Charlie Munger

Graduate Speech:

  • Darwin is a great model in terms of objectivity. And the reason why I especially like Darwin is that his example provides reasonable hope of mental improvement to a great many people. If Darwin could take the modest intellectual endowments and end up next to Newton in Westminster Abbey, we can all learn something from him.
  • And one of the great things to learn from Darwin is the value of extreme objectivity. He tried to disconfirm his ideas as soon as he got’em. He quickly put down in his notebook anything that disconfirmed a much-loved idea. He especially sought out such things. Well, if you keep doing that over time, you get to be a perfectly marvellous thinker instead of one more klutz repeatedly demonstrating first-conclusion bias”
  • Investment should be approached in the same way. When you find a company or idea you like…try and break it down and prove yourself wrong. If you can’t (and as long as you’re somewhat competent), you have a good investment.

Antitodes to Biases

  • Look for disconfirming evidence – killing your own ideas
  • Emphasize factors that don’t produce lots of easily available numbers
  • Under-weigh extra vivid experience and overweigh less vivid experience. Same with recent events i.e cool off
  • Remember the lesson: I idea or a fact is not worth more merely because it is easily available to you.
  • There’s no logical answer in some cases except to wring the money out and go elsewhere

Poor Charlie’s Almanack

  • I don’t want you to think we have any way of learning or behaving so you won’t make mistakes. I’m just saying that you can learn to make fewer mistakes than other people – and how to fix mistakes faster when you do make them…
  • But there’s no way you can live any adequate life without making many mistakes. In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke.
  • Learn how to ignore the examples from others when they are wrong, because few skills are worth more having.
  • It is not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it – who look and sift the world for a mispriced bet – that they can occasionally find one.
  • And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have odds. And the rest of the time they don’t. It’s just that simple
  • Our experience tends to confirm a long held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing some simple and logical thing, will often dramatically improve the financial results of the lifetime.
  • A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables.
  • And then all that is required is a willingness to bet heavily when the odds are extremely favourable, using resources available as a result of prudence and patience in the past.
  • Opportunity comes, but it doesn’t come often so seize it when it does come.
  • People calculate too much and think too little
  • If you want to rise in the world above others you just must use the mental model Framework in a checklist style fashion – otherwise i twill be an unequal contest like that of a one-legged man in an ass kicking contest…
  • There’s always going to be somebody who is making money faster, running the mile faster or what have you…Once you get something that works fine in your life, the idea of caring terribly that somebody else is making money faster strikes me as insane.
  • There’s one big truth that the typical investment counselor will have difficulty recognizing but the guy who’s investing his own money ought to have no trouble recognizing…If you’re comfortably rich and you’ve got a way of investing your money that is overwhelmingly likely to keep you comfortably rich and someone else finds some rapidly growing something-or-other and is getting richer a lot faster than you are, that is not a big tragedy.
  • How crazy it would be to be made miserable by the fact that someone else is doing better because someone else is always going to be doing better at any human activity you can name… Even Tiger Woods loses a lot of the time.
  • If you want to get smart, the question you’ve got to ask is why? why? why? And you relate the answers to a structure of deep theory (Mental Models).
  • To acquire general wisdom, you also need : Full attribution ethos; and extreme reductionism (like in algebra) to understand lollapalooza outcomes
  • A great business at a fair price is superior to a fair business at a great price

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