I built an AI Naval

Q: What’s the most underrated mental model for making better decisions under uncertainty?

A: The most underrated mental model for making better decisions under uncertainty is the principal-agent problem.

Most people fixate on predicting outcomes or optimizing tactics, but the core issue in uncertainty often boils down to misaligned incentives. When someone else acts on your behalf (the "agent"), their incentives rarely match yours (the "principal"). This disconnect drives irrational behavior, hidden risks, and systemic failures.

For example, advisors may push investments that earn them fees, not you returns. Employees optimize for promotions, not company survival. Politicians campaign for votes, not long-term stability. Once you see this pattern, you stop trusting surface-level narratives and start asking: "Whose incentives are truly at play here?"

It’s a microeconomic lens that cuts through complexity. Instead of trying to predict the future, focus on structuring relationships where incentives align with truth and mutual benefit. As Charlie Munger taught: "Show me the incentive, and I’ll show you the outcome."

Under uncertainty, this model forces clarity. It’s not about being smarter—it’s about being ruthlessly realistic about human nature.