In no particular order, and some of my free form responses to Charlie Munger’s seminal work. He’s the right hand man with Warren Buffett. This publication is sighted by many as a great source of influence and knowledge for business. Running a business, investing, and in the larger context: some great life lessons on its own. (outside of business). His stuff is in bold. my comments are [between these things].
1. “Any year that you don’t destroy one of your best-loved ideas is probably a wasted year.” [Boom! Right off the bat I wholeheartedly disagree with one of his claims. Why can’t a best loved idea just be that? Maybe the idea isn’t ready to bring forward yet. Or maybe we are not ready for the idea yet. To force oneself to have to move or destroy a best loved idea within a year is an awful way to go. I gravitate to fellow entrepreneurs because we think openly, free from shackles of time (and other elements). Why can’t we love our ideas? Why do we have to destroy them. We can execute or destroy a best loved idea on our own time. Yuck! -1 for Charlie Munger.]
2. “Never fool yourself, and remember that you are the easiest person to fool.” – Richard Feynman. [Absolutely. Ego is the Enemy. We are easily prone to drink too much of our own Kool-Aid. Travel, being open to meeting and dialoguing with strangers, especially people very different from ourselves. These things help us to be less prone to fool ourselves. They help keep us in the real world, vs. an idealistic self absorbed bubble.]
3. [Charlie Munger thinks social proof causes humans to think like sheep, so contrary thinking invites new ideas that are possibly more objectively correct. +1 for Charlie Munger.]
4. “Invert, always invert. Many hard problems are best solved only when they are addressed backwards.” [I’d like to read more examples on this, and in the context of innovation. He mentions this one: “If you want to help India, the question you should consider asking is not: “How can I help India?” Instead, you should ask: “How can I hurt India?” You find what will do the worst damage, and then try to avoid it.”]
5. “It is impossible to begin to learn that which one thinks one already knows.” – Epictetus. [OK, fine, but why do we have to be so hard on ourselves? At some point, we have to believe in things that we think we already know. If not, won’t we be walking around like kindergarteners, questioning everything? This is a beautiful way to live if we just want to play and look at the world in wonderment, smelling flowers all day. But successful, happy people I know appear to me to have built a foundation of knowledge and principles as a base line for growth. They are never afraid to learn. But they’re not afraid to have a bit of confidence and momentum for figuring out some shit along the way. -1 for Charlie Munger.]
6. “I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches— representing all the investments that you get to make in a lifetime. And once you’d punched through the card you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did and you’d be forced to load up on what you’d really thought about. So you’d do so much better.” – Warren Buffett. [Love this. It summarizes Buffett’s long term investment strategy. More than this, it reminds me of Cuba for some reason. In Cuba, they don’t throw away much, because they have to make what they have work. In the US, cars from the 1950s got crunched for new cars. In Cuba, no new cars were coming in, so they kept repairing what they have. It’s great to work with constraints. Constraints are blessings in disguise. They get us to think creatively. +1 for Charlie Munger.]
7. Psychology Mental Models.
Hammer-and-nail bias.
Appealing to person’s self-interest
Consistency principle
Social proof
Sunk cost
Deprival super-reaction
First conclusion bias
Crowd folly
Reciprocity
Five Ws – Who, What, Where, When, Why
[Wait a minute. This seems oddly familiar to Robert Caldini’s 6 Principles of Persuasion. Whichever came first, it’s ok, because I like and agree with these.]
8. Autocatalysis: “Disney is an amazing example of autocatalysis. They had all those movies in the can. They owned the copyright. And just as Coke could prosper when refrigeration came, when the videoeassette was invented, Disney didn’t have to invent anything or do anything except take the thing out of the can and stick it on the cassette. And every parent and grandparent wanted his descendants to sit around and watch that stuff at home on videocassette. So Disney got this enormous tail wind from life. And it was billions of dollars worth of tail wind. Obviously, that’s a marvelous model if you can find it. You don’t have to invent anything. All you have to do is to sit there while the world carries you forward…” [Note to brain: remember this word: autocatalysis. Very good. Everybody with a smart phone in their pocket is a MASSIVE foundation for autocatalysis. There’d be no Uber without smart phone. The list is long.]
9. Remember: “Only twenty percent of the people can be in the top fifth“. [Totally. I saw this when I saw people going into Starbucks for the first time. All high end fancy car consumer types. Then, about a year later, I saw a couple construction workers going into the same Starbucks. That hit home with me. My friend Tom: “Chicago is a city of 10 million people. 900,000 are poor and destitute. 100,000 are rich and affluent. The other 9 million are trying to be like the 100,000.” +1 Charlie Munger (and Tom!)]
10. “I have a clipping from the 1911 Buffalo Evening News that lists the fifty most important stocks then actively traded on the New York Stock Exchange. Today only one, General Electric, remains in business as a large, independent company. That’s how powerful the forces of competitive destruction are. Over the very long term, history shows that the chances of any business surviving in a manner agreeable to a company’s owners are slim at best. [This is sobering. But also exciting. I was looking at investing some coin in these stocks that continue to go up and up and up. Apple, Amazon, Google. But in the big scheme of life, maybe the party is already over for these guys (from an investment standpoint). My nature is such that I’m more into finding the next Apple, Amazon, Google. I like to think that i’m a forward thinker, but when a company that looks promising goes public, I get scared away: “ah, these guys are overhyped.” Shame on me, it’s no win thinking. TY for minimal fee mutual funds. Buy and forget. But beyond investing, this story above is a great testament to business. Important companies today can be insignificant or non existent tomorrow. This is refreshing. The little guy can win, and often does win. We can create and invent and make something remarkable. We live in a pretty good world! +1 Charlie Munger.]
11. “And when these new businesses come in, there are huge advantages for the early birds. And when you’re an early bird, there’s a model that I call “surfing”— when a surfer gets up and catches the wave and just stays there, he can go a long, long time. But if he gets off the wave, he becomes mired in shallows.” o [Hence why Berkshire tends not to invest in technology.] Love this. +1 Charlie Munger.]
12. “There’s always been a market for people who pretend to know the future. Listening to today’s forecasters is just as crazy as when the king hired the guy to look at the sheep guts.” [Forecasters? Agreed, crazy. But future thinkers? Different story. I love being around people who are thinking about the future (but are living in the present moment). I think it’s great to talk about what’s coming down the road. It keeps me young and fresh. -1 Charlie Munger]
13. “febezzlement” —the functional equivalent of embezzlement—to explain how wealth is stripped away by layers of unnecessary investment managers and consultants.
14. Use math to size the problem: o By 2034, there will be 8 billion consumers. Each consumer must drink 64oz of water per day. If you capture half the market, and each person drinks 16oz of Coca-Cola a day, we can sell 2.92 trillion eight ounce servings in 2034. Then, if you net 4 cents per serving, you’ll earn $117 billion. [love the aphorism, but have fault with the assumption. I think people will be drinking different things than 16oz of Coke a day. Yuck product. But Coke is in the bottled water business. I’d like to invest in THE compostable plastic (bottle) solution. That’s my math. -1 Charlie Munger]
15. Mimicking the herd invites regression to the mean (merely average performance). [What an interesting guy. Conservative in so many ways but alternative thinking in others.]
16. The only way to win is to work, work, work, and hope to have a few insights. Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day More important than the will to win is the will to prepare Develop fluency in mental models from the major academic disciplines If you want to get smart, the question you have to keep asking is “why, why, why?”
17. Remember that reputation and integrity are your most valuable assets – and can be lost in a heartbeat. [A lot of younger people may not know this yet.]
18. “Self-pity is always counterproductive. It’s the wrong way to think. And when you avoid it, you get a great advantage over everybody else, or almost everybody else, because self-pity is a standard response.”
19. “Assiduity. I like that word because to me it means: “Sit down on your ass until you do it.”” [Do it now. Execution. I am obsessed with getting the ball out of my court. A ‘to do’ list is a great thing. I love to get it done and cross things off my list. If an email sits in my inbox too long, or something sits on my “to do” list too long, I get irritated. I love this irritation. It keeps me in check. It allows me to be productive and clear headed.]
20. “I think that, every time you see the word EBITDA [earnings before interest, taxes, you should substitute the words “bullshit earnings.” [amen.]
21. “I would argue passion is more important than brain power.” [Grit and passion are two words that will continue to be revered (because they are becoming more scarce.]
22. There are always people who will be better at something than you. You have to learn to be a follower before you become a leader.”
23. “The ‘silly’ question is the first intimation of some totally new development.” – Alferd Whitehead
24. “There is no limit to what a man can do or where he can go if he doesn’t mind who gets the credit.” – Robert Woodruff
25. On Buffett’s teachings: “his words are often made more acceptable through use of insightful humor.” [We always welcome an opportunity for more humor in our lives. If you can get someone to laugh with you, they are your friend. If you can get someone to gut wrench laugh with you, they are your friend for life.]
