Psychology of Human Misjudgement

Being aware of psychological ploys is not a perfect defense

  1. Reward and punishment superresponse tendency:
    • If you would persuade, appeal to interest and not to reason.
    • People’s actions will line up with what they’re rewarded for and away from what they’re punished for according to the rule of nature “repeat behavior that works”.It is extremely stupid to reward behavior that one doesn’t want.
    • Prompt rewards work better than delayed rewards in changing and maintaining the behavior.
    • The behavior is best reinforced with a random distribution of withdrawal of rewards( rewards must not be consistent).
    • Bad behavior is extremely habit-forming when it is rewarded
    • Granny’s rule( Do DAILY the unpleasant and necessary tasks first before rewarding yourself with the pleasant tasks) is an extremely example of reward superpower.
    • Consequences
      • Incentive Caused bias: Man is driven both consciously and subconsciously by incentives and will carry out whatever behavior is necessary to get that incentive. He’ll also rationalize his bad behavior towards getting that incentive.
    • Antidotes: For Consultants
      • Fear professional advice when it is especially good for the adviser
        • Learn and use the basic elements of your advisor’s trade as you deal with him
        • Double check, disbelieve, or replace much of what you’re told, to the degree that seems appropriate after objective thought
    • Antidotes: For employers
      • The use of sound accounting theory and practice. Accounting systems should accurately cater for operational reality. If you create an accounting system that encourages frauds, your employees will commit fraud because of their incentive caused bias.
      • The incentive structure shouldn’t intensely trigger incentive caused bias.
      • Prevent bad behavior from starting as it often becomes the case of “whose bread i eat, his song i sing”.
      • Tough internal audit systems
      • Severe public punishment for identified miscreants to ensure they do not occur anymore.
      • Misbehavior preventing routines and systems involving anti-gaming features are a necessity in system design “avoid rewarding people for what can be easily faked”.
  2. Liking/Loving Tendency:
    • Human beings are genetically programmed to like/love being liked and loved.
    • The phenomenon of liking and loving causing admiration also works in reverse. Admiration also causes or intensifies liking or love, often creating a vicious cycle.
    • A man constructed to love admirable persons and ideas with a special intensity has a huge advantage in life.
    • Consequences
      • It acts as a conditioning device that makes the liker or lover tend to
        • ignore faults of the object of his/her affection
        • favor people, products and actions associated with the object of his affection
        • distort other facts to facilitate love
  3. Disliking/Hating Tendency
    • The Opposite of the above.
    • Consequences:
      • It acts as a conditioning device that makes the disliker/hater tend to
        • Ignore virtues in the object of dislike
        • Dislike people, products and actions merely associated with the object of his dislike
        • Distort other facts to facilitate hatred.
      • Distortion of facts often make mediation between opponents locked in hatred impossible
  4. Doubt-avoidance Tendency:
    • Man is programmed with a tendency to quickly remove doubt by reaching some decision.
    • It is usually triggered by some combination of puzzlement and stress.
  5. Inconsistency-Avoidance Tendency
    • It is important not to put one’s brain in chains before one has come near his full potentiality as a rational person.
      • Man’s brain conserves space by being reluctant to change decisions we’ve earlier made.
      • This is evident in all habits(good and bad).
      • Works alongside the doubt-avoidance tendency to ensure hastily made conclusions and decisions are stuck too even when dis confirming evidence comes along.
      • This tendency also maintains previously made conclusions, loyalties, reputations, commitments etc
      • New ideas are often not accepted because they were inconsistent with old ideas in place(ideas often brain-block their holders from  accepting newer/better ideas).
      • Pretending to have an identity, habit or conclusion will cause it to prevail.
      • Consequences
        • A person making big sacrifices will intensify his devotion to the identity as it would be inconsistent to make big sacrifices for something that was not good.
        • Initiation ceremonies are often public in nature to intensify the commitment made. They’re often also tough to increase their costs to the individual.
      • Antidote:
        • “A drop of prevention is worth a river of cure”.
        • Prevent first conclusion bias by listening to arguments from both sides and consider all counterarguments.
        • Prevent confirmation bias(. Charles Darwin trained himself to) intensively consider any evidence tending to dis-confirm his hypothesis especially the good ones.
        • Be prepared to destroy your own ideas.
  6. Curiosity Tendency
    • Man is programmed with a curiosity tendency.
    • Culture greatly increases the effectiveness of curiosity in advancing knowledge.
    • Curiosity providesfun and wisdom after formal education has ended.
    • Consequences
      • Curiosity enhanced by the best of modern education helps man prevent or reduce bad consequences arising from other psychological tendencies.
  7. Kantian Fairness Tendency
    • Kant’s categorical imperative requires humans follow behavior patterns that if followed by all others would make the surrounding human system work best for everybody.
    • Consequences
      • Fair sharing is often expected and when it doesn’t occur, hostility often results. e.g. At a bus-stop, people often form a queue(fair sharing) and are hostile to people who don’t get on the queue(hostility)
  8. Envy/Jealousy Tendency
    • Occurs when something we desire is seen with another person
    • The world is driven by envy not greed.
    • Kantian fairness tendency often contributes to it.
  9. Reciprocation tendency
    • The natural automatic tendency of man to reciprocate both favors and disfavors is extreme and often works subconsciously.
    • It facilitates group co-operation for the benefit of members and commercial trade.
    • Reciprocation tendency causes many extreme and dangerous consequences all the time.
    • Guilt is the conflict triggered in one direction by reciprocate-favor tendency and in the opposite direction by reward super-response tendency pushing one to enjoy one hundred percent of some good thing
    • Consequences
      • Hatred to a level causing brutal conduct as seen in wars.
      • Joins forces with inconsistency avoidance tendency in causing 1. the fulfillment of promises made as part of a bargain 2. correct behavior expected from people in a role e.g. priests, doctors, engineers e.t.c.
      • Gift giving by salesmen to purchasing agents of companies to make them carry out “reciprocatory” purchases.
      • Concessions on the part of requester causing the requestee to make a “reciprocatory” concession. This is also used when requesting something outlandish where a request for something more outlandish is initially made and the requester concedes to the initial outlandish request he earlier intended.
      • Antidotes
        • Defer reaction
        • Do not or let employees accept any favors or gifts from vendors.
  10. Influence from mere association tendency
    • A conditioned reflex where mere association triggers a response.
    • Consequences
      • People associate a high priced item with its having higher quality. Companies will also raise the price of items to ensure this association takes place
      • Adverts target things the have extreme peculiar effects on the purchasers of products. E.G. Power equipment being advertised with beautiful women.
      • Some of the most important miscalculations come from what is accidentally associated with one’s past success, or one’s liking and loving, or one’s disliking and hating.(e.g. Because you wore a cap today, the ladies are feeling you and you associate their reactions to your cap and you wear a cap every time.)
      • Hating and disliking something because of a precious negative association
      • Liking and loving because of a previous positive association.
      • Persian messenger syndrome: Killing the bearer of bad news. This often causes people to hide negative outcomes or let them fester instead of bringing them into the limelight for fast resolution.
      • It sometimes works against reciprocate favor tendency. A man in misfortune who gets help from someone fortunate may experience an envy driven dislike for the fortunate person. He then associates the favor giver with his misfortune and dislikes him
      • The use of stereotypes.
    • Antidotes
      • Carefully examine each past success looking for accidental, non-causative factors associated with such success that might mislead an appraisal of a new venture.
      • Look for dangerous aspects of a new venture that weren’t there when the past success occurred.
      • Objectively examine before making decisions.
      • Develop through exercise of will the habit of welcoming bad news.” Always tell us the bad news promptly, it is only the good news that can wait”. It also helps to be so wise and informed that people fear not telling you bad news because you are so unlikely to get it elsewhere.
      • To prevent stereotypes, One must learn that trend doesn’t always predict tendency and the average dimension in some group will not reliably guide him to the dimension of some specific item.
  11. Simple, pain-avoiding psychological denial
    • The reality is too painful to bear, so one distorts the facts until they become bearable. It usually has the worst outcomes when mixed with love, death and chemical dependency.
    • Consequences
      • Addicted people tend to believe they’re still in respectable condition with respectable prospects even as they deteriorate further.
    • Antidotes
      • Flee from all activities that can cause addiction
  12. Excessive Self-Regard Tendency
    • Man mostly mis-appraises himself on the high side.
    • Consequences
      • People appraise things they own higher than things they don’t own.
      • Man’s tendency for over-appraise-your-own-possessions phenomenon ” A man’s decisions are suddenly regarded by him as better than would have been the case just before he made them”. Even when it is obvious to him that it was a bad decision.
      • Man’s preference for people like himself. This explains cliquishness. People in an organization often select people like themselves, hence fraudulent people selecting fraudulent people making a problem resistant to change and worse.
      • A higher proclivity to gamble when a person can pick his number or can make complicated conclusions(e.g. football betting).
      • An over-appraisal of one’s talent/skill causing one to bet against higher skilled/talented players.
      • Bad hiring decisions as employers often over-appraise their own conclusions that rely on impressions in face-to-face contact. This often favors candidates who are marvelous presenters.
      • Man always makes excuses for his fixable poor performance instead of providing the fix. The worst criminals don’t appraise themselves as all that bad. They either believe
        • They didn’t commit their crimes
        • that considering the pressures and disadvantages of their lives, it is understandable and forgivable that they behaved as they did and became what they became.
      • Success from overconfidence that happens to cause success “never underestimate the man that overestimates himself”.
    • Antidotes
      • A willingness to “clean house” when one is in control of a group of cliquish problematic people.
      • Employers should under-weigh face to face contacts and over-weigh the applicant’s past record.
      • Be more objective when you are thinking about yourself, your family and friends, your property and the value of your past and future activity.
      • On a personal level, a  man should face this simple facts
        • fixable but unfixed bad performance is bad character and tends to create more of itself causing more damage to the excuse giver with each tolerated instance
        • In demanding places, you will surely be discarded if you keep giving excuses instead of behaving as you should.
      • On an institutional level
        • A fair meritocratic, demanding culture plus personnel handling methods that build up morale
        • Severance of the worst offenders and when that is impossible, fix them as best as you can.
  13. Overoptimism tendency
    • “What a man wishes, that also will he believe”.
      • Consequences
        • Man is usually excessively optimistic.
      • Antidotes
        • The trained habitual use of the simple probability math of Fermat and Pascal.
  14. Deprival-Super-reaction Tendency
    • Loss seems to hurt more than gain seems to help. If a man almost gets something he greatly wants and it’s taken from him at the last moment, he reacts as if he he had long owned the thing and it was taken from him.
    • This includes the reactions to both kinds of loss experience
      • The loss of the possessed reward
      • The loss of the almost possessed reward.
      • Consequences
        • Man often incurs disadvantage by mis-framing his problems often comparing what is near instead of what really matters.
        • Man reacts with irrational intensity to even a small loss, or threatened loss of property, love, friendship, or any other valued thing. As seen in bureaucratic infighting which is usually to the detriment of an organization as a whole.
        • This protects ideological or religious views by triggering dislike and hatred towards vocal nonbelievers as the ideas of nonbelievers if allowed to spread will diminish the influence of the believers view.
        • It works with inconsistency-Avoidance tendency to ensure that extremes of ideology are maintained with great intensity and with great antipathy to non-believers, causing extremes of cognitive dysfunction(Also called group-think).
        • Labors resistance to reduced wages even when it’s clearly in their interest to make a different decision.
        • Ruin from compulsion to gamble.
          • It causes the gambler to have a passion to get even once he has suffered loss, and the passion grows with the loss
          • The most addictive forms of gambling provide a lot of near misses with each triggering Deprival-Super-reaction tendency
        • Overpriced purchases at open outcry auctions as man is convinced that the last price from another bidder was reasonable and this tendency prompts him to top the last bid.
        • Combines with inconsistency-Avoidance tendency to cause a man to use all his good assets to attempt to rescue a big venture going bad.
        • Takeaways are difficult to get, causing  less rationality
    • Antidotes
      • To prevent group-think,
        • Keep in place an extreme culture of courtesy in spite of ideological differences.
        • Bring in able and articulate disbelievers of incumbent groupthink.
      • Never go to open outcry auctions
      • Prevent its combination with inconsistency avoidance tendency by learning poker.
  15. Social-Proof Tendency
    • The automatic tendency to think and act as he sees others around him thinking and acting.
    • It is genetic for young people to emulate their peers and not their parents. Hence it is more effective to manipulate the quality of their peers than on manipulating their children.
    • It is mostly triggered in the presence of either puzzlement or stress or both of them.
      • Consequences
        • Companies doing similar things as their peers
        • As it is triggered by a combination of stress and isolation, disreputable sales men use it. This is also used by cults.
        • Advertisers willing to pay for their products in movies( this combines mere-association tendency(brad Pitt!!!!!) with social proof
        • Combines with envy/jealousy and deprival-superreaction tendency in scenarios where several people are fighting for one instance of something when their are several instances of the same available.
    • Antidotes
      • Stop any bad behavior before it spreads
      • Foster and display all good behavior
      • learn how to ignore the examples from others when they are wrong.
  16. Contrast-Misreaction Tendency
    • Man’s senses do not measure in scientific units. They mostly register changes by noting contrast with their last recollected state( a $1000 addition to a $50000 car is barely noticeable). Cognition tends to follow this perception.
    • A little leak will often sink a great ship
    • Consequences
      • Small steps towards disaster will often cause a person to go too far towards disaster to avoid it.
      • Cognition, misled by tiny changes involving low contrast, will often miss a trend that is destiny.
      • An embezzler never embezzles a large amount his first time around. He often starts small and goes a little larger than he and his peers.
    • Examples
      • A salesman showing a prospect some extremely ridiculously priced items then showing him a moderately ridiculously priced item.
      • Advertisers putting a false before sales price to cause the buyer to make a contrast (ASOS!!!!).
      • Force your mind to notice the small leaks.
  17. Stress-Influence Tendency
    • Sudden stress causes a rush of adrenaline prompting faster and more extreme reactions. It also makes social-proof tendency more powerful.
    • Consequences
      • Light stress can slightly improve performance whereas heavy stress causes dysfunction (because it causes an extreme of pessimism, extended in length and accompanied by activity stopping fatigue causing stress depression).
      • Pavlov’s last work(Adequate stress can  change an individual’s behavior by causing stress induced nervous breakdowns)
        • Individuals can be classified to predict how easily they’ll breakdown.
        • The individuals hardest to break down were the hardest to return to their pre-breakdown state
        • Any individual could be broken down
        • A breakdown couldn’t be reversed without reimposing stress
  18. Availability-Misweighing Tendency
    • The brain over weighs what is easily available( Only the factors i (can see/know) are the ones that matter).
    • Man’s brains easily drifts into working with what’s easily available to it.
    • The brain cannot use what it can’t remember or what it is blocked from recognizing because it is heavily influenced by one or more psychological tendencies bearing on it
    • An idea or a fact is not worth more merely because it is easily available to you
    • Consequences
      • Extra-vivid evidence, being so memorable and consequently more available in cognition are usually over weighed. (use this to persuade someone to reach a correct conclusion and as a device for improving one’s memory by attaching vivid images one after the other to items one doesn’t want to forget)
    • Antidotes
      • The use of procedures e.g. Checklists to ensure other factors are taken into account
      • Emphasize dis-confirming evidence: emphasize factors that don’t produce lot’s of metrics.
      • Include skeptical, articulate people with far-reaching minds to advocate ideas that are the opposite of the status quo.
      • Over-weigh less vivid evidence and under-weigh less vivid evidence.
  19. Use-It-or-Lose-It Tendency
    • All skills attenuate with disuse
    • Consequences
      • The fewer the possessed skills practiced, the fewer the number of skills retained. This is the cause of man with  a hammer tendency.
      • Learning capacity shrinks as gaps are created in the latticework of theory needed for understanding new experiences.
      • If an individual is fluent in a skill, the skill will be lost more slowly and will come back faster when refreshed with new learning.
    • Antidotes
      • The use of simulators to practice rarely used skills
      • The dutiful practice of all useful, rarely used skills especially those outside his discipline. Some skills require daily practice
      • Assemble skills into a checklist that is routinely used. This is the only way to prevent missing important stuff
      • Never stop learning an important skill until you’re fluent at it.
  20. Drug-Misinfluence Tendency
    • See Simple, pain-avoiding psychological denial
  21. Senescence-Misinfluence Tendency
    • There is a natural cognitive decay that comes with old age.
    • Consequences
      • Complex new skills are very difficult to learn at an old age
    • Antidotes
      • Only intensely practiced skills are maintained in old age(refer to Use-It-or-Lose-it Tendency)
      • Continuous thinking and learning done with joy can delay its effect
  22. Authority-Misinfluence Tendency
    • Follow-the-leader tendency is a consequence of the dominance hierarchy we’re born into
    • Consequences
      • Man suffers greatly when his leader is wrong or when his ideas are misunderstood
    • Antidotes
      • Be careful who you appoint to power because a dominant authority figure will often be hard to remove, aided as he will be by authority-mis-influence tendency.
  23. Twaddle-Tendency
    • Man has a tendency to prattle and pour out twaddle that does much damage when serious work is being attempted.
    • The work of an administrator is to keep the people who don’t matter from interfering with the work of the people that do.
    • Antidotes
      • Keep prattling people, pouring out twaddle far away from serious work
  24. Reason-Respecting Tendency
    • Man has a natural love of accurate cognition and a joy in its exercise.
    • Few practices are wiser that not only thinking through reasons before giving orders but also communicating these reasons to the recipient of the order.
    • Consequences
      • Man learns well when a teacher gives correct reasons for what is taught instead of teaching without reasons given.
      • Ideas get through best when reasons for the ideas were meticulously laid out.
      • Learning is most easily assimilated and used when, life long, people consistently hang their experience, actual and vicarious, on a lattice work of theory answering the question: Why?
      • If a person gives incorrect or meaningless reasons, it still increases compliance with his orders and requests.
    • Antidotes
      • You had to tell who was to do what, where, when and why
  25. Lollapalooza Tendency
    • The tendency to get extreme consequences from confluences of psychological tendencies acting in favor of a particular outcome.

Prescription for guaranteed misery in life

  • Ingesting chemicals
    • Addiction can happen to anyone through a subtle process where the bonds of degradation are too light to be felt until they’re too strong to be broken.
  • Envy
  • Practice intense ideology
    • The antidote to this is an iron prescription. It state that I am not entitled to have an opinion unless I can state the arguments against my position better than the people who are in opposition.
  • Self serving bias
    • Thinking you are entitled to do what you want to do.
    • Thinking what’s good for you is good for everyone else and rationalizing foolish or evil conduct, based w your subconscious tendency to serve yourself.
    • Don’t allow for the self-serving bias of others.
  • Self-pity
    • Pretty close to paranoia and very hard to reverse. Very counterproductive
  • Be subject to perverse incentives and associations
    • Working in  perverse incentive system that rewards more for more foolish behavior. Perverse incentives are so powerful as controllers of human cognition and behavior that one should avoid their influence.
    • Working under someone you don’t admire or want to be like.
  • Resentment
    • For people who can’t quit resentment, they should practice the disreali compromise( give up vengeance as a motivation for action, but maintain a list of people who’ve wronged you and check up on them from time to time to note the way the world has taken down your enemies without your assistance)
  • Be unreliable
    • Do not faithfully do what you have been engaged to do. This single habit will counterbalance the combined effect of all your virtues however great.
    • It also guard tees distrust and exclusion from the best human contribution and company.
    • If however you’re reliable, it’ll be hard to end up miserable even if you start disadvantaged.
    • It is essential for progress in life.
  • Learn everything you possibly can from your own experience minimizing what you learn vicariously from the good experience of others, living and dead.
      • They that won’t be counseled can’t be helped.
      • Experience keeps a dear school, but fools will learn in no other and scarce in that, for it is true, we may give advice bit we cannot give conduct.
      • Do not learn from the best work done before yours.
  • Go down and stay down when you get your first, second or third severe reverse in the battle of life.
  • Ignore the saying "I wish I knew where I was going to die, and and then I’d never go there"
    • Approach the study of how to create X by turning the question backward and studying how to create non X
    • Inverted, always invert. It is in the nature of thungs that many hard problems are best solved only when they are addressed backwards.
  • Minimize objectivity
    • Einstein said that his successful theories came from curiosity, concentration, perseverance, and self criticism(the testing and destruction of his well-loved ideas)
    • It helps minimize the compromises and burden of being wealthy and you keeping you in poverty.
P. S. Darwin’s life result was largely due to his working method which violated all the above rules and emphasized inversion by giving priority attention to evidence tending to disconfirm his cherished and hard-won theories

On their shoulders

  • The most valuable result of all education is the ability to make yourself do the thing you have to do, when it ought to be done, whether you like it or not.
  • Intense interest in a subject is indispensable if you’re really going to excel in it. If possible, maneuver yourself into doing something in which you have an intense interest.
  • Take a simple idea and take it seriously
  • An appetite for hard work, insatiable curiosity and patient demeanor will enable a man overcome most of life’s challenges and become successful.
  • The most important characteristics are
    • Preparation
    • Patience: The art of waiting without tiring of waiting
    • Discipline
    • Objectivity
  • Einstein’s 4 causes of his achievements
    • Self-criticism
    • Curiosity
    • Concentration
    • Perseverance
  • People who specialize in some niche usually do well.
  • Winning systems usually go ridiculously far in maximizing or minimizing one or a few variables
  • Just as multiple factors shape almost every system, multiple models from a variety of disciplines, applied with fluency, are needed to understand that system
  • Any year you do not destroy one if your best loved ideas is probably a wasted year
  • A willingness even an eagerness to identify and acknowledge my mistakes and learn from them
  • Look at your ideas and approaches as tools. When better ones come along, swap the existing ones for them
  • The Lollapalooza effect
    • When several forces form the multiple models framework combine and they’re all operating in the same direction.
    • The forces coming out of the models sometimes conflict causing tradeoffs. It is important i can recognize the tradeoffs and how they combine.
    • If there are twenty factors and they interact, you’ll have to learn to handle it. It won’t be hard if you go at it step by step with curious persistence.
  • Hard work, intellect and experience are insufficient for greatness.
  • Eliminate unpromising parts of the chessboard so you can focus on the productive ones
  • It’s not the bad ideas that do you in, it’s the good ones. They tend to be overdone
  • Quickly eliminate the big universe of what not to do followed up with a fluent, multidisciplinary attack on what remains, then act decisively when and only when the right circumstances appear. You’ll consistently out think people that are smarter than you as you’ll be more objective and multidisciplinary.
  • Investing is the equivalent of going out and betting against the parimutuel system. Look for a horse with one chance in two of winning and which pays you three to one(Basically a mis-priced gamble). Value investing is knowing enough to know whether the gamble is mis-priced.
  • You need to have a passionate interest in why things are happening. That state of mind gradually improves your ability to focus on reality. Without this cast of mind, you’re destined for failure.
  • The structure of the human mind requires that the way to complete competency of any kind is to learn it all to fluency.
  • The habit of committing far more time to learning and thinking than to doing is no accident.
  • You must be synonymous with honesty and integrity. Doing the right thing pays dividends personally and professionally.
  • Example is not the main thing in teaching, it is the only thing.
  • Don’t go to auctions of any kind
    • Open-bid:social proof tendency ensures you believe other bids are fair assessments of the value of the item even when they’re not. This combines with deprival tendency t cause great mispricing errors
    • Closed-bid: they’re often won by people making a technical mistake. There is an opportunity for big mispricing errors.
  • Compound interest is the magic that turns all your lead to gold.
  • It is occasionally possible for a tortoise, content to assimilate proven insights of his best predecessors, to outrun hares that seek originality or don’t wish to be left out of some crowd folly or ignores the best work of the past. Enormous long-term advantages can be used gotten from consistently trying not to be stupid, instead of trying to be very intelligent
  • There should be a huge area between what you’re willing to do and what you can do without significant risk of criminal penalty or causing losses. There should be things that you won’t do even though they’re perfectly legal.
  • Tell the truth so you won’t have to remember your lies
  • Anytime you seat waiting a deal to come by, you’re in a very dangerous seat
  • Passion is more important than competence/brain power
  • It is dangerous to rely on special talents. It’s better to own lots of monopolistic businesses with unregulated prices
  • On investing: For successful investing, you need
    • Temperament: the disposition to own stocks without fretting/ overt worrying.
    • Patience: being very patient but aggressive when it’s time.
    • Curiosity: I need a passionate interest in why things are happening. This interest over time improves my ability to focus on reality. Without it, you’re destined for failure regardless of the advantages bestowed upon you by nature. The more hard lessons you learn vicariously instead of by experience the better.
    • Focus investing: It is so hard to find good investments so concentrate investments in a few. I need the discipline of waiting for a fat pitch.
  • The game is to recognize a big idea when it comes along, when they don’t come along very often. Opportunity comes to the prepared mind.
  • Learning: the game is to keep learning. you’ve gotta like the learning process
  • Once you start doing something bad, it’s easy to take the next step and in the end you’re a moral sewer.
  • People with loose accounting standards invite perfectly horrible behavior in others
  • Multiple mental models
    • You must know the big ideas in the big disciplines and use them routinely. All of them not just a few.
    • You have to learn the models so they become part of your ever used repertoire.
  • Don’t fool yourself
  • Every person is going to have a circle of competence. And it’s going to be very hard to enlarge that circle. You can rise quite high by developing a circle of competence
  • You need to figure out what your own aptitudes are. If you play games where others have aptitude and you don’t, you’re going to lose.
  • It’s ridiculous the way a lot of people cling to failed ideas. It’s not bringing the new ideas that’s so hard. It’s getting rid of the old ones.
  • Refuse to delude yourself that your ideas would change the world. Instead seek to learn from my betters practical entail tricks that help avoid some of the worst miscognitions of my age cohorts.
  • Organized common sense is a very powerful tool. There is too much calculation and too little thinking.
  • Reading a lot isn’t enough. You need the temperament to grab ideas and do sensible things. Most people don’t grab the right ideas or don’t know what to do with them.
  • You must be cautious of the effect of legislation(and government activities) on your business and industry.
  • The five essential entrepreneurial skills for successful are concentration, discrimination, and organization, innovation and communication.
  • The fundamental full attribution ethos of hard science
    • You’ve go to know all the big ideas in all the disciplines more fundamental than your own.
    • Never make any explanation that can be made in a more fundamental way in any other way than the most fundamental way.
    • Always take with full attribution to the most fundamental ideas that you are required to use.
  • Extreme success is likely to be caused by some combination of the following factors
    • Extreme maximization or minimization of one or two variables
    • Adding success factors so that a bigger combination drives success, often in nonlinear fashion, as defined by the concept of breakpoint and critical mass. Results are often non-linear. You get a little more mass then you get a lollapalooza effect.
    • An extreme of good performance over many factors.
    • Catching and riding some sort of big wave.
  • Worldly wisdom: you learn to make fewer mistakes than other people and how to fix your mistakes after when you do make them.
    • One trick of life is to get so you can handle mistakes without psychological denial.
    • Beware of ideology based mental misfunctions: It distorts cognition terribly. It pounds ideas in better than it convinces out. The only heavy ideology you need are in favor of accuracy, diligence and objectivity.
    • You must have the confidence to override people with more credentials than you whose cognition is impaired by some of psychological bias that is obviously present. But there are instances when you have to recognize that you have no wisdom to add and that your best course is to trust some expert.
    • When you don’t know and don’t have any special competence, don’t be afraid to say so. No body expects you to know everything about everything. Flee people that always confidently answer is questions about which they don’t have any real knowledge.
    • To teach effectively, instead of just pounding it in, teach in a way that requires a slight mental reach(indirection) . Because you have to reach for it, you hold it better. This takes advantage of commitment and consistency tendency.
    • The right lessons are easily learned if you’ll work at it. And if you learn to, you can be especially useful at crucial moments when others fail.
    • The human mind is not constructed so that it works well without having reasons. You need to hang reality on a theoretical structure with reasons.
    • Multiple mental models: You can’t really know anything if you just remember isolated facts and try and bang them back. If the facts don’t hang together in a lattice work of theory, you don’t have them in a usable form. You need multiple models upon which to hang your experience.
      • You need multiple models because if you have just a few, you’ll torture reality till it fits your models, or at least you’ll think it does. (To the man with a hammer, everything is a nail).
      • Take all the main models and use as a checklist in reviewing complex systems. It’s Essential to get the main models and use them in a multimodular way.
      • For best results, we need to have multidisciplinary coverage of immense amplitude, with all needed skills raised to an ever-maintained practice based fluency, including considerable power of synthesis at boundaries between disciplines, with the highest fluency levels being achieved where they are most needed with forward and reverse thinking techniques being employed in a manner reminding one of inversion in algebra, and with "checklist" routines being a permanent part of the knowledge system.
      • For enhanced multidisciplinarity, we need to
        • Make more courses mandatory not optional.
        • Practice problem solving across several disciplines, including practice that prevents the loft of skills through disuse.
        • Increased use of the best business periodicals to prompt practice in relating events to multidisciplinary causes often as intertwined
        • Avoid ideology of every form
        • Intensely Imitate the fundamental organizing ethos of hard science( the fundamental 4 discipline combination of maths, physics, chemistry and engineering).
          • You must both rank and use discipline in order of fundamentalness
          • You must master to tested fluency and routinely use the truly essential parts of all fours constituents of the fundamental four-discipline combination, with particular intense attention given to discipline more fundamental than your own.
          • You must never practice either cross-disciplinary absorption without attribution or departure from a "principle of economy" that forbids explaining in any other way anything readily explainable from more fundamental material in your own or any other discipline
          • When the above approach doesn’t produce much new and useful insight, you should hypothesize and test to establish new principles, by using methods similar to those that created successful old principles. However you may not use any new principle inconsistent with an old one unless you can now prove that the old one is true.
      • The models need to come from multiple disciplines- all the wisdom of the world is not to be found in one little academic department.
      • If you want to be a good thinker, you must develop a mind that can jump the jurisdictional boundaries of fields. Take in the best big ideas from all these disciplines.
      • The models that are the most reliable come from the hard sciences and engineering ring
      • The models and techniques MUST include
        • Mathematics:
          • Compound interest
          • Probability
          • Permutations and combinations
          • Decision tree theory
        • The five Ws
          • Tell Who was going to do What, Where, When and Why.
          • If you ask people why, they’ll understand it better, they’ll consider it more important and they’ll be more likely to comply. Even if they don’t understand the reason, they’ll be more likely to comply.
          • In communicating with other people about everything. You must include why
        • Accounting: the language of practical business life
          • Double entry bookkeeping
          • Accounting has it’s limitations(useful life, depreciation rate are just estimations) . It’s a starting place.
        • Engineering
        • Physiology
        • Biology
        • Psychology: the perceptual apparatus of man has shortcuts in it due to its limited circuitry.
          • Helps prevent manipulation from cognitive dysfunction. You must know the limitations of your cognitive apparatus.
          • You must understand the psychology of misjudgement that cause the human mind to reach wrong conclusions . They always interact and they’re all very important.
        • Microeconomics: less reliable
          • A free market economy or partly free market economy is the equivalent of an ecosystem.
          • People who narrowly specialize can get very good at occupying some little niche. And the often find good economics they wouldn’t get any other way.
          • Scale:
            • Cost reduction along the experience curve: Doing something complicated in more and more volume enables people, who are trying to improve and are motivated by the incentives of capitalism to do it more and more efficiently.
            • If you get a whole lot of volume through your operation, you get better at processing that volume.
            • Scale let’s you get greater value from volume. It also grants huge purchasing advantages.
            • Grants success in an all or nothing scenario.
            • Scale grants an informational advantage: you get more customers if you’re the well known.
            • Social proof: If everybody’s doing something, we think it’s better.
            • It allows great specialization within the firm, allowing each person to become better at what he does.
            • Sometimes, scaling down and intensifying gives you the big advantage. Scale lets you go to a narrower specialization as it enables more efficiency.
            • The biggest problem of scale is that as you get bigger, you get bureaucracy which comes with territoriality: you think the work is done when it leaves your desk for anothers. You also get corruption
            • Building scale let’s you have a fighting chance with the incumbents.
        • Beware of the effect of competition on an industry. In some scenarios, and everyone competing makes money and does well in spite while in others, shareholder funds are wasted just to get by.
        • Be able to distinguish when technology is going to help you and when it’s going to kill you. Is the advantage of new technology going to the owner or the customers. Employees will always show how much you’ll save without showing how much of the savings will stick.
        • Competitive destruction: when new technology comes that totally makes old technology invalid.
        • Surfing: when you’re the early bird in a business, you get huge advantages. If you can ride the wave, you get long runs.
      • Charlies 4 type of checklists
        • Two track analysis
          • What are the factors that really govern the interests involved, rationally considered.
          • What are the subconscious influences where the brain at a subconscious level is automatically doing these things which by and large arenusefil but which malfunction.
          • You can do these by
            • Rationality: by evaluating the real interests, real probabilities etc
            • Evaluate the psychological factors that cause subconscious conclusions – many of which are wrong.
        • Ultra-simple, general problem solving notions
          • Decide the big no Brainer questions first
            • It is usually simple to simplify problems by deciding big no-brainer questions first.
          • Apply numerical fluency
            • Scientific reality is revealed only by math as if math was the language of God.
          • Invert
            • Invert, always invert. It is not always enough to think through problems forward. You must also think in reverse.
          • Apply elementary multidisciplinary wisdom, never relying entirely upon others
            • The best and most practical wisdom is elementary academic wisdom. However you must think in a multidisciplinary manner using all the easy-to-learn concepts from the freshman course in every basic subject. If in your thinking, you rely too much on others, you will suffer much calamity.
          • Watch for combinations of factors- the lollapalooza effect
            • The really big effects, lollapalooza effects, will often come only from large combinations of factors.
        • Psychology based tendencies: see note psychology of human misjudgement.
        • Investing and decision making checklist
          • Risk: all investment evaluations should begin by measuring risk, especially reputational.
            • Incorporate an appropriate margin of safety
            • Avoid dealing with people of questionable character
            • Insist upon proper compensation for riskl aasumed
            • Beware of inflation and interest rate exposure
            • Avoid big mistakes, shun permanent capital loss
          • Independence
            • Objectivity and rationality require independence of thought
            • People’s opinions don’t make you right or wrong. The only thing that matters is the correctness of your analysis and judgment.
            • Mimicking the herd invites regression to the mean.
          • Preparation: The only way to win is to work, work, work, work and hope to have a few insights.
            • Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.
            • More important than the will to win is the will to prepare.
            • Develop fluency in mental models from the major academic disciplines
            • If you want to get Smart, the question you have to keep asking is why, why, why?
          • Intellectual humility: acknowledging what you don’t know is the dawning of wisdom
            • Stay within a well defined circle of competence
            • Identify and reconcile disconfirming evidence
            • Resist the craving for false precision, false certainties etc.
            • Above all, never fool yourself, and remember you’re the easiest person to fool.
          • Analytic rigor: use the scientific method and effective checklists to minimize errors and omissions
            • Determine value apart from price, but progress apart from activity, wealth apart from size.
            • It is better to remember the obvious than to grasp the esoteric
            • Be a business analyst, not a market, macroeconomic, or security analyst.
            • Consider totality of risk and effect; look always at potential second order and higher level impacts
            • Think forward and backwards: invert, always invert.
          • Allocation: proper allocation of capital is an investor’s number one job
            • The highest and best use is always measured by the next best use(opportunity cost)
            • Good ideas are rare: when the odds are in your favor, allocate heavily.
            • Don’t fall in love with an investment: be situation dependent and opportunity driven.
          • Patience: resist the natural human bias to act
            • Never interrupt Compound interest unnecessarily
            • Avoid unnecessary transactional taxes and frictional costs; never take action for its own sake.
            • Be alert for the arrival of luck
            • Enjoy the process along with the proceeds, because the process is where you live
          • Decisiveness: when proper circumstances present themselves, act with decisiveness and conviction
            • Be fearful when others are greedy and greedy when others are fearful
            • Oppurtunity doesn’t come often, so seize it when it does.
            • Oppurtunity meets the prepared mind. That’s the game.
          • Change: live with change and accept unremovable complexity
            • Recognize and adapt to the true nature of the world around you; don’t expect it to adapt to you.
            • Continually challenge and willingly amend your best-loved ideas
            • Recognize reality even when you don’t like it- especially when you don’t like it.
          • Focus: Keep things simple and remember what you set out to do
            • Remember that reputation and integrity are your most valuable assets and can be lost in a heartbeat
            • Guard against the effect of hubris and boredom
            • Don’t overlook the obvious by drowning in minutiae
            • Be careful to exclude unneeded information of slop
            • Face your big troubles; don’t sweep them under the rug.
    • Worldly wisdom as applied to stock picking.
      • A good model to simplify what goes on in the market for common stock is the pari-mutuel system at racetracks. Everyone goes there and bets, and the odds change based on what’s bet. It’s difficult to beat the system. Also the house takes a percentage on the top. Not only do you have to beat all bettors, you’ve got to have such a large margin, that you can afford to pay the house. Intelligence alone cannot assure success. You need a combination of fanaticism and discipline. You also need to bet seldomly.
      • the market is efficient as a pari-mutuel system is efficient-with the favorite more likely than the long shot to do well in racing, but not necessarily give any betting advantage to those that bet on the favorite. once you put the price into the formula, it isn’t so clear anymore what was going to work best for a buyer choosing between the stocks. So it’s a lot like a pari-mutuel svstem. And, therefore, it gets very hard to beat.
      • It’s not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it-who look and sift the world for a mispriced bet-that they can occasionally find one. The wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds, otherwise they don’t bet.
      • The way to win is to work, work, work and hope to have a few insights.
      • With stock managers, what makes sense for the investor rarely makes sense for the manager. What determines the behavior are incentives for the decision maker, and getting the incentives right is a very important lesson.
      • To beat the market, a stock picker can do the following
        • Ben Graham’s approach( The concept of value to the private owner): Calculate the price the whole enterprise would sell for if it were available. I then take the stock price and multiply by the number of shares and if you’ve got something that was a third or less the sellout value, you’ve got a lot of edge going for you. You have a huge margin of safety, by having the big excess value going for you. It’s very difficult in a modern market.
        • Berkshire’s approach: sometimes a company that was selling at 2 or 3 times its book value could still be a huge bargain because of momentums implicit in its position, sometimes combined with an unusual managerial skill plainly present in some individual or system. Load up on the very few good insights you have instead of pretending to know everything about everything at all times. Over the long term, it’s hard for a stock to earn much better return than the business which underlies it earns even if you buy it at a huge discount. If you buy a business that earns 18 percent on capital over twenty or thirty years, even if you pay an expensive looking price, you’ll end up with one hell of a result. The trick is getting into better businesses.
          • You could find them small
          • Finding them big: get into a great business which has a great manager because management matters. When you get an opportunity to get into a wonderful business being run by a wonderful manager. Occasionally, you’ll find a human being who’s so talented that he can do things that ordinary skilled mortals can’t. However, betting on the quality of a business is better than betting on the quality of management.
        • Cancer-surgery formula: The sick business fix game. They look at the mess and figure out if there’s anything sound left that can live on its own if they cut away everything else. If they find, they just cutaway everything else.
      • Taxes. Take care to run from tax shelters. Also avoid paying transactional taxes by making good decisions where you don’t need to make another. Take care of the do-something psychological tendency:
      • The dangers in this philosophy: companies can fall off the wave and investment disasters resulting from their too high prices.
      • There are a few businesses where any manager could raise the return enormously just by raising prices – and yet they’ve not done it. There are actually people out there who don’t price everything as high at the market will easily stand.
      • The dream is to get into a situation where you had the top hand in a game that is clearly going to end up with one winner and a management with a lot of integrity and intelligence.
  • For coping with life’s challenges
    • Have low expectations
    • Have a sense of humor
    • Surround yourself with the love of friends and family
  • The best way to avoid envy is to plainly deserve the success we get.
  • The best way to try to get what you want is to try to deserve what you want. You have to deliver to the world what you would buy if you were on the other end.
  • There’s no love as right as admiration based love, and such love should include the instructive dead.
  • The acquisition of wisdom is a moral duty. Without lifetime learning, you’re not going to do very well. You can only progress when you learn the method of learning.
  • When dealing with a system that involves many factors, it’s best to look at it as a whole rather than examining the components in isolation. This brings to fore the importance of the multidisciplinary approach.
  • If you would persuade, appeal to interest, not to reason.
  • Engaging in routines that allow you maintain objectivity are very helpful to cognition. They are required to maximize correct thinking
  • Maximizing non-egality often works wonders
    • Maximizing the experience of people who have the most attitude and determination as learning machines. It’s necessary if you want to reach the highest of human achievement.
    • Provide a lot of playing time for your best players
  • Assiduity is very important to success
    • Sit down on your ass until you do it.
    • Select partners full of assiduity.
  • Life is likely to provide terrible and unfair blows. Some people recover and others don’t. Epicetus’s morals come in handy here
    • Every mischance in life creates an opportunity to behave well and learn something useful
    • My duty is not to become immersed in self-pity, but to utilize each terrible blow in a constructive fashion.
  • Manage your income with prudence
    • Net worth enables you serve better
    • Always understand your income.
  • Go through life Anticipating trouble and be ready to perform adequately if trouble comes.
  • The job of managing people often involves getting a such responsibility into the people with real knowledge and away from people who feign knowledge.
    • People who are selling something often rate their goods above average regardless of the evidence to the contrary.
  • The highest form of civilization is a seamless, non-bureaucratic Web of deserved trust
    • In life, maximize the seamless Web of deserved trust.
  • An excess of professionalism often hurts, because the careful l procedures themselves often lead to overconfidence in their outcome.
  • Extra care in thinking is not all good, but also introduces extra error. The best defense is systematic self criticism to an extreme degree. You must not fool yourself, and you’re the easiest person to fool.
  • If you must depend on external advice, you must suitably control the high talents of consultants so that the servant becomes the Useful tool of the master instead of serving itself under perverse incentives for

Munger’s Investment Valuation Process

  • View a stock as an ownership of the business and judge the staying quality of the business in terms of its competitive advantage. Look for more value in terms of discounted future cash-flow than you are paying for. Move only when you have an advantage.
  • Circles of competence( I’m no genius, I’m smart in spots and stay around those spots … Thomas Watson)
    • To stay within this circle, screen to limit investment fields to only simple, understandable candidate. Candidates usually fall into 3 baskets
      • Too tough to understand: you have to have a special insight into the business. If you have competence, you know the edge.
      • Yes: Is it an easy to understand, dominant business franchise that can sustain itself and thrive in all market environments.
      • No: Heavily promoted deals and IPOs.
      • Those that survive are run through the mental model.
    • If you cannot respond legitimately to the next question, you lack mastery and are likely you’re outside your circle of competence.
  • Take into account all relevant aspects, both internal and external to the company and its industry, even if they are difficult to identify, measure or reduce to numbers. However recall the ecosystem theme( The maximization/minimization of a single factor can make the single factor disproportionately important.
  • Treat financial reports and their accounting with skepticism. they’re the beginning of a proper calculation of intrinsic valuation, not the end.
  • There’s no thing as risk-less investment. just find those with few risks that are easily understandable.
  • Assess and understand competitive advantage in every respect(products, markets, trademarks, employees, distribution channels etc) and the durability of that advantage. A company’s competitive advantage is its moat. A superior company has a deep moat that is continuously widened.
    • Think in terms of Moats: The ability of a business to keep its width and its impossibility of being crossed is the primary criterion of a good business. The moat should be widened every year. if it is, the business will do well.
    • Also think in terms competitive destruction(forces that over the long term lay siege to a company).
    • This helps when a fanatic sets his sights on your marketplace. A large enough and constantly widening moat is the only way to survive.
    • Identify and buy only those systems that beat these odds
  • Recast financial statement figures(on both sides) to fit your view of reality.
  • Assess a companies management beyond number crunching( to what degree are they able, trustworthy and owner-oriented).
  • Calculate the intrinsic value of the whole business( with allowance for potential dilution) and determine an approximate value per share to compare to market prices.(The comparing value(what you get) to price(what you give) is the fundamental purpose of the whole process)
    • A great business at a fair price is superior to a fair business at a great price.
  • Work with a margin of safety
    • This is dependent on the price paid. It is large at a price, smaller at another and non existent at a higher price.
    • Investing  strategies should have backup systems and extra capacity built in
  • Ignore insignificant detail and distractions.
  • Apply a prior to pulling the trigger checklist( this is based on the principle that proper valuation is a companion of proper timing).
  • Invest Decisively
  • Charlie’s superior performance comes from a constant search for better methods of thought, a willingness to prepay through rigorous preparation and the extraordinary outcomes of his multidisciplinary model
  • According to the munger school of highly-concentrated, focused investing
    • Make investments so you don’t have to make another decision. If you buy something because its undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. That’s hard. If you buy a few great companies, you can sit on your ass. That’s a good thing.
  • Books to enlighten on what makes a great business model(A focus on the issue of competitive destruction and how to adapt, survive and even dominate over time
    • Guns germs and steel
    • The selfish gene
    • Ice Age
    • Darwin’s blind spot
TLDR Okay it’s a good company. But is the price low enough, Is the management made up of people you are comfortable with, is it cheap enough to buy, is it cheap for the wrong reason or the right reason, What’s the flip side, What can go wrong that i haven’t yet seen

An Investing principles checklist

  • Risk: All investment evaluations should begin by measuring risk, especially reputational
    • Incorporate an appropriate margin of safety
    • Avoid dealing with people of questionable character
    • Insist upon proper compensation for risk assumed
    • Always beware of inflation and interest rate exposures
    • Avoid big mistakes; shun permanent capital loss
  • Independence
    • Objectivity and rationality require independence of thought
    • Just because other people agree or disagree with you doesn’t make you right or wrong. The only thing that matters is the correctness of your analysis and judgment
    • Mimicking the herd invites merely average performance
  • Preparation: The only way to win is to work , work, work , work and hope to have a few insights.
    • Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.
    • More important than the will to win is the will to prepare.
    • Develop fluency in mental models from the major academic disciplines
    • If you want to get smart, the question you have to keep asking is “why, why, why”
    • It’s not give to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it – who look and sift the world for a mispriced bet that they can occasionally find one.
  • Intellectual Humility: Acknowledging what you don’t know is the dawning of wisdom
    • Stay within a well-defined circle of competence
    • Identify and reconcile disconfirming evidence
    • Resist the craving for false precision, false certainties, etc
    • Above all, never fool yourself and remember that you’re the easiest person to fool.
  • Analytic vigor: The use of the scientific method and effective checklists minimizes errors and omissions
    • Determine value apart from price, progress apart from activity and wealth apart from size.
    • It is better to remember the obvious than to grasp the esoteric.
    • Be a business analyst, not a market, macroeconomic or security analyst
    • Consider totality of risk and effect, Look always at potential second order and higher level impacts
    • Think forwards a backwards – Invert always invert.
  • Allocation: Proper allocation of capital is an investor’s number one
    • Remember that highest and best use is always measured by the next best use(opportunity cost)
    • Good ideas are rare: when the odds are greatly in your favour, bet(allocate heavily).
    • Don’t “fall in love” with an investment- be situation-dependent and opportunity-driven
  • Patience: Resist the natural human bias to act
    • Compound interest is the eight wonder of the world. Never interrupt it unnecessarily
    • Avoid unnecessary transactional taxes and frictional costs; never take action for tis own sake
    • Be alert of the arrival of luck(Both for it’s positive and negative tendecies).
    • Enjoy the process with the proceeds, because the process is where you live
  • Decisiveness: When proper circumstances present themselves, act with decisiveness and caution
    • Be fearful when others are greedy and greedy when others are fearful
    • Opportunity doesn’t come often, so seize it when it does
    • Opportunity meeting the prepared mind: that’s the game
  • Change: Live with change and accept unremovable complexity
    • Recognize and adapt to the true nature of the world around you: don’t expect it to adapt to you
    • Continually challenge and willingly amend your best loved ideas
    • Recognize reality even when you don’t like it- especially when you don’t like it.
  • Focus: Keep things simple and remember what you set out to do
    • Remember that reputation and integrity are your most valuable assets and can be lost in a heartbeat
    • Guard against the effects of hubris and boredom
    • Don’t overlook the obvious drowning in minutiae
    • Be careful to exclude unneeded information or slop:” a small leak can sink a great ship”
    • Face your big troubles; don’t sweep them under the rug
    • The task of a man is not to see what lies dimply in the distance, but to do what lies clearly at hand.
P. S.
  • On learning: If you’re going to be an investor, you’re going to make some investments where you don’t have all the experience you need. But if you keep trying to be a little better over time, you’ll start to make in events that are virtually certain to have good outcome. If you don’t keep learning, others will pass you by.
  • EBITDA = Bullshit earning
  • To the young: work with small stocks, searching for unusual mis-priced opportunities.
  • The idea of excessive diversification will yield a good result is false. Good investments will almost always involve low diversification.
  • A better business is one where you don’t have to put back all your profit in at the end of the year.
  • If you develop the right judgement skills, you’ll buy shares during price declines. Really good investment opportunities don’t come along too often and don’t last too long, but so be prepare to act. Have a prepared mind.

Some Of Charlie Munger’s Influences

  • Warren buffet
    • Buffet:the making of an American capitalist
    • The essays of Warren buffet: lessons for corporate America.
  • Set klarman
    • Margin of safety
  • Alfred North Whitehead
  • Paul Johnson
  • Cicero
  • Benjamin Franklin
  • Isaac Newton
  • Albert Einstein
  • Carl Braun
  • Samuel Johnson
  • Simon Marks
  • Philip Fisher:
    • Common stocks and uncommon profits
    • Conservative investors sleep well
  • Ben Graham
    • The intelligent investor
    • Security analysis
    • The interpretation of financial statements
    • World commodities and world currencies
    • Benjamin Graham: the memoirs of the dean of wall Street.
  • Henry singleton
  • James hill
  • Andrew Carnegie
  • Harvey Firestone
  • Richard Thaler
  • Jack Welch
  • Les Schwab
  • John Gribbin
    • Deep simplicity
  • Richard Dawkins
    • The selfish gene
  • Jared Diamond
    • guns, germs and steel.
  • Robert rubin
    • in an uncertain world : tough choices from wall Street to Washington

How to be happy, get rich and other advice

  • Tips on how to be happy and successful
    • Life is more than being shrewd in wealth accumulation.
    • A lot of success in life comes from knowing what you want to avoid.
    • Develop good mental habits. It pays to draw from many disciplines
    • Avoid evil, particularly if they’re attractive members of the opposite sex.
    • If your new behavior earns you a little temporary unpopularity with your peers, then to hell with them.
  • Be satisfied with what you have/ beware of envy.
    • If you’re comfortably rich and someone else is getting richer faster, so what. Someone will always be getting richer faster than you.
  • How to get rich
    • Spend each day trying to be a little wiser than when you woke up.
    • Discharge your duties faithfully and we’ll. Step by step you get ahead but not necessarily in fast spurts.
    • Build discipline by preparing for the fast spurts slugging it out one inch at a time, day by day.
    • At the end of the day- if you live long enough- most people get what they deserve.
  • How to find a good spouse
    • There is only one way. Deserve a good spouse(someone who isn’t nuts)
  • The importance of reading
    • There are no wise people over a broad subject matter area who don’t read all the time.
    • Read biographies.
      • If you’re trying to teach the great concepts that work, it helps to tie them into the lives and personalities of the people who developed them.
      • Make friends among the eminent dead who had the right ideas. It’s way better than just being given the basic concepts.
  • Reduce material needs
    • One of the great defences if you’re worried about inflation is not to have a lot of silly needs in your life. I don’t need a lot of material goods.
  • Philanthropy
    • The fortunate have a responsibility to give back.
  • Avoid debt
    • Once in debt, it’s hell to get out. You can’t get ahead while paying back
  • It is normal for self appraisal to be more positive than external appraisal.
  • When you’ve mixed raisins with turds, you’ve still got turds
  • Don’t have a negative public reputation.

Honesty, the best policy

  • If you tell the truth, you never have to remember your lies. Keep it simple by telling the truth all the time. You’ll make extra money from morality.
  • Ability will get you to the top but it takes character to keep you there.
  • Trickery and treachery are the practices of fools without the wits enough to be honest.
  • There should be a huge area between what you’re willing to do and what you can do without significant risk of criminal penalty or causing losses. There should be things that you won’t do even though they’re perfectly legal.