Lessons we learned from Charlie Munger are the way he thinks and observes the world. His sense of humor in delivering his strong and direct opinions impresses me. Those criticisms against the investment management and academic subjects reveal his natural character in the family of the lawyer. More about Charlie’s thinking modes are summarized below:
Reverse and Cross-Domain Thinking
Charlie is known for his reverse thinking. To fall into the worst cases, what actions should we take? Find them out, and get away from them. This is mentioned by Charlie multiple times in his speech.
Second, Charlie talks about the cross-domain thinking when criticizing the subjects of economics and psychology XD. Economics should have included the facet of psychology, and psychology should not be limited to the existing boundary. Charlie is brave, as his professional background is neither economics nor psychology.
Think to Prevent Ourselves from Psychology of Misjudgement
This is a long topic, basically saying that humans get blinded by the psychological nature. Below are some key ideas:
- React more to the loss than the reward. Imagine the loss and reward of 100 dollars.
- Tend to stay unchanged. Change means uncertainty, and uncertainty is the opposite of the survival gene by nature.
- A sense of following the crowd. Again, this is by nature to keep a higher survival rate, even if the crowd is not making the right decision.
- Envy by nature. The good side of this nature is to push the speed of civilization. The negative side of it is the trigger of the war.
Data Is Not Everyting
Not everything can be turned into collectible or interpretable data. Because of this, we have to be cautious about what is not seen in the datasheet. The integrity of the management team or the culture of a company is not easy to measure, for example.
Always Learn and Think in a Right Way – Link New Knowledge to Our Thinking System
This is the habit that shapes who Charlie Munger is. To be a strong man, we not only eat good food but also train our muscles. So does the brain. We learn and think to digest and train what we’ve learned, making it part of our body.
Charlie encourages us to make a checklist to review our decisions and build a self-thinking system where we can practice linking information or new knowledge to it.
Investement – Find the Good Ones and Wait for the Marginal Safety Moment
The question is: How to find the good ones? When is the moment of the marginal safety? Well, what I learn is: start with what you are familiar with.
Let AI summarize what I wrote:
