Charlie Munger spent the last 98 years finding and implementing Mental Models that help him solve complex problems.
You’ll learn them in a couple of threads.
Last week we discussed 4 Mental Models of Charlie.
Today, another 4 will follow.
You’ll learn them in a couple of threads.
Last week we discussed 4 Mental Models of Charlie.
Today, another 4 will follow.
1. Parimutuel Betting
Our life is a constant weighing up of opportunity and risk.
That’s why the smartest way to live life and invest in the stock market is to only take unfair bets.
Bets where the relationship between odds and returns are stacked in your favor.
Our life is a constant weighing up of opportunity and risk.
That’s why the smartest way to live life and invest in the stock market is to only take unfair bets.
Bets where the relationship between odds and returns are stacked in your favor.
2. The Superpower of Incentives
If you call your Wall Street broker, he’ll always have an excellent opportunity for you to invest.
Why?
Because every opportunity to sell you a stock is an excellent one for him.
He gets his commission from selling you the stock.
If you call your Wall Street broker, he’ll always have an excellent opportunity for you to invest.
Why?
Because every opportunity to sell you a stock is an excellent one for him.
He gets his commission from selling you the stock.
If the stock goes up, down, or sideways doesn’t matter to him at all.
But it matters to you.
The incentives of the broker and you don’t align.
Think about how many of these situations exist in everyday life.
Learning:
Look for situations where you both have skin in the game.
But it matters to you.
The incentives of the broker and you don’t align.
Think about how many of these situations exist in everyday life.
Learning:
Look for situations where you both have skin in the game.
3. Invert, always Invert
Often, it’s not clear what goal you should aim for or what to achieve.
There are so many.
But you always know what should never happen.
Focus on that part.
Ask yourself what you must avoid at all costs, and then find out how.
Often, it’s not clear what goal you should aim for or what to achieve.
There are so many.
But you always know what should never happen.
Focus on that part.
Ask yourself what you must avoid at all costs, and then find out how.
It’s so much easier because you have a lot less to think about.
There are a hundred ways to improve your investment performance.
But only a couple of things you must avoid to achieve that goal.
Just as in investing, focus on the downside.
There are a hundred ways to improve your investment performance.
But only a couple of things you must avoid to achieve that goal.
Just as in investing, focus on the downside.
4. Compounding
Compounding is usually only associated with financial investments.
But just like the other mental models, it’s a universal concept for life.
It’s not just money that compounds.
Knowledge, experience, relationships are all subjects of compounding.
Compounding is usually only associated with financial investments.
But just like the other mental models, it’s a universal concept for life.
It’s not just money that compounds.
Knowledge, experience, relationships are all subjects of compounding.
Just think about Munger’s learning curve in over 98 years of constant reading, thinking, and discussing.
If you want to improve at anything, make it part of a routine that you regularly perform for years.
Make it part of your life.
If you want to improve at anything, make it part of a routine that you regularly perform for years.
Make it part of your life.
This was the second part of the series.
A new will follow at least once every week.
If you don’t wan to miss them, consider following me @MnkeDaniel
You would also help me greatly by Retweeting and Liking the Thread.
Thank you very much!
A new will follow at least once every week.
If you don’t wan to miss them, consider following me @MnkeDaniel
You would also help me greatly by Retweeting and Liking the Thread.
Thank you very much!
People who might be interested in this:
@heymaxkoh
@Ajitshah73
@ValueInvestorAc
@SleepwellCap
@GSpier
@TomGardnerFool
@heymaxkoh
@Ajitshah73
@ValueInvestorAc
@SleepwellCap
@GSpier
@TomGardnerFool
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