Mental models that organise a problem before you start on it, each with where it came from and where it breaks.
A bank fails when its liabilities come due faster than its assets, which can happen to a solvent bank.
Any banking interview question on runs, deposit insurance, liquidity rules or March 2023.
From It's a Wonderful Life · 1946
Check all three legs, marketability, cheap money and a population buying for resale, before calling something a bubble.
Answering whether a current market is a bubble, or explaining why some overvalued assets never become one.
From Boom and Bust · William Quinn and John D. Turner
In distress, a claim is worth what its documents let it argue for, not where it sits on the slide.
Restructuring and distressed interviews, credit modelling, and any discussion of covenant-lite lending.
From The Caesars Palace Coup · Max Frumes and Sujeet Indap
Match the discount rate to the cash flow: a flow to all capital providers is discounted at the blended cost of all of them.
The discount-rate questions in a DCF interview, and any model where the cash flow and the rate have been matched carelessly.
From WACC Explained · The Finance Storyteller
The market misprices what is hard to measure, so a consistent cheap signal can beat an expensive expert.
Quant interviews, any debate about discretionary against systematic investing, and understanding how you yourself are being assessed in recruiting.
From Moneyball · 2011
Judge a chief executive by what they do with the cash, not by how well they run what produces it.
Private equity interviews, assessing a management team, and any question about buybacks, dividends or acquisitions.
From The Outsiders · William N. Thorndike
Every cell in a DCF is a claim about future cash or about its risk; if you cannot say which, the cell should not be there.
The first DCF question in any interview, and whenever a model has grown so large that nobody can say what it is for.
From Session 3: Intrinsic and DCF Valuation — Laying the Groundwork · Aswath Damodaran (NYU Stern)
Judge a decision by what was knowable when it was made, and keep the outcome in a separate column.
Reviewing a trade or a deal that went wrong, answering a question about a failure, and any post-mortem.
From Thinking in Bets · Annie Duke
Results come from a few outcomes, so the job is to survive long enough to be there when they arrive.
Position sizing, venture portfolio construction, and any moment of frustration that most of your effort seems to produce nothing.
From The Psychology of Money · Morgan Housel
In a management buyout the insider is the buyer, so the board's job is to make the market, not take the offer.
Any take-private, management-led bid, or fairness question in M&A and private equity interviews.
From Barbarians at the Gate · 1993
Clarify the metric, protect the guardrails, then decompose the drop by segment until it is isolated; show the process, not a guess.
Product management interviews, any analytics role, and any desk conversation that starts with a number going the wrong way.
From Google Product Manager Metrics Interview: A Worked Mock · Aakash Gupta
Reason about a model in tokens: that is what it reads, what fills its window and what you pay for.
Explaining how a language model works, estimating the cost of an AI feature, and debugging a model that fails at a character-level task.
From Most Devs Don’t Understand How LLM Tokens Work · Matt Pocock
Name the two sides, say which one pays and why, and describe exactly how one side's growth helps the other.
Marketplace and platform pitches, product strategy questions, and the marketplace model.
From Platform Revolution · Geoffrey Parker, Marshall Van Alstyne and Sangeet Paul Choudary
Ask what a rating assumes about defaults happening together before trusting what it says about the pool.
Any question about 2008, about structured credit, or about why a highly rated instrument lost most of its value.
From The Big Short · 2015
A limit is an escalation rule: it decides when a problem must move up the firm, not just how big it may be.
Markets and risk interviews, especially the question of what a risk function actually does.
From Margin Call · 2011
Settlement takes days, and the collateral call arrives before the trade clears. That gap is where a squeeze does its damage.
Any long/short, prime brokerage or market structure conversation that touches GameStop.
From Eat the Rich: The GameStop Saga · 2022
Whatever you can measure and reward will be maximised literally, including the gaps between the measure and the goal.
AI product and risk discussions, designing any metric or bonus scheme, and evaluating a model's objective.
From The Alignment Problem · Brian Christian
Name the purpose of a job separately from its tasks; automation changes the tasks and leaves the purpose to be done better or worse.
Answering what AI changes about an analyst role, planning a career, or assessing headcount claims in a bank.
From NVIDIA's fiscal 2026 letter from Jensen Huang · Jensen Huang
Term premium is an estimate from a model; say which model, and treat the level as less certain than the direction.
Any rates conversation that invokes the term premium, and any question about why long yields moved while policy did not.
From Treasury Term Premia: 1961-Present · Tobias Adrian, Richard K. Crump, Benjamin Mills and Emanuel Moench, Federal Reserve Bank of New York (Liberty Street Economics)
Accrual profit is the economics of a period; cash is the bank account. Every difference is a timing gap that the cash flow statement reconciles.
The first accounting question in any finance interview, and the foundation for every quality-of-earnings judgement.
From Accrual Accounting: How it Works & Why it’s #1 · Accounting Stuff
Answer accretion with arithmetic and value with evidence, and never let the first stand in for the second.
Any M&A interview, any accretion-dilution question, and any board case where accretion is offered as the reason to proceed.
From Session 25: Acquisition, a Value Destroyer? · Aswath Damodaran (NYU Stern)
Judge an adjustment by whether an owner of the whole business would also get to ignore the cost.
Reading any earnings release, pitch deck or S-1 that leads with a non-GAAP measure.
From WeWork: Or the Making and Breaking of a $47 Billion Unicorn · 2021
Start from an observation you can make and others cannot, then do the work to see whether the market already knows.
Stock idea generation and the stock pitch question in any buy-side interview.
From One Up on Wall Street · Peter Lynch
An index buys read speed with write speed and disk; add one for the query you run most and remove the ones you never use.
Database questions in engineering and data interviews, and any slow query on a desk.
From B-tree vs B+ tree in Database Systems · Hussein Nasser
Before estimating, ask what number is anchoring you and what the base rate is for cases like this.
Valuation, deal pricing, forecasting, and the behavioural finance questions in hedge fund and asset management interviews.
From Thinking, Fast and Slow · Daniel Kahneman
Check whether the metric is still the goal or has become the goal, and reserve the heavy process for decisions that cannot be undone.
Product and leadership questions, assessing a large company's culture, and deciding how much process a decision deserves.
From Amazon's 2016 letter to shareholders (Day 1) · Jeff Bezos
Ask how a business escapes competition before asking how large its market is.
Venture and growth interviews, any moat discussion, and any pitch that leads with market size.
From Zero to One · Peter Thiel and Blake Masters
Judge a design by how much a reader must understand to change it safely, and prefer deep modules behind small interfaces.
Code review, design discussions, and software engineering interviews that ask what good code is.
From A Philosophy of Software Design · John Ousterhout
Ask what a consensus protocol assumes about crashes and the network; its guarantee is only as strong as those assumptions.
Distributed systems interviews, database replication questions, and any design that claims strong consistency across machines.
From Distributed Systems 6.1: Consensus · Martin Kleppmann (Cambridge)
Supply shocks faded on their own; the hikes anchored expectations so the fading could happen. Credit both, in that order.
Macro and rates interviews, and any debate about central bank credibility.
From The contribution of monetary policy to disinflation · Pongpitch Amatyakul, Fiorella De Fiore, Marco Lombardi, Benoit Mojon and Daniel Rees, Bank for International Settlements (BIS Bulletin No 82)
Ask when the debt comes due, what it can reach, and what trips it, before asking how much there is.
Real estate, infrastructure and any capital structure question where leverage is measured only as a ratio.
From Brookfield Asset Management's 2008 letter to shareholders · Bruce Flatt
Spending is only growth if the return on it exceeds the cost; estimate the return under several assumptions before admiring the spend.
Any capital-intensive growth story, the AI capital expenditure debate, and valuation of a company reinvesting most of its cash flow.
From Hayden Capital's Q2 2026 letter, on the "SaaS-pocalypse" and returns on reinvestment · Fred Liu
Ask where a market is in the sequence rather than whether it is a bubble; the stages are more recognisable than the verdict.
Any market history question, any debate about whether a current theme is overdone, and macro interviews.
From Manias, Panics, and Crashes · Charles P. Kindleberger
A forecast is a story written in numbers; if a row cannot be said as a sentence about the business, it should not be in the model.
Building or defending a DCF, writing a stock pitch, or reviewing someone else's model.
From Narrative and Numbers · Aswath Damodaran
Design every retryable operation so that doing it twice has the same effect as doing it once; the network will test this for you.
System design interviews, payment and order systems, and any API that a client might retry.
From Build a Robust Payments Service Using Idempotency Keys · Arpit Bhayani
A rescue that swaps assets at fair value changes nothing; only new capital changes a bank's solvency.
Banking crises, bailout design, and the interview question of what a capital injection does that asset purchases do not.
From John Hussman's October 2008 market comment on recapitalising the banks · John Hussman
The right amount of debt minimises the blended cost of capital; the maximum a lender will provide is a different and larger number.
LBO and leveraged finance questions on how much debt a deal can carry, and corporate finance questions on capital structure.
From Session 18: Optimum Capital Structure — The Cost of Capital Approach · Aswath Damodaran (NYU Stern)
Lending cures illiquidity; only capital cures insolvency. Decide which problem you have before choosing the remedy.
Questions about why Lehman was allowed to fail and AIG was not, about central bank lending, or about any distressed situation.
From Too Big to Fail · 2011
Ask what would make this fail and who is paid for what before asking anything else.
Diligence, deal structuring, reading any management proposal, and preparing for any decision you cannot easily reverse.
From Poor Charlie's Almanack · Charles T. Munger
Look for situations where the range of outcomes is wide but the chance of permanent loss is small, because the market prices both as risk.
Idea generation, special situations, and any pitch where the obvious objection is that the outcome is unknowable.
From The Dhandho Investor · Mohnish Pabrai
A prepayable bond gets shorter when rates fall and longer when they rise; the spread you are paid is for that asymmetry.
Fixed income, securitised products and mortgage finance interviews, and any question about why mortgage rates move with MBS rather than the policy rate.
From Mortgage-Backed Securities · Andreas Fuster, David O. Lucca and James Vickery, Federal Reserve Bank of New York (Staff Reports)
A bank's margin in a hiking cycle is decided by how slowly it reprices its deposits, measured as the deposit beta.
Bank earnings, FIG coverage, and any interview that asks how rising rates affect a bank.
From Is This Time Different: How Are Banks Performing during the Recent Interest Rate Increases Compared to 2004-2006? · Anya Kleymenova, Lori Leu and Cindy M. Vojtech, Board of Governors of the Federal Reserve System (FEDS Notes)
Judge a network by whether its first small market is dense and self-sustaining, not by the size of the market it aims at.
Early-stage diligence, growth strategy questions, and any marketplace that reports total users rather than density.
From The Cold Start Problem · Andrew Chen
Find the narrowest step in a supply chain; that is where the risk, the pricing power and the politics all sit.
Technology coverage, macro and geopolitical questions, and any discussion of moats in hardware.
From Chip War · Chris Miller
In physical commodities the money is in moving, financing and accessing the cargo; the price direction is usually hedged.
Trading house and commodities interviews, and any analysis of a business that moves physical goods.
From The World for Sale · Javier Blas and Jack Farchy
Decide what a business is worth before looking at the price, then act only when the price is far enough below.
Any stock pitch, any conversation about whether a market move is a reason to act, and any valuation that starts from the price.
From The Intelligent Investor · Benjamin Graham
Private credit's borrowers are more levered and its recoveries lower than the syndicated market's, and the capital waiting to be deployed is what pressures underwriting.
Credit fund, leveraged finance and private equity interviews, and any discussion of where the risks in private credit sit.
From Private Credit: Characteristics and Risks · Fang Cai and Sharjil Haque, Board of Governors of the Federal Reserve System (FEDS Notes)
Measure risk as the chance of ending the holding period with less buying power, which makes volatile productive assets safer than stable unproductive ones.
Any debate about what risk means, portfolio construction over long horizons, and questions about gold or cash as safe assets.
From Berkshire Hathaway's 2011 letter to shareholders · Warren Buffett
Measure what changed for the customer, not what was shipped; a team given an outcome behaves differently from one given a list.
Product interviews at large companies, metrics questions, and any discussion of how a team should be judged.
From Escaping the Build Trap · Melissa Perri
The practices that make shipping frequent are the ones that make it safe, so do not trade one for the other.
Engineering management questions, system design discussions about release process, and any debate that assumes speed costs reliability.
From Accelerate · Nicole Forsgren, Jez Humble and Gene Kim
Check what share of the value is terminal and what multiple the terminal assumptions imply; those two checks catch most broken DCFs.
Any DCF review, any interview follow-up on the terminal growth rate, and any model where the answer seems too sensitive to the last year.
From Session 9: Terminal Value · Aswath Damodaran (NYU Stern)
A long window degrades before it fills; curate and order what goes in rather than relying on size.
Designing any system that feeds documents to a model, and explaining why a model missed something that was in its context.
From Why LLMs Get Dumb (Context Windows Explained) · NetworkChuck
Investors as a group earn what businesses earn minus what they pay to helpers; every layer of advice is a claim on that pool.
Asset management economics, the active-passive debate, and any fee discussion.
From Berkshire Hathaway's 2005 letter to shareholders · Warren Buffett
An inverted curve is the market expecting cuts; read the near-term forward spread, because the long spread is diluted by the term premium.
Rates, macro and sales and trading interviews, and any time a headline says the curve has inverted.
From (Don't Fear) The Yield Curve · Eric Engstrom and Steve Sharpe, Board of Governors of the Federal Reserve System (FEDS Notes)
Seniority is a queue for losses; the thickness of the slices beneath you is your protection.
Any structured credit, securitisation or capital structure question, in an interview or on the desk.
From The Big Short · 2015
Publish the method for intrinsic value, then let it decide: buy back below it, issue above it, and keep the multiple consistent so the method cannot flatter.
Valuing a holding company or an insurer with an investment portfolio, and any discussion of how management should decide on buybacks.
From Markel Group's 2023 letter to business partners · Thomas Gayner
In a disagreement, weight each view by that person's track record on the question, not by their rank or confidence.
Investment committees, group cases, and any time you are deciding whose forecast to trust.
From Principles · Ray Dalio
A buyback creates value only with funds to spare and a price well below intrinsic value; above that price the same action destroys it.
Any capital allocation question, any company announcing a buyback, and private equity interviews on value creation.
From Berkshire Hathaway's 2011 letter to shareholders · Warren Buffett
Decide which mistake is more expensive before tuning a model; the threshold is a business choice the statistics only express.
Any model used for screening, fraud, credit or hiring, and the interview question of how you would evaluate a classifier.
From Precision vs Recall, With a Clear Example · Kimberly Fessel
Build the test set before the feature, measure every change against it, and keep a person in the loop where the metric cannot be trusted.
Any AI product discussion, any system design that includes a model, and the question of how you know an AI feature works.
From How to Systematically Set Up LLM Evals · Dave Ebbelaar
Growth ties up cash in receivables and inventory, so model the working capital a business needs before trusting its profit.
Three-statement questions, cash flow forecasting, and any growth company whose profit and cash are diverging.
From Working Capital Explained · The Finance Storyteller