charlie Munger