97 - Engineering Mental Models: Why Engineers make good investors

Mental Models discussed in this podcast:

• Margin of Safety
• Backup Systems
• Scale
• Failure Points
• Leverage

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Show Outline

The full show notes for this episode are available at https://www.diyinvesting.org/Episode97

Margin of Safety

Example of building a bridge

Backup Systems

Example of loss of power

Scale (or Economies of Scale)

The volume of a sphere increases faster than the surface area. Therefore it is more efficient for vessels to be larger.

Failure Points

The more complicated a system is, the greater number of failure points.

Leverage

You can move large objects with a small amount of force with a sufficiently large lever. 

"Give me a large enough lever and I can move the world."

Summary:

As an investor with an engineering background, I believe I bring a unique perspective to investing in businesses. The mental models: margin of safety, backup systems, scale, failure points, and leverage originate in engineering are useful for investors.