Charlie said:

Charlie said: "Why are some people smarter than others? This is partly related to innate personality traits. Some people's personality is not suitable for investment. They are always impulsive or anxious. But if you have a good personality, mainly referring to being very patient and taking the initiative when you know you should take action, then you can gradually understand this game through practice and learning. Obviously, the broader your source of lessons, not just from your own bad experiences, the better you will become."

I haven't found anyone who can do it quickly yet. As investors, Warren Buffett was much better than me when I first met him, and I'm the same way. If we stagnate at any stage, satisfied with the knowledge we already have, our performance will be much worse than it is now. So the key is to keep learning, and I don't think people who don't enjoy the process of learning can continue to learn."

After developing investment thinking, how to achieve it? Charlie advocates the method of "checklist". Developing the habit of checking the "checklist" is one of the effective methods to deal with professional high-risk situations, and the structure of the human brain determines that we need such system."

However, it should be noted that Charlie will certainly not apply the following principles one by one in the order on the checklist, and the order of their appearance is also unrelated to their importance. Each principle must be regarded as a part of the entire complex investment analysis process, just like each individual small square in the whole mosaic pattern."

• Risk-evaluation of all investments should start with the measurement of risk (especially credit risk).

• Calculate the appropriate margin of safety.

• Avoid trading with people with moral issues.

• Insist on requiring appropriate compensation for predetermined risks.

• Always remember the risks associated with inflation and interest rates.

• Avoid making big mistakes; avoid sustained losses of capital.

• Independence-"Only in fairy tales, the emperor is told that he is not wearing clothes".

• Objective and rational attitude requires independent thinking.

• Remember, whether you are right or wrong depends not on whether others agree or oppose you, but on whether your analysis and judgment are correct.

• Going with the flow will only bring you closer to the average (can only achieve mediocre performance).

• Preparation-"The only winning method is to work, work, work, work, and hope to have a little insight."

• Develop yourself into a lifelong learner through extensive reading; cultivate curiosity and strive to become smarter every day.

• The willingness to prepare is more important than the desire to win.

• Proficiently grasp the thinking models of various disciplines.

• If you want to become smarter, the question you must constantly ask yourself is "why, why, why".

• Humility is the beginning of wisdom, admitting one's ignorance.

• Act only within one's defined ability circle.

• Identify and verify negative evidence.

• Resist the desire for false precision and incorrect certainty.

• Most importantly, don't fool yourself and remember, you are the easiest person to fool yourself.

"Understanding the power of compound interest and the difficulty of obtaining it is the core and soul of understanding many things."

• Strict analysis - using scientific methods and effective checklists can minimize errors and omissions to the greatest extent possible.

• Distinguish between value and price, process and action, wealth and size.

• Remember that the simple is better than the profound.

• Become a business analyst, not a market, macroeconomic, or securities analyst.

• Consider overall risks and benefits, always paying attention to potential second-order effects and higher-level impacts.

• Think forward and backward - always think backwards.

PS: The second-order effect is a concept that is involved in multiple fields. Its specific definition and performance vary depending on the field.

Broadly speaking, second-order effects typically refer to the further effects or influences caused by an event or behavior. These effects are often more complex and far-reaching than first-order effects and involve more related factors and variables. In the field of social sciences, second-order effects are commonly used to describe the complex chain reactions related to a certain social policy or economic decision. For example, the implementation of an economic policy may not only have direct economic effects, but also second-order effects such as inflation, resource shortages, or environmental pollution.

In the field of building structures, second-order effects specifically refer to the second-order displacement deformation caused by gravity under lateral displacement conditions, that is, the combined deformation effect of horizontal and vertical forces. In frames with lateral displacement, second-order effects mainly refer to additional internal forces caused by vertical loads in the frame with lateral displacement, usually referred to as P-Δ effect. In frames without lateral displacement, second-order effects refer to additional internal forces caused by axial force in the column segment with bending deformation, usually referred to as P-δ effect.

• Allocation - properly allocating capital is an investor's most important job.

• Remember, the best use is always measured by the second best use (opportunity cost).

• Good ideas are rare - when the opportunity is right for you, bet hard (allocate capital).

• Don't 'fall in love' with investment projects - act according to the situation and follow the opportunity.

• Patience - restrain the human tendency to love action.

• "Compound interest is the eighth wonder of the world" (Einstein), don't interrupt it until necessary.

• Avoid unnecessary transaction taxes and friction costs, never act just for the sake of action.

• Keep a clear head when luck comes.

• Enjoy the results and the process, because you're living in the process.

• Determination-when the appropriate timing appears, take action resolutely.

• When others are greedy, be afraid; when others are afraid, be greedy.

• Opportunities are rare, so when they come, seize them.

• Opportunity only favors the prepared: investment is such a game.

• Change-learn to change in life and accept the complexity that cannot be eliminated.

• Recognize and adapt to the true nature of the world around you, don't expect it to adapt to you.

• Continuously challenge and actively revise your "most beloved concept."

• Face reality, even if you don't like it -- especially when you don't like it.

• Focus-don't complicate things, remember what you originally wanted to do.

• Remember, reputation and integrity are your most valuable assets-that can turn into nothingness in an instant.

• Avoid arrogance and boredom.

• Don't ignore the obvious because of excessive focus on details.

• Eliminate unnecessary information: "A thousand-li embankment is destroyed by ants' nests."

• Confront your big problems and don't hide them.

Charlie's most basic code of conduct, the fundamental philosophy of life: preparation, discipline, patience, and determination. Each factor is unrelated, but when added together, they become a powerful critical substance capable of catalyzing the famed lollapalooza effect attributed to Munger.

Editor/Somer