Finance
by Charlie Munger, edited by Peter Kaufman
How do you avoid being stupid?
Charlie Munger was Warren Buffett's partner at Berkshire Hathaway for decades. This collection of his talks, edited by Peter Kaufman, is about thinking well more than picking shares. Munger's claim is that steadily avoiding stupidity beats trying to be brilliant, and he offers a toolkit for doing it.
Hear a sample · read by Laura
Munger says isolated facts won't make you wise. You need the big ideas from many subjects, such as psychology, maths, engineering and biology, hung together on a latticework in your head. Then you can look at a problem from several angles and catch what one discipline alone would miss.
Munger pushed Buffett away from buying poor businesses just because they were cheap. Buying See's Candies taught them both that paying a fair price for a wonderful business usually beats getting a mediocre one cheap. A great business keeps compounding. A poor one keeps disappointing.
Munger thinks the wise investor waits for the rare moment when the odds are clearly in his favour, then bets heavily. The rest of the time he does very little. Owning a few great businesses and sitting still also saves on fees and keeps you away from the noise.
Many models
Learn the big ideas from many fields, so you don't see every problem the same way.
Invert
To solve a hard problem, flip it round, work out what would cause failure, then avoid that.
Incentives
If you want to know how someone will act, look at how they're paid.
Lollapalooza
Several mental biases acting at once can produce extreme results, which Munger calls a lollapalooza.
Competence
Know the edges of what you understand, and stay inside them.
A story from the book
FedEx needed its planes loaded fast at night, and the shift kept running late. Workers were paid by the hour, so a slower shift paid more. Munger tells how FedEx switched to paying for the whole shift and letting people go home once the planes were loaded. The problem vanished.
One thing to try
Pick a subject you know little about, like biology or engineering. This week, learn one of its big ideas well enough to explain it to a friend. Then look for a problem at work or at home that it helps you see differently.
Knotd has the key ideas from 250+ non-fiction books, each in a few minutes, in plain words. Poor Charlie's Almanack comes with a Name That Idea round and a Spot the Trap case to make it stick.
Get the whole book on KnotdOpen in the appHow do you avoid being stupid? Charlie Munger was Warren Buffett's partner at Berkshire Hathaway for decades. This collection of his talks, edited by Peter Kaufman, is about thinking well more than picking shares. Munger's claim is that steadily avoiding stupidity beats trying to be brilliant, and he offers a toolkit for doing it.
A latticework of models; Pay up for a great business; Bet big, but rarely.
Pick a subject you know little about, like biology or engineering. This week, learn one of its big ideas well enough to explain it to a friend. Then look for a problem at work or at home that it helps you see differently.
Yes. Knotd has the key ideas from Poor Charlie's Almanack in a few minutes, in plain words, plus a Name That Idea round and a Spot the Trap case to test them. It's one of 250+ non-fiction books in the app.
