Charlie Munger: Think simply, act seriously.

Source: Qile Club

I. Problems are easier to solve using reverse thinking

1. Investing in an excellent company at a reasonable price yields much better results than buying an average company at a cheap price.

2. If you remove our 15 best decisions, our performance would be extremely mediocre. What you need is not a lot of action, but a great deal of patience.

3. Thinking through a problem thoroughly solves half of it. As you have said, it is a paradox: great opportunities are full of potential when you first enter; however, if overdone, they become fraught with danger.

4. For complex adaptive systems and the human brain, problems often become easier to solve if reverse thinking is applied.

Let me now use a bit of reverse thinking. What will cause us to fail in life? What should we avoid?

For example, laziness and dishonesty will lead to failure in life. Even if you have many strengths, being dishonest will inevitably lead to a tragic outcome. Therefore, you should cultivate the habit of keeping your word, as laziness and dishonesty must clearly be avoided.

5. In such situations, the correct persuasion technique is the one pointed out by Benjamin Franklin, who said: 'If you want to persuade others, appeal to their interests rather than their reason.'

6. At Berkshire Hathaway and Daily Journal, we have consistently outperformed the average. The question arises: how have we achieved this? The answer is simple: we strive to do less.

7. If you borrow someone’s car, don’t forget to refill the gas before returning it.

8. Always think in simple terms but execute with diligence.

9. People need to cultivate the habit of using checklists.

Using checklists helps avoid many mistakes, not just for pilots. You should organize broad foundational knowledge into a mental checklist and then apply it. There is no other method that yields the same results.

10. I was extremely fortunate to understand a principle at a very young age: the most reliable way to obtain something you desire is to make yourself worthy of it.

This is an exceedingly simple principle, the golden rule. You must learn to treat others as you would like to be treated.

11. We prefer to place large sums of money in areas where we don’t need to make additional decisions.

If you purchase something because its value is undervalued, then when its price rises to your expected level, you must consider selling it.

However, if you can buy a few great companies, then you can sit back and relax, which is excellent.

12. We have never tried to be very smart people, but we continuously try not to become foolish.

13. Neither Warren nor I feel that we have a great advantage in the high-tech industry. In fact, it is difficult for us to understand the essence of developments in technology sectors like software and computer chips. So we try to avoid these things and face up to our personal knowledge gaps.

14. Average results must be mediocre results. As I often say, an iron law of life is: 20% of people can achieve better results than the other 80%.

15. Following the crowd will only bring you closer to the average (only mediocrity can be achieved).

16. Our success has not been due to our ability to solve difficult problems, but rather our ability to stay away from them. We just look for simple things to do.

17. Occasionally, overconfident egomaniacs actually achieve great things, which is an unpleasant part of modern life. I have learned to live with it. Egomaniacs may occasionally become big winners, but I don't want a bunch of egomaniacs parading in front of me; I choose cautious people.

II. People calculate too much and think too little.

1. You don’t need to understand all knowledge, just absorb the most outstanding ideas from various disciplines, which is not difficult to achieve.

2. Acquiring systematic common sense is a powerful tool. There are many dangers brought by computers; people calculate too much and think too little.

3. I certainly don't want you to mistakenly believe that we possess any learning or behavioral method that can prevent you from making many mistakes.

I’m just saying that by learning, you can make fewer mistakes than others — and correct them more quickly after making them. But it is impossible to live a prosperous life without making many mistakes.

4. When you do not understand something and lack the relevant expertise, don’t be afraid to admit it. I dislike being around people who always answer questions confidently despite not truly understanding them.

5. Outstanding literary works require readers to think a little in order to comprehend them. If you have to use your brain to understand a principle, you will remember it better.

6. What we call common sense is knowledge that ordinary people typically lack. When we say someone has common sense, we really mean they possess knowledge that most people do not.

People tend to think possessing common sense is easy, but in fact, it is quite difficult.

7. If you train yourself to be more objective and acquire knowledge across multiple disciplines, then when considering issues, you can outperform those much smarter than you. I find this very interesting.

Besides, you can also make a lot of money. I myself am living proof of that.

Third, strive to acquire interdisciplinary knowledge as much as possible.

1. Most people only develop a mental model based on one discipline — such as economics — and attempt to solve all problems using one method.

As the saying goes: 'To someone holding a hammer, everything looks like a nail.' This is an inefficient way to solve problems.

2. Reading alone is not enough; you must possess a character capable of grasping ideas and doing sensible things. Most people fail to master the right ideas, or they do not know how to apply them.

3. In my view, beyond history, there are many things that people must understand. These many things refer to the important ideas across all disciplines.

You must master a great deal of knowledge, forming a framework of thought in your mind, which can then be automatically applied in the days to come.

If you can achieve this, I solemnly assure you that one day you will unconsciously realize: 'I have become one of the most efficient individuals among my peers.'

4. The essence of the theory of economies of scale is that the more goods you produce, the better you can produce those goods. This is a tremendous advantage. It has significant implications for the success or failure of businesses.

5. You must possess numerous interdisciplinary models. You might say: 'Oh my, this is too difficult to achieve!'

But fortunately, it’s not that difficult—because mastering about 80 to 90 models is sufficient to make you a person with universal wisdom. And among these 80 to 90 models, only a few are extremely important.

6. The foundational part of psychology—what I call the psychology of misjudgment—is an extremely important body of knowledge, encompassing approximately 20 key principles.

7. There aren’t many types of disciplines, and truly useful ideas are also limited. Fully understanding them will bring you immense satisfaction.

Moreover, if you clarify them through personal exploration rather than rote memorization based on others' explanations, your grasp of those ideas will be much firmer.

8. The education I received in the past was extremely misguided, and I have never read any works on so-called modern Darwinism. Though I have read a wide range of books, I simply haven't come across this type of literature.

Last year, I suddenly realized how foolish I was for not having read anything about modern Darwinism. So, I went back and, with the help of great biologists from Oxford University like Dawkins and others, filled in my knowledge on this school of thought.

For me, understanding the modern Darwinian synthesis has been an absolute joy. This theory is extraordinarily beautiful and remarkably correct. Once mastered, it becomes quite simple.

4. Only through extraordinary diligence can one find a few opportunities.

1. Whether you are right or wrong does not depend on whether others agree with or oppose you — the only thing that matters is whether your analysis and judgment are correct.

2. It's easy to simply accept everything a professor says as truth. The key is to discern which parts of what the professor teaches are correct and which are not — this is what defines someone who has received a good education.

3. We don't pretend to know everything.

We always recognize that only through hard work can we accurately identify a few opportunities. And those few opportunities are enough.

4. From a very young age, I realized that significant opportunities, the ones meant for me, would be few. When an opportunity arises, we must seize it immediately. Think about it: isn't this how life works for you?

5. The first rule of fishing is to fish where the fish are. The second rule is to remember the first rule. In highly competitive environments, no matter how hard you try, it may be useless.

6. Always stay in the game, keep your eyes open, and when rare opportunities arise, don’t let them slip away. Remember, the chances that fall to each ordinary person are few.

7. You must figure out where your strengths lie and compete within your circle of competence.

8. It is extremely important to know the boundaries of your circle of competence. How can it be called a circle of competence if you don’t even know where the boundaries are? Lacking the ability but thinking you have it will lead to serious mistakes.

9. You must always compare what you can achieve with what others can achieve. You need to remain steadfastly rational, especially by not deceiving yourself.

5. Tell the truth, and you won’t have to remember your lies.

1. Essentially, we select people we deeply admire to manage our subsidiaries. Generally speaking, we get along with them easily because we like and admire them.

2. I think it’s better to live honestly without deceiving others.

Peter Kaufman has told me many times: 'If cheaters knew how much money honest people could make, they would stop cheating.' Warren also made a classic statement: 'Walk the straight path, and the road will widen.' This is absolutely true.

3. The secret to making money is to save expenses and live a simple life.

Warren and I, when we were young and had no money, we spent carefully, saved our money, and invested it. Stick to this principle for a lifetime, and eventually, you’ll become wealthy—a lesson anyone can understand.

4. "Honesty is the best policy." — Benjamin Franklin

"If you tell the truth, you don't have to remember your lies!" — Louis Vincenti

5. Life is more than just cleverly accumulating wealth.

6. Envy is a foolish sin because it is the only one in which you cannot derive any pleasure.

7. In general, envy, resentment, hatred, and self-pity are all catastrophic mental states. Excessive self-pity can make a person nearly paranoid, and paranoia is one of the hardest things to reverse; do not fall into self-pity.

I have a friend who carries a thick stack of cards with him, and whenever someone expresses self-pity, he slowly and dramatically pulls out the stack and hands the top card to the speaker.

The card reads, "Your story has moved me deeply. I have never heard of anyone as unfortunate as you."

You might think this is a joke, but I consider it mental hygiene.

Whenever you find yourself feeling self-pity, regardless of the reason—even if it’s because your child is dying of cancer—remember that self-pity is unhelpful.

In such moments, give yourself one of my friend's cards.

VI. The method to find a good spouse is first that you are worthy of the other person.

1. What is the secret to a long and happy life? This is easy to answer because the principle is simple.

Do not envy, do not complain, and avoid excessive consumption; maintain an optimistic attitude in the face of any difficulties, associate with reliable people, and perform your duties honestly...

These are all simple truths, albeit old-fashioned ones. If followed, they will benefit you for a lifetime.

2. Find a good spouse. What is the best way to find a good spouse? The only best way is that you must first be worthy of a good spouse because, by definition, a good spouse is certainly no fool.

3. Becoming friends with 'deceased great men' may sound amusing, but if you genuinely befriend those deceased great thinkers in life, I believe you will lead a better life and receive a better education.

4. Over the years, reading has brought me numerous benefits.

5. The truth is: there are things some people cannot learn. Some individuals are naturally stronger than you, and no matter how hard you try, there will always be someone better than you.

My mindset is: 'So what?' Among us here today, is there anyone who absolutely must stand at the top of the world? There is no such necessity.

6. The best protective armor for old age is a life carefully lived before it.

7. Become a little smarter every day.

1. Every smart person I've met in my life (smart people from all walks of life) reads books every day — without exception, not a single one does not.

2. I believe 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 greatest role.

If you want to achieve extraordinary success, you must become such a person.

3. Without lifelong learning, you will not achieve great success. Relying solely on existing knowledge, you won’t get far in life.

After leaving here, you must continue to learn in order to go further in life.

4. For Berkshire Hathaway, its long-term large-scale investment performance may be the most outstanding in human history.

The methods that made Berkshire Hathaway a lot of money in one decade might not work as well in the next, so Warren Buffett has to become a continuously learning machine.

5. I constantly see people improving in life. They are not the smartest, and not even the hardest working, but they are learning machines. Every night when they go to bed, they are a little smarter than they were that morning.

Children, this habit will greatly benefit you, especially since you still have a long way to go.

6. Take Warren Buffett for example, if you observe him with a timer, you will find that he spends half of his waking hours reading books.

He devotes most of the remaining time to one-on-one conversations with highly talented individuals, sometimes over the phone and sometimes in person—these are people he trusts and who trust him in return.

7. Cicero has a famous saying: If a person does not know what happened before they were born, they will remain like an ignorant child throughout their life.

8. I often tell a joke about Max Planck.

After winning the Nobel Prize, Planck gave lectures across Germany, and the content was more or less the same each time, focusing on the new quantum physics theory.

Over time, his driver memorized the lecture content and said, 'Professor Planck, it's quite boring doing this all the time. How about this: In Munich, let me give the lecture, and you can sit in the front row wearing my driver’s cap.' Planck replied, 'Alright.'

So the driver stepped onto the stage and delivered a lengthy discourse on quantum physics. Later, a physics professor stood up and asked a very difficult question.

The speaker responded, 'Wow, I never expected such a simple question to be posed in an advanced city like Munich. Let me ask my driver to answer it.'

I share this story not to praise the protagonist for being clever. I believe the world's knowledge can be divided into two types: Planck knowledge, which belongs to those who truly understand it because they have put in the effort and possess the ability.

The other type is driver knowledge, where individuals master the art of mimicry; they may have stylish hair, and their voices are often pleasant, leaving a strong impression. But in reality, what they possess is driver knowledge masquerading as genuine knowledge.

9. Every day when you get up, strive to become a little smarter than you were before.

Work seriously and complete your tasks exceptionally well. Gradually, you will make progress, though it may not be rapid. But this approach lays the foundation for faster advancement... inch forward bit by bit every day.

In the end — if you live long enough — like most people, you will eventually get what you deserve.

10. It is difficult to encourage people to adopt an entirely different habit without trying a competitive product. Everyone who has been married understands this principle.

11. You must have a strong interest in figuring out the reasons behind what is happening. If you maintain this mindset over the long term, your ability to focus on reality will gradually improve.

12. To be competitive in any field, you must master all aspects of that field, whether or not you enjoy doing so, as this is determined by the deep structure of the human brain.

8. Being smart means continuously asking why.

1. Animals thrive in environments suitable for growth; similarly, those in the business world who focus on a specific area — and become exceptionally good because of that focus — often achieve economic rewards they could not obtain otherwise.

2. The only way to win is to work, work, work, work, and hope for a bit of insight.

3. One of the key factors for successful investing is having a good temperament — most people are either too impulsive or overly worried.

Success means you must be very patient, yet able to take the initiative when you know it is time to act.

4. Cultivate yourself into a lifelong self-learner through extensive reading; nurture curiosity and strive to become a little smarter every day.

5. If you want to become smarter, you must constantly ask: 'Why, why, why?'

6. The way to become a winner is to work, work, work, and work some more, while anticipating the ability to seize a few key opportunities.

7. What should young people seek in their work? I have three fundamental principles.

It is almost impossible to satisfy all three principles simultaneously, but you should strive to try:

First, do not sell anything you would not buy yourself.

Second, do not work for people you do not respect and admire.

Third, only work with people you like.

Be strict with yourself, continuously improve your cultivation throughout life, and overcome inherent human weaknesses.

8. People encounter different challenges at various stages of life, often very difficult ones.

I believe there are three things that help in dealing with these difficulties: First, don't expect too much; Second, maintain a sense of humor; Third, surround yourself with the love of friends and family; Most importantly, adapt to changes in life. If the world hadn’t changed, I would still have 12 flaws today.

Nine, others' evaluations of Charlie Munger

1. For Charlie and Warren, hard work has always been ongoing, regardless of whether it leads them to decide on an investment - usually it does not.

They spend more time learning and thinking than they do acting, a habit that is no accident.

This combination of discipline and patience, seen in true masters across every industry, reflects an uncompromising determination to 'play the hand you're dealt' well.

Like Richard Zackhauser, a world-class bridge master, what Charlie cares about is not whether he wins the game but whether he plays his cards well.

Although in Munger and Buffett’s world, poor outcomes are acceptable (since some results are beyond their control), insufficient preparation and hasty decisions are unforgivable because these factors are controllable.

— Peter Kaufman, author of 'Poor Charlie's Almanack'

2. The source of Charlie’s confidence is not who or how many people agree or disagree with him but his ability to objectively assess and measure his own capabilities.

This self-awareness enables him to adopt a rare sense of objectivity when evaluating the accuracy of his knowledge, experience, and reasoning.

— Peter Kaufman, author of 'Poor Charlie's Almanack'

3. He is extraordinarily intelligent with wide-ranging interests, and seems never to forget anything, no matter how arcane or minute it might be.

His greatest strength is an absolute adherence to honesty, morality, and integrity.

— Louis Simpson, Director & CEO of Asset Operations Division, US Government Employees Insurance Company

4. He possesses a rational temperament ideally suited for investing: unwavering patience, discipline, and self-control — no matter the pressure, Charlie never wavers or compromises on his principles.

— Louis Simpson, Director & CEO of Asset Operations Division, US Government Employees Insurance Company

5. Charlie is inherently rational and applies this trait to business, which has led to remarkable commercial success.

In fact, I believe those moral qualities of Charlie truly stem from his deep admiration for Benjamin Franklin.

He is honest and upright, always does more than his fair share, and never complains about what others have done.

—Warren Buffett, Chairman and CEO of Berkshire Hathaway

6. This method of practicing tennis is like chipping in golf; few others are willing to adopt it, yet my father was passionate about it, which gave him a competitive edge that drove others crazy in other aspects of life.

I really dread being his opponent. Fortunately, my father and I are rivals on the tennis court rather than in the business world.

—David Boswick, son of Charlie Munger

7. He knows how to concentrate deeply on a problem without being distracted by external influences.

—Bill Gates, Co-founder of Microsoft

8. He truly is the most knowledgeable thinker I have ever encountered. From business principles to economic laws, from dormitory designs for students to yacht designs, he has no equal. Charlie possesses the ability to capture the essence with simple descriptions.

—Bill Gates, Co-founder of Microsoft

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Editor/Jayden