“Those who keep learning, will keep rising in life. I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines.”
– Munger’s commencement address to USC Law School, 2007
I don’t know where to even begin.
We all knew that this day would come to pass. That Charlie Munger will no longer be among us. But when it happened last week, it felt different.
How can I describe Charlie? A true Colossus? Renaissance Man? A Legend? Warren Buffet, his long time business partner described Charlie as ‘the best 30-second mind in the world’.
Munger had this amazing capability to pack his wisdom into memorable quotes, and people relished those nuggets. Especially during Berkshire Hathaway’s shareholder meetings.
I am so glad that a couple of years ago in 2022, I was fortunate to make the trip to Omaha, Nebraska to attend Berkshire’s annual shareholder meeting. It was like visiting the Capitalism Hall of Fame. From a distance I got to see so many business leaders and investors that I’ve admired over the years: Warren Buffett, Tim Cook, Jamie Dimon, Guy Spier, Mohnish Pabrai.
And then there was Charlie Munger. He showed up with his characteristic panache, acerbic humor, and witty rejoinders to Warren’s folksy economic commentary and advice. And sometimes with “I have nothing to add”.
Someone like Munger who learnt all his life, collected wisdom, and shared it freely; it is quite apropos to dedicate this edition of Signal to the wit and wisdom of this amazing human.
In this edition, I’d like to share with you 7 of my favorite Charlie Munger mental models / concepts that I have found helpful in my professional life. And I am also sharing a free download in the Wrapping Up section.
My 7 Favorite Munger Mental Models / Concepts
1. “Go to bed smarter than when you woke up.”
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines,” Munger said in a 2007 commencement address at the University of Southern California Law School. “They go to bed every night a little wiser than when they got up, and boy does that help — particularly when you have a long run ahead of you.”
2. Invert. Always Invert.
This principle, derived from the mathematician Carl Jacobi, is a cornerstone of Munger’s problem-solving strategy. It’s about looking at problems backward to find solutions that aren’t apparent when you approach them in a usual, forward-looking manner. For example, if I want to exercise every single day, then I should identify the things that would stop me from exercising every day. It could be a long list of excuses – stay up too late, drink night, don’t set an alarm, don’t have my workout gear ready, or don’t have a workout plan. By inverting, I can identify all the ways I could fail – so I can take care of these things and hit my goal.
3. The money is in the waiting.
Patience, discipline, and compounding in investment, as in life, always pay off. “The big money is not in the buying or selling, but in the waiting,”. Waiting is not natural for human beings, we are not wired to wait. We are wired to act. Fight or flight. But by demonstrating patience, and letting the strategy play out, we can win big in the long term.
4. To get what you want, you should deserve what you want.
From “Poor Charlie’s Almanack,” this quote is a testament to Munger’s belief in rational thought, merit and hard work as the foundations of success. Munger says “It’s such a simple idea. It’s the golden rule, so to speak. You want to deliver to the world what you would buy if you were on the other end.”
5. Multidisciplinary Multi-Model Approach
Munger advocates for a broad perspective in thinking and decision-making. Drawing from a diverse range of disciplines ensures a more rounded and robust understanding of complex problems. Here is what he says on collecting these mental models “And what I noted, since the really big ideas carry ninety-five percent of the freight, that it wasn’t at all hard for me to pick up all the big ideas in all the disciplines and make them a standard part of my mental routines. Once you have the ideas, of course, they are no good if you don’t practice. If you don’t practice, you lose it. So I went through life constantly practicing this multidisciplinary approach. Well, I can’t tell you what that’s done for me; it’s made life more fun, it’s made me more constructive, it’s made me more helpful to others, it’s made me enormously rich—you name it. That attitude really helps.”
6. Thinking Objectively
Munger stresses the importance of challenging one’s own beliefs and ideas. He says, “We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.” This echoes his belief in understanding opposing views thoroughly: “It’s bad to have an opinion you’re proud of if you can’t state the arguments for the other side better than your opponents. This is a great mental discipline.” This principle reflects Munger’s commitment to intellectual rigor and the ability to think from multiple perspectives, a cornerstone of his decision-making process.
7. Reliability
Munger talks about how reliability is the foundation for success. And he approaches it using the inversion principle in a little scarcastic way: “Prescriptions For Guaranteed Misery In Life: First, be unreliable. Do not faithfully do what you have engaged to do. If you will only master this one habit you will more than counterbalance the combined effect of all your virtues, howsoever great. If you like being distrusted and excluded from the best human contribution and company, this prescription is for you. Master this one habit and you can always play the role of the hare in the fable, except that instead of being outrun by one fine turtle you will be outrun by hordes and hordes of mediocre turtles and even by some mediocre turtles on crutches.”
Wrapping Up
Munger identified many models in the discipline of psychology in his famous “The Psychology of Human Misjudgment” speech where he went through the 25 psychological tendencies in detail. He believed that by learning to recognize certain dysfunctional decision-making processes, one can learn to make fewer mistakes. Here is the link to Download The Psychology of Human Misjudgment to learn more.
If you’d like to read or listen to Poor Charlie’s Almanack, Stripe Press has created an incredible resource (link).
Charlie Munger’s legacy extends far beyond his financial acumen. His wisdom on life, decision-making, and learning will continue to inspire generations. As we remember Munger, let’s strive to incorporate his teachings into our daily lives, whether in our professional endeavors or personal growth.
That is it for this edition.
Abhijeet
