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Charlie Munger: How to Think and Make Decisions
16 Oct 2017This is post 2/4 in a series about Charlie Munger's wisdom.
Don't Try to be Smart, Avoid Idiocy
It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying "It’s the strong swimmers who drown."
We try to profit from always remembering the obvious than from grasping the esoteric.
Other people are trying to be smart, all I’m trying to be is non-idiotic. I’ve found that’s all you have to do to get ahead in life, be non-idiotic and live a long time. It’s harder to be non-idiotic than most people think.
Organized common (or uncommon) sense is an enormously powerful tool. There are huge dangers with computers. People calculate too much and think too little.
Use of the scientific method and effective checklists minimizes errors and omissions.
Don't overlook the obvious by drowning in minutiae.
Restrict Yourself to your Circle of Competence
Acknowledging what you don’t know is the dawning of wisdom.
If we have a strength, it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter.
— Warren Buffett
Only in fairy tales are emperors told they are naked.
If you try to predict the future of everything, you attempt too much. You’re going to fail through lack of specialisation.
Mimicking the herd, invites regression to the mean.
Above all, never fool yourself, and remember that you are the easiest person to fool.
You have to figure out what your own aptitudes are, If you play games where other people have the aptitudes and you don't, you're going to lose.
Invert, Always Invert
Invert, always invert: Turn a situation or problem upside down. Look at it backward. What happens if all our plans go wrong? Where don’t we want to go, and how do you get there? Instead of looking for success, make a list of how to fail instead. Tell me where I’m going to die, that is, so I don’t go there.
I was greatly helped in my quest by two turns of mind. First, I had long looked for insight by inversion in the intense manner counseled by the great algebraist, Jacobi: "Invert, always invert." I sought good judgment mostly by collecting instances of bad judgment, then pondering ways to avoid such outcomes. Second, I became so avid a collector of instances of bad judgement that I paid no attention to boundaries between professional territories.
Model Thinking
Just as multiple factors shape almost every system, multiple models from a variety of disciplines, applied with fluency, are needed to understand that system.
The most important thing to keep in mind is the idea that especially big forces often come out of these one hundred models. When several models combine, you get lollapalooza effects; this is when two, three, or four forces are all operating in the same direction. And, frequently, you dont get simple addition. It's often like a critical mass in physics where you get a nuclear explosion if you get to a certain point of mass - and you dont ger anything much worth seeing if you don't reach the mass. Sometimes the forces just add like ordinary quantities and sometimes they combine on a breakpoint or critical-mass basis.
More commonly, the forces coming out of these one hundred models are conflicting to some extent. And you get huge, miserable tradeoffs. But if you can't think in terms of tradeoffs and recognize tradeoffs in what you're dealing with, you're a horse's patoot. You clearly are a danger to the rest of the people when serious thinking is being done. You have to recognize how these things combine.
I've long believed that a certain system - which almost any intelligent person can learn - works way better than the systems that most people use. What you need is a latticework of mental models in your head. And, with that system, things gradually get to fit together in a way that enhances cognition.
Especially important examples of these models include the redundancy/backup system model from engineering, the compound interest model from mathematics, the breakpoint / tipping-moment / autocatalysis models from physics and chemistry, the modern Darwinian synthesis model from biology, and cognitive misjudgment models from psychology.
Personally, I've gotten so that I now use a kind of two-track analysis. First, what are the factors that really govern the interests invoked, rationally considered? And second, what are the subconscious influences where the brain at a subconscious level is automatically forming conclusions in various ways - which, by and large, are useful - but which often malfunction?
How can smart people so often be wrong? They don't do what I'm telling you to do: use a checklist to be sure you get all the main models and use them together in a multimodular way.
