MONTHLY MULLING💡

Charlie Munger's Most Important Lesson

Aug 21, 2022

Hi👋 Tapan here.

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Happy Sunday y’all!

I have been busy at my job and had to skip sending out the newsletter last week.

It’s a nice benefit to have a newsletter called ‘Monthly Mulling’ which goes out twice a month (as it has been called out multiple times by my friend Siddha) 😂

It allows me the flexibility to have a mental break during the busy months.

*My favourite neighbourhood cafe - took me almost 2 years to find this gem*

Currently,

📖 What I am reading: Selected Stories of Tagore by Rabindranath Tagore

📺 What I watched: Sandman (based on Neil Gaiman’s graphic novel of the same name. I really enjoyed it and might pick up the book)

Onwards 🚀

🤓 Charlie Munger’s Latticework

It’s possible you might not know about Charlie if you’re not part of the investing community. And this is by Charlie’s design.

Charlie Munger, the 98-year-old polymath, is known for his wit, humour, and concise responses. He is also the long-time partner of Warren Buffett.

He is known for saying no to everything and on a majority of occasions, his response is -

I picked up the idea of mental models from Charlie (my article on mental models).

You've got to have models in your head. And you've got to array your experience both vicarious and direct on this latticework of models.
You must know the big ideas in the big disciplines and use them routinely - all of them, not just a few.

BUT it’s important to have multiple models from various disciplines that you can use. It is important because, otherwise, you’ll end up trying to fit the problem into the ONE solution you have learned.

To the man with only a hammer, every problem looks like a nail.

*The king focused on using his sword will ignore the gun salesman*

But why are we talking about Charlie Munger? I am reading Poor Charlie’s Almanack and today, I wanted to present a couple of lessons from the book.

I will be doing a full article at a later date. Hopefully (🙈). I haven’t written a full-length article for about a year now.

🧠 Invert, Always Invert

Munger’s favourite and most-talked-about model is inversion.

If you just go around and identify all of the disasters and say, ‘What caused that?’ and try to avoid it, it turns out to be a very simple way to find opportunities and avoid troubles.
It’s counterintuitive that you go at the problem backwards.

Confusing?

💡 How do we use this in real life?

Don’t seek brilliance, avoid stupidity
Don’t seek happiness, avoid things that make you unhappy
Don’t seek the next multi-bagger, avoid investments that have the potential to lose all your money

🤔 You get the idea, right? Instead of asking how can I get XYZ. Ask yourself, what should I do to not get XYZ and then avoid those things.

Munger’s approach to solving problems backwards was influenced by Carl Gustav Jacobi, a nineteenth-century algebraist who famously said, “Invert, always invert.”

A famous quote from Munger that he often repeats,

All I want to know is where I’m going to die, so I’ll never go there.

🤫 How To Guarantee A Life Of Misery

Now using the model of inversion explained above, Charlie made his brilliant Harvard School commencement speech in 1986.

He said he can’t teach students how to be happy. But he can give 4 lessons on how to live a miserable life.

😶‍🌫️ Be unreliable - Do not faithfully do what you have engaged to do.

If you master this one habit [of being unreliable], you will always play the role of the hare in the fable, except that instead of being outrun by one fine turtle, you will be outrun by hordes of mediocre turtles and even some mediocre turtles on crutches.

🤡 Only learn from your own experiences - Stop learning from the good and bad experiences of others, living and dead. Only focus on your own experience.

I think you learn economics better if you make Adam Smith your friend. That sounds funny, making friends among the eminent dead, but if you go through life making friends with the eminent dead who had the right ideas, I think it will work better in life and work better in education.

🤕 Go down and stay down - there is so much adversity out there that you will fail, once, twice, and multiple times. Once you fail, stay down.

🥸 Minimize objectivity - don’t indulge in self-criticism, don’t destroy your favourite ideas, and always seek confirming evidence

If you minimize objectivity, you ignore not only a lesson from Darwin but also one from Einstein. Einstein said that his successful theories came from “curiosity, concentration, perseverance, and self-criticism”.

The four lessons above will guarantee you a life of misery. If you avoid them using the model of inversion, you might be a step closer to happiness.