Charlie Munger recommends reading A Man for All Markets by Ed Thorp
@nntaleb says: The book reveals a thorough, rigorous, methodical person in search of life, knowledge, financial security, and, not least of all, fun.
Here is a thread of 17 highlights:
@nntaleb says: The book reveals a thorough, rigorous, methodical person in search of life, knowledge, financial security, and, not least of all, fun.
Here is a thread of 17 highlights:
I began life in the Great Depression. Along with millions of others, my family was struggling to get by from one day to the next. Though we didn’t have helpful connections and I went to public schools, I found a resource that made all the difference: I learned how to think.
Because of circumstances, I was largely self-taught and that led me to think differently. Rather than subscribing to widely accepted views—such as you can’t beat the casinos [or the markets are perfectly efficient]—I checked for myself.
I learned at an early age to teach myself. This paid off later on because there weren’t any courses in how to beat blackjack, build a computer for roulette, or launch a market-neutral hedge fund.
Seeing what World War II had done to my relatives, and how World War I plus the Great Depression had limited my father’s future, I determined to do better for myself and the children I hoped to have. [Ed Thorp echoing @wolfejosh's quote "Chips on shoulders puts chips in pockets"]
I was learning to work things out for myself, not limited by prompting from teachers, parents, or the school curriculum. I relished the power of pure thought combined with the logic and predictability of science. I loved visualizing an idea, and then making it happen.
I realize that I had always been irritated by what I viewed as petty, rigid mediocrities. Later I would understand the stupidity of butting heads with them. I would learn to avoid them when I could and finesse them when I couldn’t.
[The principles he taught his children]: We planned to give them all the education they wanted, teach them to think for themselves rather than simply accept received wisdom from experts and authority, and encourage them to choose their own calling in life.
I also believed then, as I do now after more than fifty years as a money manager, that the surest way to get rich is to play only those gambling games or make those investments where I have an edge.
[On why there is always opportunities for small businesses]: Even though the Goliath I was challenging had always won, I knew something no one else did: He was nearsighted, clumsy, slow, and stupid, and we were going to fight on my terms, not his.
From a mathematical idea in my head, I forged a system for beating the game. Then I was ridiculed by the casino, which said that it sent cabs for fools like me. It felt good to know that, just by sitting in a room and using pure math, I could change the world around me.
I read stock market classics and scores of other books ranging from fundamental to technical, theoretical to practical, and simple to abstruse. Once again, just as with casino games, I was surprised and encouraged by how little was known by so many.
This phenomenon has been called the wisdom of crowds. Like most simplifications, it has a flip side. With Madoff there were just two answers, fraudster or genius. The crowd voted for genius and got it wrong. I call the flip side to the wisdom of crowds the lunacy of lemmings.
I didn’t believe the efficient market theory. I had overwhelming evidence of inefficiency. We didn’t ask, Is the market efficient? But rather, In what ways and to what extent is the market inefficient? and How can we exploit this?
Undervaluing a deferred benefit is a widespread investment error and seems to be part of our basic psychological makeup.
Charlie Munger presents his list thinking tools in Poor Charlie’s Almanack. This collection of insights includes a favorite of mine for understanding deals and relationships, namely, “Look for the incentives,” which is closely related to finding “Cui bono?” or “Who gains?
To preserve the quality of my life and to spend more of it in the company of people I value and in the exploration of ideas I enjoy, I chose not to follow up on a number of business ventures, although I believed that they were nearly certain to become extremely profitable.
Life is like reading a novel or running a marathon. It’s not so much about reaching a goal but rather about the journey itself & the experiences along the way. As Benjamin Franklin famously said, “Time is the stuff life is made of,” and how you spend it makes all the difference.
