Thread by @IvanRadojicic91

1/ My takeaways from Poor Charlie’s Almanack - collection of talks by Charlie Munger

2/ Recommended by many successful people as one of the best business books (h/t @naval ). Totally deserved.

3/ It’s filled with nuggets from start to finish, but here are some of my key takeaways:
- Importance of patience
- Inversion (thinking problems through in reverse)
- Multidisciplinary approach to problem-solving
- Avoiding psychology-caused misjudgments

4/ PATIENCE

5/ Success takes a lot of time. This should be remembered at all times. (single most important thing from the book)

6/ “Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in fast spurs...At the end of the day — if you live long enough— most people get what they deserve”.

7/ The world is super competitive so finding good insights is HARD. Luckily you don’t need too many.

8/ ”How many insights do you need? Well, I’ll argue that in a lifetime you don’t need many. If you look at Berkshire Hathaway and all of its accumulated billions, the top ten insights account for most of it.”

9/ But once you find those rare opportunities, it’s critical to be aggressive and decisive.

10/ "You stuck to your principles, and when opportunities come along, you pounced on them with vigor.”

11/ INVERSION

12/ It’s often better to think problems through backwards – not asking how to create X, but rather how to avoid creating non-X.

13/ “I wish I knew where I was going to die, and then I’d never go there”

14/ Avoiding stupidity is more important than seeking brilliance (via negativa)

15/ “A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.

Just avoid things like AIDS situations, racing trains to crossing, and doing cocaine. Develop good mental habits.”

16/ Accordingly, Charlie Munger’s (and Warren Buffett’s) risk management approach is to protect the downside and avoid the ruin. Same as @nntaleb

17/ MULTIDISCIPLINARY APPROACH

18/ To avoid a “man with a hammer” problem, it’s critical to learn and fluently apply big concepts from multiple fields.

19/ ”Most people are trained in one model – economics, for example – and try to solve all problems in one way. You know the old saying: To the man with hammer, the world looks like a nail. This is a dumb way of handling problems”

20/ The most important fields are mathematics (arithmetic, basic probability), hard sciences (physics, chemistry, engineering), biology, micro-economics, psychology (“no bonkers” kind)

21/ The schools won’t encourage the multidisciplinary education, so you will have to educate yourself.

22/ To be effective, you've got to apply those models in a checklist fashion, similar to what pilots do before the flight.

23/ PSYCHOLOGY OF MISJUDGMENT

24/ A lot of human behavior is driven by genetically-programmed subconscious algorithms. They are generally useful but can often mislead.

25/ Charlie outlines 25 psychological tendencies that can lead to misjudgments. Some of the ones that resonated the most:

26/Reward & punishment super-response tendency

Incentives are superpowers and can lead to terrible, rationalized behavior ("Incentive caused bias")

E.g. management consultant's report always ending with the same advice: "The problem needs more management consulting services''

27/ Liking/Loving tendency.

People tend to ignore faults and comply to the wishes of the object of liking.

Make sure people you love/like are good/admirable people.

28/ Disliking/hating tendency.

People tend to ignore virtues of the object of disliking and dislike any products/people/actions merely associated with it.

Train yourself out of it – you might be missing out.

29/ Doubt-avoidance tendency.

People tend to rush to conclusions too quickly (evolutionary origins)

Force a delay before making an important decision (required from judges and jurors)

30/Inconsistency-avoidance tendency.

People tend to take actions consistent with their past actions, causing ”First conclusion bias” and “Confirmation bias”.

Train yourself to intensely consider the evidence tending to disconfirm your hypothesis, especially strong ones.

31/Reciprocation tendency.

The automatic tendency to reciprocate favors with favors and disfavors with disfavors. Easily manipulated by @RobertCialdini's compliance practitioners.

Introduce rules banning manipulation (e.g. avoid accepting gifts in commercial arrangements)

32/ Influence-from-mere-association tendency.

When people tell you what you didn’t want to hear there’s an automatic reaction of antipathy (“Persian Messenger Syndrome).

Train yourself to welcome bad news.

33/Excessive self-regard tendency.

90% of the drivers in Sweden think they are better than average.

Force yourself to be more objective when evaluating yourself/family/possessions/your future value

34/ Social-proof tendency.

People often think/do the same things others around them think/do.

Learn to ignore the examples from others when they are wrong

35/ Availability miss-weighting tendency.

Human brain tends to overweight what’s easily available to it.

Use checklist (prepared upfront) and consciously underweight extra-vivid evidence, and over-weight less-vivid

36/ Envy/jealousy tendency.

Triggered when some scarce resource seen in possession of another member of the same species (evolutionary origin).

It’s a really stupid sin because it’s the only one you could never possibly have any fun with.

37/ This were just the things I liked the most from first 2 readings.

There are many more insights and the book is more than worth reading in detail (many times).

The End.

cc: @Douglas9162 (thanks for inspiration)