This book brings together his investing thoughts beyond his famous statement "I have nothing to add."
Read on...
Munger propounds the 'Multiple Mental Models' approach to decision making. This collection of 'Big Ideas from Big Disciplines' contains an iconoclastic checklist for decision-making.
The book is written in an unconventional style. The ideas are not listed in an orderly fashion but just touched upon lightly, with pictures given alongside - in line with Munger's idea to "make the mind reach out to the idea" thereby increasing the idea's retentiveness in memory.
The pictures serve to make the idea vivid by increasing their retentiveness and add a bit of geeky humor to the book.
The "Lollapalooza Effect" is Munger's term for the confluence of multiple biases; according to Munger, the tendency toward extremism results from such confluences. These biases often occur at either conscious or subconscious level, and at both microeconomic and macroeconomic scales.
The 25 Cognitive Biases is also explained in the book. Munger explains why people are so psychologically flawed, leading to mistakes in decision making.
After having read the book page by page, I, hereby, list down the 38 thundering lessons from this awesome book.
These are the examples that stuck with me.
These learnings are worded and appended in a way that makes it easier for most of us to understand and absorb.
If you are interested in reading about such learning from other all-time best-selling books, you may click here.
For now, if you wish to know about '"Poor Charlie's Almanack", and what I learned from it, here you go...
1) When you borrow someone's car, you always return it tank full.
2) I am no genius. I am smart in spots, and I stay around those spots.
3) Heavily promoted deals and IPOs are a strict NO.
4) Value is what you get, price is what you pay.
5) A great business at a fair price is superior to a fair business at a great price.
6) Enjoy the process along with the proceeds because process is where you live.
7) Bonds of degradation are too light to be felt until they are too strong to be broken. Be very watchful to even small degradation.
8) If I have been able to see a little farther than other men, it is because I have stood on the shoulders of other giants.
9) You ought to have multiple mental models, and that too from various disciplines of life. With just a few models, you are like a hammer that considers every problem as a nail.
10) In any communication, make sure you communicate the 5Ws - Who is going to do What, When, Where and Why.
11) If you have to choose between a good business and a good management, go for a good business.
12) Once you encounter a good business with a good management, load up heavily.
13) Even with a 10% return, paying 35% tax at the end of 30 years leads to 8.3% annualized yield. In contrast, if you pay 35% each year, your annualized yield after 30 years comes to 6.5%. Sitting on your ass yields roughly 2% higher yield.
14) Terrible mistakes are done by people who are overly cautious about tax savings.
15) If anyone shows you a 200-page prospectus, don't buy it.
16) If you have a strong preference for an ideology (left or right), and you are sure that only you are right, you will make numerous cognitive errors. It's better to have a strong ideology for logic and accuracy and reasoning, rather than whether socialism is good or bad. Your view is ok, but don't make it a rule.
17) Smart people go wrong many times because they are smart only in one domain. They don't use a checklist from multiple models across multiple domains to verify real systems - which are highly complex systems.
18) If a system can easily be cheated, then it is ok not to have such a system even if it means that life would be hard for most people. A cheat able system creates a corrupt ecosystem. e.g. compensating employees for stress.
19) You must stop slop early. If you let the slop run for a while, an entire ecosystem is created, just like a cancer like disease, and then it becomes virtually impossible to stop it.
20) We don't solve hard problems. We make money by making the world easy for ourselves.
21) Don't try to avoid mistakes. Learn to make fewer mistakes than most people and then learn to fix them early. There is no way you can lead an adequate life without making enough mistakes.
22) When you don't know, don't be afraid to say so.
23) Scientific reality is often revealed through mathematics as if mathematics is the language of God. Without numerical fluency, you are like a one-legged person in an ass-kicking contest.
24) You must not only think problems in forwards but also in reverse. Indeed, many problems can't even be solved by just thinking forward. Invert, always invert. As an example, the square root of 2 is an irrational number can only be proven in reverse.
25) Any action just does not have consequences. The consequences have consequences which further have consequences. It's many levels deep. Everything is complex.
26) A bit of unfairness for one in position of responsibility is fine to have fairness of many others that he or she is accountable for. Trying fairness for all is impractical.
27) The safest way to get what you want is to deserve what you want.
28) Acquisition of wisdom is not just to advance in life, but it's your moral duty. For that, you got to be hooked on to lifelong learning.
29) Skills of one decade would never take you through to the next decade. You have to be a continuous learning machine.
30) Self-pity will almost always lead to disastrous results. It's a natural response for humans but you can train yourself out of it.
31) New ideas are rarely accepted by the old guard. And that's because our minds resist change. The old ideas get deeply entrenched. Progress is usually made by the new generation which still doesn't have any preconceived notions.
32) Associations in our mind lead to faulty decisions. As an example, the first success at casino leads someone to try again. Don't rest your decisions on past associations of success or failure. Start afresh and base yourself on current data.
33) In an organization, bad news needs to be shared instantly. If anything can wait, that's good news.
34) Fixable but unfixed bad performance is bad character. Excuses will only lead to deteriorating results.
35) The pain of a loss is far higher than the happiness of an equivalent gain.
36) A frog would immediately jump out of boiling water but would die in water at room temperature when its temperature is slowly raised to boiling point. A small leak can sink a big ship. Same with businesses.
37) An idea or a fact is not worth more just because it's easily available or accessible.
38) A skill that's not practiced will be lost forever.
Hope these 38 fabulous lessons will help shape up your thought process to some extent and help you appreciate life much better.
If you are interested in reading about such learning from other all-time best-selling books, you may click here.
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