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I often find that my understanding of the world is strongly informed by a few key concepts. For example, I've repeatedly found the concept of opportunity cost to be a useful frame. My previous post on privileging the question is in some sense about the opportunity cost of paying attention to certain kinds of questions (namely that you don't get to use that attention on other kinds of questions). Efficient charity can also be thought of in terms of the opportunity cost of donating inefficiently to charity. I've also found the concept of incentive structure very useful for thinking about the behavior of groups of people in aggregate (see perverse incentive).
I'd like people to use this thread to post examples of concepts they've found particularly useful for understanding the world. I'm personally more interested in concepts that don't come from the Sequences, but comments describing a concept from the Sequences and explaining why you've found it useful may help people new to the Sequences. ("Useful" should be interpreted broadly: a concept specific to a particular field might be useful more generally as a metaphor.)
Most functions are not linear. This may seem too obvious to be worth mentioning, but it's very easy to assume that various functions that appear in real life are linear, e.g. to assume that if a little of something is good, then more of it is better, or if a little of something is bad, then more of it is even worse (apparently some people use the term "linear fallacy" for something like this assumption), or conversely in either case.
Nonlinearity is responsible for local optima that aren't global optima, which makes optimization a difficult task in general: it's not enough just to look at the direction in which you can improve the most by changing things a little (gradient ascent), but sometimes you might need to traverse an uncanny valley and change things a lot to get to a better local optimum, e.g. if you're at a point in your life where you've made all of the small improvements you can, you may need to do something drastic like quit your job and find a better one, which will temporarily make your life worse, in order to eventually make your life even better.
The reason variance in financial investments matters, even if you only care about expected utility, is that utility isn't a linear function of money. Your improvement in the ability to do something is usually not linear in the amount of time you put into practicing it (at some point you'll hit diminishing marginal returns). And so forth.
Jordan Ellenberg discusses this phenomenon at length in _How Not to Be Wrong: The Power of Mathematical Thinking... (read more)