Charlie Munger: A Lesson on Elementary Worldly Wisdom, Revisited

Talk 3 of the eleven in Chapter Four of Poor Charlie’s Almanack. See The Eleven Talks of Poor Charlie’s Almanack for the full collection.

Key Takeaways

You’re deeply limiting yourself if you don’t create a personal framework for Multidisciplinary Thinking

Highlights & Notes

Kyle’s reading layer from Poor Charlie’s Almanack, preserved verbatim. Munger’s text and pulled-in source quotes appear as bullets; Kyle’s own annotations appear as Kyle: callouts.

• How do you get worldly wisdom? What system do you use to rise into the tiny top percentage of the world in terms of having sort of an elementary practical wisdom? I’ve long believed that a certain system-which almost any intelligent person can learn-works way better than the systems that most people use. As I said at the U.S.C. Business School, **what you need is a latticework of **Mental Models in your head. And you hang your actual experience and your vicarious experience (that you get from reading and so forth) on this latticework l of powerful models. And, with that system, things gradually get to fit together in a way that enhances cognition.
• “The incessant concentration of thought upon one subject, however interesting, tethers a man’s mind in a narrow field.” Sir William Osler #Multidisciplinary Thinking
• “The very first step towards success in any occupation is to become interested in it.” #Whatever you are, be a good one #Career Advice
• Of course, when I urge a multidisciplinary approach-that you’ve got to have the main models from a broad array of disciplines and you’ve got to use them all-I’m really asking you to ignore jurisdictional boundaries. #Multidisciplinary Thinking
  • You can’t really say “I’m not interested in math, physics, etc.”
• And some of the worst dysfunctions in businesses come from the fact that they balkanize reality into little individual departments with territoriality and turf protection and so forth. So if you want to be a good thinker, you must develop a mind that can jump the jurisdictional boundaries. #Multidisciplinary Thinking
• Since your academic structure, by and large, doesn’t encourage minds jumping jurisdictional boundaries, you’re at a disadvantage because, in that one sense, even though academia’s very useful to you, you’ve been mistaught. My solution for you is one that I got at a very early age from the nursery: the story of the Little Red Hen. The punch line, of course, is, ""Then I’ll do it myself,’ said the Little Red Hen.” #Academia
• Hershey began to build the Pennsylvania town that bears his name. Hershey’s utopian ideas and principles continue to influence the company and the town. #City Building
• Value Line’s mission is “to help investors get the most accurate and independently created research information available, in any format they choose, and teach them how to use it to meet their financial objectives.” In operation since 1931, Value Line has a solid reputation for reliability, objectivity, independence, and accuracy. Best known for the Value Line Investment Survey, the company publishes dozens of print and electronic research products. #look-it-up
• Ideology does some strange things and distorts cognition terribly. If you get a lot of heavy ideology young-and then you start expressing it-you are really locking your brain into a very unfortunate pattern. And you are going to distort your general cognition.

  Kyle: How do religious people balance their theology with cognitive reasoning?

• Therefore, in a system of multiple models across multiple disciplines, I should add as an extra rule that you should be very wary of heavy ideology. You can have heavy ideology in favor of accuracy, diligence, and objectivity. But a heavy ideology that makes you absolutely sure that the minimum wage should be raised or that it shouldn’t-and it’s kind of a holy construct where you know you’re right-makes you a bit nuts. #Multidisciplinary Thinking
• “What a man wishes, that also will he believe.” (Demosthenes) #Confirmation Bias
• “Work. Finish. Publish.” (Michael Faraday’s advice to the young William Crookes, later a famous chemist and physicist in his own right)
  • From Leonardo Da Vinci (Book):
    • On a page that includes a drawing of a water clock and sundial, he lets loose a lament that touches on the sadness of unfinished work: “We do not lack devices for measuring these miserable days of ours, in which it should be our pleasure that they be not frittered away without leaving behind any memory of ourselves in the mind of men.” He began scribbling the same phrase over and over again, that includes a drawing of a water clock and suna page every time he needed to try a new pen nib or to fritter away a moment: “Tell me if anything was ever done.. .Tell me…Tell me. And at one point he jotted a cry of anguish: “While I thought that I was learning how to live, I have been learning how to die.”
    • Why? One possible reason is that the task he undertook became overwhelming for a perfectionist. As Vasari explained about Leonardo’s unfinished works, he was stymied because his conceptions were “so subtle and so marvelous” that they were impossible to execute faultlessly. “It seemed to him that the hand was not able to attain to the perfection of art in carrying out the things which he imagined.” According to Lomazzo, the other early biographer, “he never finished any of the works he began because, so sublime was his idea of art, he saw faults even in the things that to others seemed miracles.”
• But these psychology professors think they’re so smart that they don’t need a checklist. But they aren’t that smart. Almost nobody is. Or, maybe, nobody is. #Checklists
• So it’s much better to let some things go uncompensated-to Let Life Be Hard-than to create systems that are easy to cheat. #Incentives
• The importance of honesty was amplified by the Mormon Apostle Mark E. Petersen when he said: “Honesty is a principle of salvation in the kingdom of God. Just as no man or woman can be saved without baptism, so no one can be saved without honesty.”
• We’ve never eliminated the difficulty of that problem. And ninety-eight percent of the time, our attitude toward the market is … [that] we’re agnostics. We don’t know. Is GM valued properly vis-à-vis Ford? We don’t know. #Circle of Competence
• We just look for no-brainer decisions. As Buffett and I say over and over again, we don’t leap seven-foot fences. Instead, we look for one-foot fences with big rewards on the other side. So we’ve succeeded by making the world easy for ourselves, not by solving hard problems. #Circle of Competence
• Each of you will have to figure out where your talents lie. And you’ll have to use your advantages. But if you try to succeed in what you’re worst at, you’re going to have a very lousy career. I can almost guarantee it. To do otherwise, you’d have to buy a winning lottery ticket or get very lucky somewhere else. #Career Advice

  Kyle: Requires intense Self-Reflection. Early in your career it’s hard to discern what you’re bad or good at vs. what you just haven’t learned yet.

• Disney ($DIS) 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 videocassette 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 descendents 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.
• Q: Could you talk about why you left the law?
  • A: I preferred making the decisions and gambling my own money. I usually thought I knew better than the client anyway. So why should I have to do it his way? So partly, it was having an opinionated personality. And partly, it was a desire to get resources permitting independence.

    Kyle: Something to be said about building with your own floor plan in mind.

• Warren Buffett: “The Intelligent Investor is still the best book on investing. It has the only three ideas you really need:
  • 1. The Mr. Market analogy
  • 2. A stock is a piece of a business
  • 3. Margin of safety.”
• I’m all for fixing social problems. I’m all for being generous to the less fortunate. And I’m all for doing things where, based on a slight preponderance of the evidence, you guess that it’s likely to do more good than harm. What I’m against is being very confident and feeling that you know, for sure, that your particular intervention will do more good than l harm, given that you’re dealing with highly complex systems wherein everything is interacting with everything else.

  Kyle: Experimentation in social good #Do Good Better

• You must have the confidence to override people with more credentials than you whose cognition is impaired by incentive-caused bias or some similar psychological force that is obviously present. But there are also cases where you have to recognize that you have no wisdom to add-and that your best course is to trust some expert. #Incentives #Spirit of Humility

  Kyle: Balance between offering value as an outside perspective and trusting in the expertise of other people. #The Mirage of Knowledge #Tom Nichols

• In effect, you’ve got to know what you know and what you don’t know. What could possibly be more useful in life than that? #Self-Reflection
• On the other hand, in copying Jack Welch, I am trying to teach you something, When you don’t know and you don’t have any special competence, don’t be afraid to say so. #Circle of Competence
• I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge. To me, they’re like the bee dancing its incoherent dance. They’re just screwing up the hive. #Circle of Competence #Spirit of Humility
• As you go through life, sell your services once in a while to an unreasonable blowhard if thať’s what you must do to feed your family. But run your own life like Grant McFayden. That was a great lesson.
• There, again, we’re talking about elementary psychology. It’s elementary literature. Good literature makes the reader reach a little for understanding. Then, it works better. You hold it better. It’s the commitment and consistency tendency. If you’ve reached for it, the idea’s pounded in better. #Reading
• And if you see he wants to do something really stupid, it probably won’t work to tell him, “What you’re doing is bad. I have better morals than you.” That offends him. You’re young. He’s old. Therefore, instead of being persuaded, he’s more likely to react with, “Who in the hell are you to establish the moral code of the whole world?” But, instead, you can say to him, “You can’t do that without three other people beneath you knowing about it. Therefore, you’re making yourself subject to blackmail. You’re risking your reputation. You’re risking your family, your money, etc.” That is likely to work. And you’re telling him something that’s true. Do you want to spend a lot of time working for people where you have to use methods like that to get them to behave well? I think the answer is no. But if you’re hooked with it, appealing to his interest is likely to work better as a matter of human persuasion than appealing to anything else. That, again, is a powerful psychological principle with deep biological roots. #Morals
• “The sign above the players’ entrance to the field at Notre Dame reads ‘Play Like a Champion Today.’ I sometimes joke that the sign at Nebraska reads ‘Remember Your Helmet.’ Charlie and I are ‘Remember Your Helmet’ kind of guys. We like to keep it simple.” Warren Buffett
• If I were running the civilization, compensation for stress in workers’ comp would be zero-not because there’s no work caused stress, but because I think the net social damage of allowing stress to be compensated at all is worse than what would happen if a few people that had real work-caused stress injuries went uncompensated. #Worker’s Compensation
• Well, I am searching for justice when I argue for the Navy rule-for the justice of fewer ships going aground. Considering the net benefit, I don’t care if one captain has some unfairness in his life. After all, it’s not like he’s being courtmartialed. He just has to look for a new line of work. And he keeps vested pension rights and so on. So it’s not like it’s the end of the world. #Let Life Be Hard
• Well, if you’re like me, it’s kind of fun for it to be a little complicated. If you want it totally easy and totally laid out, maybe you should join some cult that claims to provide all the answers. I don’t think that’s a good way to go. I think you’ll just have to endure the world-as complicated as it is. Einstein has a marvelous statement on that: “Everything should be made as simple as possible, but no more simple.” #Simplicity
• There are a relatively small number of disciplines and a relatively small number of truly big ideas. And it’s a lot of fun to figure it out. Plus, if you figure it out and do the outlining yourself, the ideas will stick better than if you memorize ‘em using somebody else’s cram list. #Multidisciplinary Thinking #Big Important Ideas

  Kyle: How does Shane Parrish think about this with his “mental models” books?

• Let me turn to some of the probable reasons for present bad education. Part of the trouble is caused by the balkanization of academia. For instance, psychology is most powerful when combined with doctrines from other academic departments. But if your psychology professor doesn’t know the other doctrines, then he isn’t capable of doing the necessary integration. #Multidisciplinary Thinking
• Operant conditioning can be summarized as follows: “A behavior is followed by a consequence, and the nature of the consequence modifies the organism’s tendency to repeat the behavior in the future.” #Consequences
  • Humans learn by biologically-enhanced trial and error. - “B.F. Skinner (book)” by Daniel W. Bjork
• Will such a super-gifted person instead choose academic psychology wherein lie very awkward realities; that the tendencies demonstrated by social psychology paradoxically grow weaker as more people learn them.
• But, whatever you decide, I think it’s a huge mistake not to absorb elementary worldly wisdom if you’re capable of doing it because it makes you better able to serve others, it makes you better able to serve yourself, and it makes life more fun. So if you have an aptitude for doing it, I think you’d be crazy not to. Your life will be enriched-not only financially, but in a host of other ways-if you do. #Multidisciplinary Thinking
• I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart…
• “The best that is known and taught in the world—nothing less can satisfy a teacher worthy of the name.” (Sir William Osler)
• After all, I never had more than a shred of an illusion that any views of mine would much change the world. Instead, I always knew that aiming low was the best path for me, and so I merely sought (1) to learn from my betters a few practical mental tricks that would help me avoid some of the worst miscognitions common in my age cohort, and (2) to pass on my mental tricks only to a few people who could easily learn from me because they already almost knew what I was telling them. Having pretty well accomplished these very limited objectives, I see little reason to complain now about the un-wisdom of the world. #Live the Library #Investing 101 2.0 Wiki #Don’t Die With Your Music Still in You

  Kyle: Don’t make dumb mistakes - Don’t die with your music still inside you.

• “The man who doesn’t read good books has no advantage over the man who can’t read them.” (Mark Twain) #Reading