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Author: Charlie Munger

Source: Link

Published: 2005

Pages: 552

Rating: ⭐⭐⭐⭐⭐

High Level Summary

Charlie Munger is almost as well-known for his philosophy as he is for his investing career. Poor Charlie's Almanack is the perfect introduction to a huge breadth of key ideas. Munger is a huge proponent of a multi-disciplinary approach to knowledge. If you want to be a good investor you can't just know a whole lot about finance. You need all the "big ideas."

"My natural drift, which was toward learning all the big ideas in all the big disciplines, so I wouldn't be the perfect damn fool the professor described. And because the really big ideas carry about 95% of the freight, it wasn't at all hard for me to pick up about 95% of what I needed from all the disciplines and to include use of this knowledge as a standard part of my mental routines.

There are a lot of smart people out there summarizing the most important ideas that humans have ever had. You can get a decent handle on those ideas if you spend some time looking. The key is then to to put those ideas to work.

"Once you have the ideas, of course, you must continuously practice their use. Like a concert pianist, if you don't practice you can't perform well. So I went through life constantly practicing a multi-disciplinary approach."

Key Ideas & Takeaways

• Developing a multidisciplinary experience informs everything else you do
  • If there is one takeaway from the writings of Charlie Munger, it is the importance of developing a well diversified mind and knowledge base.
  • Developing one line of specialty and thinking can lead to dogmatic beliefs that close your mind to new ideas and ways of thinking about things.
  • [SEARCH MULTIDISCIPLINARY THINKING REFERENCES]
• Big important ideas
  • "My natural drift, which was toward learning all the big ideas in all the big disciplines, so I wouldn't be the perfect damn fool the professor described. And because the really big ideas carry about 95% of the freight, it wasn't at all hard for me to pick up about 95% of what I needed from all the disciplines and to include use of this knowledge as a standard part of my mental routines. Once you have the ideas, of course, you must continuously practice their use. Like a concert pianist, if you don't practice you can't perform well. So I went through life constantly practicing a multi-disciplinary approach."
  • [SEARCH BIG IMPORTANT IDEAS REFEREN
• Understand and expand your circle of competence
  • This idea isn't unique to Charlie Munger but he drives home the importance.
  • [SEARCH CIRCLE OF COMPETENCE REFERENCES]
• The importance of Checklists: Charlie Munger's Checklist
  • Charlie Munger was a big believer in the necessity to study and understand a variety of key disciplines and mental models and running through a checklist of ideas to avoid making a mistake as much as possible
  • Some people "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." (Charlie Munger)
  • See also ‣
• Destroying your own confirmation bias'
  • Confirmation bias can be one of the most dangerous tendencies in investing because you can do all the work and research under the sun but you won't be properly primed to take in new information that might update your way of thinking.
  • "Charles Darwin trained himself, early, to intensively consider any evidence tending to disconfirm any hypothesis of his, more so if he thought his hypothesis was a particularly good one." (Charlie Munger)
  • [SEARCH CONFIRMATION BIAS REFERENCES]
• Incentives are one of the most powerful forces in psychology
  • The ability to understand people conscious and unconscious incentives will largely help you dictate how they will behave. This is true of managers, companies, and investors.
  • [SEARCH INCENTIVE REFERENCES]
• Looking at idea standing on your head: Inversion
  • "Invert, always invert." (Carl Jacobi)
  • [SEARCH INVERSION REFERENCES]