All Models Are Wrong

As an economist, I’ve learned a great deal about models.

Models to help in the explanation of the world in which we live.

Models to help in the prediction of the actions of individuals.

Models to help in the formulation of the policies that govern.

But the truth is all these models are wrong.

What we need to do is to find the ones that are useful.

Realist or hyperrealist

It is useful to begin with this attitude, “with experience, I’m becoming less wrong.”

Understanding how the world works is something so important that we should devote all of our life to it.

As Ray Dalio in his book, Principles: Life and Work, said:

I have become so much of a hyperrealist that I’ve learned to appreciate the beauty of all realities, even harsh ones, and have come to despise impractical idealism.

If there’s one thing to learn from Dalio is our ability to be a hyperrealist. Which also means to take emotions out of the equation.