Charles .T. Munger also known as Warren Buffets long time investment partner put together a collection of talks and speeches in a book. This collection gave the public a glimpse of the mental models that the two investors apply in their daily lives.
After reading the book several times, I extracted a few memorable quotes that I believe are simple and life-changing if applied.
1. Simplicity is the end result of long hard work not the starting point.
2. Very basic knowledge is an enormously powerful tool. There are huge dangers with computers. People calculate too much and think too little.
3. A successful investment career boils down to only a handful of decisions.
4. It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.
5. Avoid trouble in life and missteps in investing.
6. Organise common or uncommon sense.
7. Our game is to organise a big idea when it comes along, remember that opportunity comes to the prepared mind.
8. Attractive investment opportunities tend to be ephemeral.
9. Even among the most competent and motivated of people, decisions are not always made on a purely rational basis.
10. It’s kind of fun to sit there and outthink people who are way smarter than you are because you’ve trained yourself to be more objective and multidisciplinary.
11. ” I am no genius, I’m smart at spots and I stay around those spots” Thomas Watson founder of IBM
12.You need to have a passionate interest in why things are happening. The cast of mind, kept over long periods, gradually improves your ability to focus on reality.
13. The habit to committing far more time to learning and thinking than to doing is no accident.
14. Avoid dealing with people of questionable character.
15. More important than the will to win is the will to prepare.
16. Determine value apart from price, Progress apart from activity, wealth apart from size.
17. We are like the hedgehog that only knows one big thing.
18. Capitalism without failure is like religion without hell.
19. It’s human nature to extrapolate the recent past into the future.
20. The system of derivatives is almost insanely irresponsible.
21. People don’t think about consequences of consequences.
22. When you mix raisins and turds, you’ve still got turds.
23. You have to learn the models…. You’ve got to have multiple models in your head…and they have to come from multiple disciplines.
24. Know what to avoid. A lot of success in life and business comes from knowing what to avoid; early death, a bad marriage etc
25. I don’t know anyone who’s wise and who doesn’t read a lot. But that’s not enough. You have to have the temperament to grab ideas and do sensible things. Most people don’t grab the right ideas and don’t know what to do with them.
26. “If I have ever made any valuable discoveries it has been due to patient attention than any other talent” Sir Isaac Newton.
27. The way to win is to work, work, work and hope to have a few insights. That’s a very simple concept but the vast majority of people have some other crazy construct in their heads.
28. How many insights do you need? Well, I’d argue that you don’t need many in a lifetime.
29. Heavy ideology is one of the most extreme distorters of human cognition. If you get a lot of heavy ideology young, you are locking your brain into a very unfortunate pattern since it pounds ideas in better than it convinces out, it’s a very dangerous thing to do. So beware of ideology-based mental misfunctions.
30. Worldly wisdom is mostly very, very simple.
31. I have more than scepticism regarding the orthodox view that huge diversification is a must. The orthodox view is grossly mistaken.
32. There is no way that you can live an adequate life without making many mistakes.
33. If you want to change behaviours you have to change motivations.
34. One should recognize the reality even when one doesn’t like it. Indeed, especially when one doesn’t like it.
35. You don’t have to be brilliant, only a little bit wiser than the other guys on average for a long long time.
I think it’s fare to state that Mungers approach of adopting mental models is simple and applies to anyone.