Source: Qilehui
Charlie Munger - Warren Buffett's Gold partner. Buffett's son once said, "My dad is the second smartest person I know, No. 1 is Charlie Munger."
Today, the editor has compiled the essence of Charlie Munger's past speeches and the book 'Poor Charlie's Almanack', inviting readers to listen to the words of the wise.
1. Use reverse thinking; problems are easier to solve.
1. Investing in an excellent company at a reasonable price yields far better results than buying a mediocre company at a cheap price.
2. If you eliminate our 15 best decisions, our performance would be very mediocre. What is required is not a lot of action, but a lot of patience.
3. Understanding a problem thoroughly means that half of the work is already done. You have already mentioned that this is a contradiction: a good opportunity has great potential at the beginning; a good opportunity can be overdone and fraught with crisis.
4. For complex adaptive systems and the human brain, using reverse thinking often makes problems easier to solve.
Let me now use some reverse thinking. What can cause us to fail in life? What should be avoided?
For example, laziness and lack of integrity can lead to failure in life. If you lack integrity, no matter how many virtues you possess, a tragic outcome cannot be avoided. Therefore, one should develop the habit of being trustworthy; obviously, laziness and lack of integrity should be avoided.
5. In such cases, the correct persuasion technique is the one pointed out by Benjamin Franklin, who said: "If you want to persuade others, appeal to their interests, not to their reason."
6. At Berkshire Hathaway Inc. and Daily Journal, we have consistently performed better than average. The question arises, how did we achieve this? The answer is simple; we strive to do less.
7. If you borrow someone else's car, don't forget to fill it up with gas before returning it.
8. Always think simply and execute with seriousness.
9. People also need to develop the habit of checking their checklists.
Checking the checklist can avoid many mistakes, not just for pilots. You should not only acquire a broad base of knowledge but also list them in your mind as a checklist and then apply them. No other method can achieve the same effect.
10. I consider myself very fortunate to have understood at a young age that the most reliable way to obtain something you want is to make yourself worthy of it.
This is a very simple principle, known as the golden rule. One must learn the principle of not imposing on others what one does not want.
11. We tend to allocate a large amount of money to places where we do not have to make additional decisions.
If you buy something because its value is underestimated, then when its price rises to your expected level, you must consider selling it.
However, if you can purchase several great companies, then you can sit back and that is great.
12. We never try to become very smart people, but instead strive continuously not to become fools.
13. Warren and I do not feel that we have a significant advantage in the Technology industry. In fact, we find it difficult to understand the essence of developments in the Software, computer chips, and other Technology sectors. So we try to avoid these areas and acknowledge our personal knowledge limitations.
14. The average result is bound to be a mediocre result. As I often say, the iron rule of life is that 20% of people can achieve better results than the other 80%.
15. Following the crowd will only bring you closer to the average (you can only achieve mediocre performance).
16. Our success is not because we are good at solving problems, but because we are good at avoiding them. We simply look for simple things to do.
17. Occasionally, the arrogance of overestimating oneself can lead to great success, which is a frustrating aspect of modern life. I have learned to adapt. The arrogant can sometimes become big winners, but I do not wish to be surrounded by a group of arrogant people; I choose cautious individuals.
Second, people calculate too much and think too little.
1. You do not need to understand all the knowledge; just absorb the most outstanding ideas from various disciplines, which is not difficult to do.
2. Acquiring systematic common sense is a powerful tool. The dangers brought by computers are numerous; people calculate too much and think too little.
3. I do not want you to mistakenly believe that we possess any ways of learning and acting that will prevent you from making many mistakes.
I just mean that you can learn to make fewer mistakes than others—and also correct mistakes more quickly after making them. However, it is impossible to lead a rich life while making few mistakes.
4. When you don't understand something and lack the relevant skills, don't be afraid to speak up. Some people always confidently answer questions they actually don't understand, and I don't like being around them.
5. Excellent literary works require readers to think a little in order to understand them. If you have to think to grasp a certain principle, you will remember it better.
6. Common sense, so-called, is the knowledge that ordinary people do not possess. When we say someone has common sense, we are actually saying that they possess knowledge that ordinary people do not have.
People think that possessing common sense is simple, but it is actually quite difficult.
7. If you train yourself to be more objective and have knowledge from more disciplines, then when considering issues, you can actually be better than those who are much smarter than you, which I find very interesting.
Moreover, you can also earn a lot of money; I myself am living proof of that.
3. Try to have more interdisciplinary knowledge.
1. Most people only develop a thinking model for one discipline—such as Economics—and try to solve all problems with one method.
You know what the saying goes: "To a person holding a hammer, the world looks like a nail." This is a clumsy way to approach problems.
2. Just reading books is not enough; you must possess a personality that can grasp ideas and act rationally. Most people cannot grasp the right ideas or do not know how to apply them.
3. I believe there are many things, apart from history, that people must understand. The so-called many things refer to the important ideas of all disciplines.
You must master a wealth of knowledge and form a cognitive framework in your mind so that you can automatically apply it in the future.
If you can achieve this, I solemnly assure you that one day you will realize, without even noticing it: "I have become one of the most efficient people among my peers."
4. The essence of the theory of economies of scale is that the more Commodities you produce, the better you can produce that Commodity. This is a huge advantage. It has a lot to do with the success or failure of a business.
5. You must have many interdisciplinary models. You might say, "Oh my, this is too hard to achieve!"
But fortunately, it is not that hard—because mastering around eighty to ninety models can almost make you a person of universal wisdom. And among those eighty to ninety models, only a few are very important.
6. The foundational part of psychology—what I call judgment psychology—is extremely important knowledge, which includes about 20 small principles.
7. There are not many types of disciplines, and truly useful thoughts are also few. Clarifying all of them will bring you a lot of enjoyment.
Additionally, if you figure them out through personal exploration rather than by memorizing others' retellings, your grasp of those thoughts will be more solid.
8. The education I received before was absurdly incorrect; I had never read any so-called modern Darwinism works. The books I read were quite diverse, but I just hadn't read that kind of book.
Last year, I suddenly realized I was really an idiot for not having read modern Darwinism, so I went back and supplemented my knowledge of this school with the help of great biologists like Dawkins at Oxford University.
For me, understanding the modern synthetic theory of Darwinism is absolutely a joyful thing. This theory is extremely beautiful and extremely correct. Once mastered, it becomes very simple.
4. Only by being particularly diligent can you find a few opportunities.
1. Whether you are right or wrong does not depend on whether others agree or disagree with you—what matters is whether your analysis and judgment are correct.
What the professor says is what it is; anyone can do that. The key lies in discerning which of the professor's points are correct and which are wrong, as this is what signifies a well-educated person.
We do not pretend to know everything.
We are always very clear that only by working particularly hard can we accurately identify a few rare opportunities. These few opportunities are sufficient.
From a very young age, I understood that major opportunities, the ones belonging to me, are just a few. When an opportunity arises, we must seize it. Think about it, is your life like this?
The first rule of fishing is to fish where there are fish. The second rule of fishing is to remember the first rule. In an extremely competitive environment, no matter how hard you try, it won't matter.
Always stay in the game, remain focused, and when rare opportunities arise, do not let them slip away, knowing that the opportunities available to an ordinary person are limited.
You must figure out where your strengths lie and compete within your own circle of competence.
Knowing the boundaries of your circle of competence is extremely important. If you don't even know where the boundaries are, how can it be considered a circle of competence? Lacking that ability but thinking you possess it will surely lead to major mistakes.
You must always compare what you can do with what others can do, and you need to consistently maintain rationality, especially not to deceive yourself.
Fifth, telling the truth means you won't have to remember your lies.
1. Basically, we choose those we greatly admire to manage our subsidiaries. Generally, it is easy for us to get along with them because we love and admire them.
2. I think it’s better not to deceive others and to live our lives like this.
Peter Kaufman has often told me, "If a con artist knew how much an honest person could earn, they would definitely stop being a con artist." Warren has also said a classic line: "Walk the straight path, and the road will become wider." This is true.
3. The secret to making money is to cut back on expenses and live simply.
When Warren and I were young and had no money, we were both frugal, saving money to invest. Sticking to it for a lifetime leads to great wealth; this principle is understandable to anyone.
4. "Honesty is the best policy." — Benjamin Franklin
“If you tell the truth, you won't have to remember your lies!” — Louis von Stein.
5. Life is not just about shrewdly accumulating wealth.
6. Jealousy is a foolish sin, as it is the only sin that you cannot derive any pleasure from.
7. Overall, jealousy, resentment, hatred, and self-pity are all disastrous states of mind. Excessive self-pity can make one nearly paranoid, and paranoia is one of the hardest things to reverse; do not fall into the emotion of self-pity.
I have a friend who carries a thick stack of cards with him. Whenever someone speaks self-pityingly, he slowly and exaggeratedly pulls out that stack of cards and hands the top one to the speaker.
The card reads, “Your story touches me deeply; I have never heard anyone as unfortunate as you.”
You may think this is a joke, but I believe this is about mental health.
Whenever you find yourself feeling self-pity, for whatever reason, even due to your child being terminally ill with cancer, remember that self-pity is unhelpful.
In such times, give yourself a card from my friend.
Six, the way to find a good partner is first that you must be worthy of the other person.
1. The secret to longevity and happiness? This is easy to answer because the reasoning is quite simple.
Do not be jealous, do not complain, do not overconsume; face any difficulties with an optimistic mindset, associate with reliable people, and do your due diligence...
These are simple truths, and they are all age-old truths. If achieved, one can benefit for a lifetime.
2. Find a good partner. What is the best way to find a good partner? The only best way is that you must first be deserving of a good partner because, by definition, a good partner is certainly not a fool.
3. Making friends with 'great people who have passed away' sounds fun, but if you truly make friends in life with those great thinkers who have passed away, then I believe you will live a better life and receive a better Education.
4. Over the years, reading has brought me numerous benefits.
5. The principle is that some things and some people cannot learn. Some people are naturally stronger than you, no matter how hard you try, there will always be someone stronger.
My mindset is: "So what?" Among the people present, is there anyone who absolutely must stand at the pinnacle of the world? There is no need for that.
6. The best protective armor in old age is a life that has been carefully lived before it.
Seven, each day is a little smarter than yesterday.
1. Every intelligent person I have met in my life (intelligent people from various industries) reads every day—without exception, not one.
2. I believe that life is like a competition, full of rivalry, and we must let those who are most capable and willing to become learning machines play the biggest role.
If high achievements are desired, one must become that kind of person.
3. If lifelong learning does not occur, high achievements will not be attained. Relying solely on existing knowledge, one cannot go far in life.
After leaving here, continue to learn so that life can take you further.
For Berkshire Hathaway Inc., its long-term large investment performance may be the most outstanding in human history.
The methods that helped Berkshire make a lot of money in this decade may not be as effective in the next decade, so Warren Buffett has to become a learning machine.
I constantly see some people doing better in life; they are not the smartest, nor the hardest working, but they are learning machines, becoming a little smarter each night than they were that morning.
Kids, this habit will be very helpful to you, especially when you still have a long way to go.
Take Warren Buffett as an example; if you observe him with a timer, you will find that he spends half of his waking time reading.
He spends most of the remaining time in one-on-one conversations with some very talented people, sometimes on the phone and sometimes face-to-face, all of whom he trusts and who trust him.
Cicero has a famous saying: if a person does not know what happened before they were born, they will live life like an ignorant child.
I often tell a joke about Max Planck.
After winning the Nobel Prize, Planck gave speeches across Germany, and the content was mostly the same, all about the new quantum physics theory.
Over time, his driver memorized the lecture content, and the driver said: "Professor Planck, it’s quite boring to keep doing this, how about this: let me speak in Munich while you wear my driver’s hat and sit in the front row, what do you think?" Planck replied, "Sure."
So the driver went up to the stage and gave a lengthy discourse on quantum physics. Later, a physics professor stood up and asked a very difficult question.
The speaker said: "Wow, I really didn’t expect to encounter such a simple question in such an advanced city like Munich. I would like to invite my driver to answer it."
I tell this story not to praise the protagonist for being clever. I believe that the knowledge in this world can be divided into two types: one is Planck knowledge, which belongs to those who truly understand, they have put in the effort and possess that capability.
The other type is driver knowledge, they have mastered the art of parroting; they might have beautiful hair; their voices are usually pleasant; they leave a deep impression on people. But what they have is actually a disguise of real knowledge called driver knowledge.
Every day when getting up, strive to be a little smarter than before.
Complete your tasks seriously and excellently. Gradually, you will make progress, but this progress may not be quick. However, this can lay a solid foundation for rapid advancement... Move a little forward every day.
In the end—if you live long enough—like most people, you will get what you deserve.
10. A competitive product is hard to encourage people to develop a completely different habit unless it has been tried. Every married person understands this principle.
11. You must have a strong interest in understanding the reasons behind what is happening. If you maintain this mindset over the long term, your ability to pay attention to reality will gradually improve.
12. If you want to be competitive in any field, you must have a deep mastery of all aspects of that field, regardless of whether you enjoy doing so; this is determined by the deep structure of the human brain.
8. Being smart means constantly asking why.
1. Animals can reproduce in places suitable for growth, similarly, those who focus on a specific area in the business world—and become very excellent because of this focus—often receive economic returns that they cannot obtain in other ways.
2. The only way to win is to work, work, work, work, and hope to have a bit of insight.
One of the key factors for successful investing is having a good character—most people always struggle to hold back or constantly worry excessively.
Success means you need to be very patient, but also able to take action when you know it's time to do so.
By extensive reading, cultivate yourself into a lifelong learner; nurture curiosity and strive to make yourself a little smarter every day.
If you want to become smart, you must continually ask, "Why, why, why."
The way to become a winner is to work, work, work, and work again, while expecting to spot a few opportunities.
What should young people pursue in their work? I have three basic principles.
It is almost impossible to satisfy all three principles at the same time, but you should strive to attempt it:
First, do not sell what you would not buy yourself.
2. Do not work for people you do not respect or admire.
3. Only collaborate with people you like.
Be strict with yourself, continuously improve your cultivation throughout your life to overcome the inherent weaknesses of human nature.
8. Different stages of life will present different challenges, very tricky problems.
I believe there are three points that help deal with these difficulties: first, do not have too high expectations; second, have a sense of humor; third, immerse yourself in the love of friends and family; fourth, and most importantly, adapt to the changes of life. If the world had not changed, I would still have 12 flaws today.
9. Others' evaluation of Charlie Munger.
1. As for Charlie and Warren, hard work has always been ongoing, regardless of whether it leads them to decide to invest—usually it does not.
They spend more time on learning and thinking than on action, and this habit is certainly not accidental.
This mixture of discipline and patience reflected in the truly great masters of each Industry: an uncompromising determination to play the cards well in hand.
Like world-class bridge master Richard Zechhauser, Charlie is not concerned about whether he can win the game, but whether he can play the cards in hand well.
Although in the world of Munger and Buffett, poor results are acceptable (as some outcomes are beyond their control), lack of preparation and hasty decision-making are unforgivable, as these factors are controllable.
— Peter Kaufman, author of "Poor Charlie's Almanack"
2. Charlie's confidence comes not from who agrees or disagrees with his views, but from an objective perspective on and evaluation of his abilities.
This self-awareness allows him to have a rare objectivity when assessing his actual knowledge, experience, and the correctness of his thinking.
— Peter Kaufman, author of "Poor Charlie's Almanack"
3. He is exceptionally smart, has a wide range of interests, and seems to never forget anything, even the most obscure or trivial details.
His greatest strengths are absolute adherence to honesty, ethics, and integrity.
——Louis Simpson, Director & CEO of the Asset Operations Department of the US Government Employees Insurance Company.
4. He possesses a rational character most suitable for investing: uncompromising patience, self-discipline, and self-control—no matter how much pressure he endures, Charlie never wavers or changes his principles.
——Louis Simpson, Director & CEO of the Asset Operations Department of the US Government Employees Insurance Company.
5. Charlie is naturally a very rational person and applies this in business, which has led to his tremendous commercial success.
In fact, I believe that Charlie's moral qualities truly stem from his deep admiration for Benjamin Franklin.
He is honest and upright, always doing more than his share, and never complains about what others have done.
——Warren Buffett, Chairman & CEO of Berkshire Hathaway Inc.
This method of practicing tennis is like hitting short clubs in golf; very few others are willing to adopt it. However, father enjoys it immensely, which gives him a frustrating competitive advantage in other aspects of life.
I am really afraid of being his opponent. Fortunately, my father and I are opponents on the tennis court rather than in business.
——David Boswick, son of Charlie Munger.
He knows how to concentrate and focus on a problem without being distracted by the outside world.
——Bill Gates, co-founder of Microsoft.
He truly is the most knowledgeable thinker I have ever encountered. From business principles to economic laws, from dormitory design to yacht design, he has no rivals. Charlie possesses the ability to capture the essence with simple descriptions.
——Bill Gates, co-founder of Microsoft.
Editor/Jeffy
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