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Economics
Incentives, markets, prices, and the forces underneath them.
- Adam SmithScottish moral philosopher and political economist (1723–1790), professor at Glasgow and confidant of David Hume, whose Theory of Moral Sentiments grounded ethics in sympathy and whose Wealth of Nations founded the modern discipline of political economy, providing the framework within which commercial society has been understood for two centuries.FiguresPhilosophyEnlightenment
- Adverse selectionWhen one side of a transaction knows something the other does not, and the ignorant side's attempt to protect itself drives away the cases it wanted.ConceptsBusiness
- Barriers to entryAnything that makes it costly, slow or impossible for a new competitor to start doing what an existing business does.ConceptsBusiness
- Baumol's cost diseaseWages rise in sectors with no productivity growth because they must compete for labor with sectors that have it.ConceptsBusiness
- Burn RateThe rate at which a business consumes cash, usually stated monthly.ConceptsBusiness
- Cash Conversion CycleThe time between paying for work and being paid for it.ConceptsBusiness
- Charlie MungerMultidisciplinary mental models, inversion as a problem-solving method, and the psychology of misjudgement.FiguresBusiness1924–2023
- ChurnThe rate at which customers leave.ConceptsBusiness
- Comparative advantageThat it pays to specialize by opportunity cost rather than by skill.ConceptsBusiness
- Competitive StrategyIndustry structure, described by five forces, sets available profitability — and a defensible position requires choosing cost leadership or differentiation rather than both.BooksBusiness1980
- CompoundingGrowth applied to a base that already includes previous growth.ConceptsBusiness
- Creative destructionJoseph Schumpeter's term for the process by which innovation destroys existing arrangements while creating new ones.ConceptsBusiness
- Customer acquisition costThe fully loaded cost of winning one customer, including the salaries of everyone who touched the deal.ConceptsBusiness
- Daniel KahnemanHeuristics and biases, prospect theory, loss aversion, and the two-systems account of judgement.FiguresBusiness1934–2024
- Diminishing marginal utilityEach additional unit of something is worth less than the one before it.ConceptsMoney
- Diminishing returnsAdding more of one input while others stay fixed yields progressively less extra output, and eventually less in total.ConceptsBusiness
- Economies of scaleCost per unit falling as volume rises, because fixed costs spread and processes specialize.ConceptsBusiness
- ErgodicityWhether the average outcome across many people equals the average outcome for one person over time.ConceptsBusiness
- Francis BaconEnglish Lord Chancellor and philosopher (1561–1626) whose Novum Organum proposed inductive natural philosophy against the Aristotelian-Scholastic tradition, whose Great Instauration projected an encyclopedic scientific reform, and whose programmatic vision shaped the founding of the Royal Society and the institutional form of modern science.FiguresPhilosophyEarly Modern
- Game theoryThe study of decisions where the outcome depends on what other people choose, and everyone knows the others are reasoning the same way.ConceptsPhilosophy
- Golden handcuffsCompensation good enough to keep you in a job that has stopped teaching you anything.ConceptsTransitions
- Gresham's lawBad money drives out good, when both must be accepted at the same official value.ConceptsBusiness
- Gross MarginWhat is left from revenue after the direct cost of delivering it.ConceptsBusiness
- Herbert A. SimonBounded rationality, satisficing, the economics of attention, and the founding of symbolic artificial intelligence.FiguresBusiness1916–2001
- Hidden costA cost that is real but never invoiced, so it never enters the decision.ConceptsBusiness
- LeverageLeverage is any arrangement in which output stops being proportional to the hours you put in.ConceptsBusiness
- Lifetime ValueThe total gross profit a customer produces before leaving.ConceptsBusiness
- Loss AversionLosing something feels roughly twice as bad as gaining the equivalent feels good.ConceptsBusiness
- Michael E. PorterThe five forces framework, generic strategies, the value chain, and strategy as trade-off.FiguresBusinessb. 1947
- Moral hazardTaking more risk because someone else carries the consequences.ConceptsBusiness
- Network effectsWhen a product gets more valuable to each user as more people use it.ConceptsBusiness
- Opportunity costThe cost of a choice is the most valuable alternative given up to make it.ConceptsBusiness
- Path dependenceWhen how you got here constrains where you can go, so that an outcome persists because of its history rather than its merits.ConceptsBusiness
- Pipeline, not runwayThe unit that actually governs whether you can leave a job.ConceptsBusiness
- Poor Charlie's AlmanackGood judgement requires the major ideas from several disciplines, and problems are often best approached by asking what would guarantee failure.BooksBusiness2005
- Present BiasOverweighting what is close in time.ConceptsBusiness
- Price discriminationCharging different buyers different prices for substantially the same thing, based on what each is willing to pay.ConceptsBusiness
- Prisoner's dilemmaThe situation where each person is better off defecting whatever the other does, so both defect and both end up worse than if they had cooperated.ConceptsPhilosophy
- Recurring revenueRevenue contracted to repeat without being re-sold.ConceptsBusiness
- Relative deprivationDissatisfaction produced by comparison with a reference group rather than by conditions themselves.ConceptsMeaning
- Revealed preferenceThe inference of what someone values from what they chose, rather than from what they said.ConceptsBusiness
- Second Order EffectsThe consequences of the consequences.ConceptsBusiness
- SignalingDoing something expensive whose main purpose is to prove something unobservable about you.ConceptsBusiness
- Status GamesCompetition for relative position rather than absolute outcome.ConceptsBusiness
- Sunk costMoney, time or effort already spent and not recoverable.ConceptsTransitions
- Switching costsWhat a customer pays to leave you, counting money, time, risk and disruption.ConceptsBusiness
- The efficient market hypothesisThat asset prices already reflect available information, so consistently beating the market on public information is not possible.ConceptsBusiness
- The Jevons paradoxMaking something more efficient can increase how much of it gets used, because efficiency lowers the effective price and demand responds.ConceptsBusiness
- The Pareto principleThe observation that outcomes are distributed very unevenly — a small share of inputs produces most of the output.ConceptsBusiness
- The principal-agent problemWhat happens when one party acts on behalf of another whose interests differ from theirs and who cannot see everything they do.ConceptsBusiness