Humans often have a tendency to complicate things, but Mr. Charlie Munger is the opposite: we are keen on simplifying matters. If something is too troublesome, we skip it and move on to something else. What could be simpler than that? The truly strong characters are the simplest.

Buffett agrees with this statement: "The reason for failure is that we possess those 'great' and complex systems, or we apply magical criteria, but what we need to do is simply return to simplicity."

Tasks must simplify processes. Simplifying complex issues starts from a problem-solving perspective, eliminating clutter to reveal the essence. Break the problem down into several components, but think about the problem comprehensively. First outline the main issues, list the primary factors on paper, and analyze the relationships between these factors. As Charlie Munger said, when dealing with tricky tasks, I usually start with the easiest decisions.

Start from the problem itself, not from the solution to the problem, using only the most effective methods, because what matters is the result, not the method of solving it. Look for good methods to solve the current problem, rather than perfect or glamorous methods. Decisions should be fewer but better, as this forces us to focus more on each decision, while also reducing the chances of mistakes.

Buffett provides ample reason: "Charlie and I understood long ago that making hundreds of clever little investment decisions in a person's investment career is quite hard. This idea has matured as Berkshire's capital scale has grown, so we decided it's sufficient to make wise decisions only during the few opportunities available, rather than every time, thus we are now content with having a good investment idea appear once a year."

We need to avoid noise or irrelevant factors and take a broad view. William James said that the clever trick lies in distinguishing between the primary and secondary, knowing what is important, and also what should be ignored. Charlie Munger emphasizes the importance of distinguishing the essential from the trivial: "I believe part of (having insight) is due to the ability to distinguish between stupidity and wisdom. By eliminating foolish actions, the mind becomes clear, allowing us to do wise things."

Sometimes, the information that can be obtained often floods us, including erroneous information or information that cannot help us explain or predict. Sometimes, we may over-focus on details and those irrelevant and unknowable things. At times, we also overlook obvious facts. Focusing on the essentials will help us clarify priorities. Occasionally, a limited number of actionable steps can lead to significant effects. Therefore, there are only a few truly important decisions.

More information does not represent richer knowledge or more successful decisions. Today, we have access to more information, but at the same time, we also have more opportunities to encounter incorrect information. Charlie Munger said that sometimes the harder you work, the more your confidence expands, but the direction you are working towards may be wrong. In Arthur Conan Doyle's "The Hound of the Baskervilles," Sherlock Holmes said that the most important art of a detective lies in distinguishing which clues are coincidences and which are key.

We must understand the things that should be avoided in life. Rather than constantly exploring paths to success, it is better to first understand the areas, conditions, and people that must be avoided, as this can help reduce mistakes and utilize time more effectively. Furthermore, prevention is simpler than remediation. Charlie Munger categorizes what he resolutely will not touch into the "too tricky" basket, because such things make people "disgusted."

Buffett explains his and Charlie Munger's approach: "After 25 years of managing companies and operating various businesses, Charlie and I still haven't learned how to solve problems, but we have learned how to avoid them. In this regard, we have been quite successful. We focus on the low barriers that are easy to clear while avoiding the high hurdles. This discovery may seem somewhat unfair, but whether in running a business or in investment, sticking to companies that are easy to understand and transparent will yield more profits than clinging to those that are hard to grasp. Our consistent attitude is that you cannot do business with a person of poor character, but we do not need contracts and due diligence to protect ourselves—these are unnecessary. We can collaborate more with people we like, appreciate, and trust."

Charlie Munger continued, "Warren said long ago that the difference between good and bad companies is that the former allows you to easily make one decision after another, while the latter brings many tough problems—difficult decisions: ‘Is it useful?’ ‘Is it worth this much money?’ So, this is a way to decide what constitutes a good company versus a bad company: does it consistently pose significant difficulties to management, or does it consistently present some satisfactory, no-brainer decisions?"

Samuel Johnson said that great achievements usually rely on a lifetime of diligent pursuit, as they cannot be attained easily. It is impossible for the brain to focus on many things at the same time, let alone expect it to perform these tasks effortlessly. Switching between different tasks is time-consuming and tiring for the brain, especially when transitioning between more complex and unfamiliar tasks.

If we focus on only one thing for a period of time, our actions and decisions will appear simpler. Doing two things at once is equivalent to achieving nothing. If we focus on just one task, it will be done better and we will better develop our skills. In business management, focus is immensely important. Some originally good companies have ignored their solid foundational businesses due to deviations in operational direction, instead opting to acquire those with ordinary or even poor performance. Geico Insurance is one such case. Geico Insurance meddled in various businesses in the 1980s, almost none of which succeeded, paying a hefty price for this. Buffett and Charlie Munger, when contemplating whether to invest in some seemingly promising companies, are most concerned about whether doing so would cause them to lose focus. Buffett said: "I think, arrogance or dissatisfaction with being alone leads some managers into fanciful thinking, resulting in stagnation of business value, and this is a common occurrence. I prefer management with a clear focus..."

Before solving a problem, it is worth asking oneself: is this problem worth the time and effort to resolve? Buffett explains the success principles both he and Charlie Munger follow in life and business: "Before making a decision, two questions must be asked: 1. Is it knowable? 2. Is it important? If it is unknowable, then let it go because we know there are many important but unknown things in the world. Furthermore, if it is not important, it makes no difference whether it is knowable or unknowable, and we will likewise let it go." Indeed, there are some important things that we cannot know, such as market trends, but sometimes what we do know is not important.

Einstein said that posing a question is often more important than solving a problem, as solving a problem may just be a matter of mathematical or experimental skill. Sometimes, understanding the difficulty of a question can be more challenging than solving it. It is helpful to ask fundamental questions: what does it mean? What is the simplest example? What is the primary question? Can I distinguish the correct answer? Can I provide some examples to clarify the question? Asking the right questions is not enough; one must also find the right direction and ask the right people. Do not overly rely on one's assumptions, as we cannot be sure that others' assumptions are the same as ours, so it is necessary to give others the opportunity to explain.

Only when there is no pressure, time limit, threat, or judgment from others can one think perfectly. Thinking requires time, and during our indecisive moments, simple and straightforward truths often go unnoticed. If a problem can be allowed to cool for a while, and the subconscious can begin to activate, it often leads to better solutions and more insights.

Since Arthur Conan Doyle created those captivating stories for us, now virtually every detective novel features a moment where the investigator gathers all the facts, at least solving some of the problems. These facts may seem strange, disconnected, and unrelated. But great detectives know that the investigative work is sufficient, and now only some pure thinking activities remain to organize the collected data. Thus, Einstein could pull out his violin, or lounge on the couch smoking, and suddenly, clarity appears and he finds the answer.

Roger Lowenstein describes Buffett in 'Buffett: The Making of an American Capitalist' as follows: 'Buffett's genius is primarily manifested in his character—patience, discipline, and rationality... His talents stem from his unparalleled independent mindset, able to focus on work free from external distractions.'

Waiting for opportunities to arise requires sufficient patience, and one must dare to refuse temptation. Acting in haste often leads to poor judgments, which is the secret of investing. Buffett says, 'In capital allocation, activity does not correlate to the results obtained; in fact, in the realms of investment and acquisition, frantic behavior only results in inefficiency. If you feel a constant urgency to invest, you will certainly make many mistakes. Investment is not like that; it requires waiting for the right opportunity to strike.'

Mr. Charlie Munger added, 'Such important opportunities tend to come to those who patiently wait and search, who are curious and carefully analyze numerous variables. When a great opportunity arises, all that's needed is to place a significant bet, exercising the caution and patience that have been maintained all along, then utilizing the resources at hand.'

What can help avoid problems or guide decision-making behavior? Benjamin Franklin proposed a principle: focus intently on the task at hand, concentrate fully, and do not entertain foolish notions of sudden wealth; diligence and patience are the first essential means of wisdom. Charlie Munger also proposed a rule supported by examples: 'Whenever anyone recommends a 200-page instruction manual with a hefty commission to be paid, never be fooled. If this 'Munger Rule' is adopted, one might occasionally make mistakes. But in the long run, throughout life, you will consistently stay ahead of others—while also reducing unpleasant experiences that could wear down your affection for those around you.'

Buffett provides us with guidance on how to succeed in the Insurance industry, which can also be applied in other fields. Truly successful companies must adhere to the following three important principles:

1. Only accept risks that can be measured appropriately, carefully assessing all related factors, including estimating the likelihood of the smallest losses, and then deriving the expected profit value. These companies never aim for market share and, when seeing their competitors undercutting prices to grab customers or offering unreasonable claims conditions, do not rush into action.

2. It is essential to strictly limit the scope of the Business undertaken to ensure that the company does not incur cumulative claims losses due to a single accident and its associated consequences, which could damage the company's solvency, while tirelessly searching for seemingly unrelated risks and potentially overlapping perspectives.

3. Avoid engaging in Business that may lead to moral hazards, regardless of how attractive the Insurance premiums may be; do not delude oneself into thinking that gaining any advantage from bad individuals is possible. Most clients' integrity is trustworthy, hence there is no need to deal with people who raise ethical concerns, as it usually proves to be far more costly than anticipated.

"Just like in our investments, insurers wanting to achieve excellent long-term performance rely not on a few successful cases, but on how to avoid making foolish decisions." Buffett stated.

Select those elements that highlight key points and focus on meaningful matters. After understanding one's goals, some standards are needed to evaluate various options. Ask oneself: What are the primary and known factors necessary to achieve the goal or avoid the issue? The criteria for determining should be based on facts while having appropriate predictability, meaning they can be reasonably relied upon. The criteria used to assess things must be the most essential and concise, ranking them according to their significance and serving as filters. Set decision thresholds to minimize the possibility of false forecasts and losses, consider the consequences of decision errors, and with filters in place, it is possible to say "no" to 90% of things in 10 seconds.

At the 2001 press conference, someone asked Buffett how he evaluated a new management concept. He responded that four standards serve as filters for selection: Can I understand it? If yes, proceed; does it have a sustainable competitive advantage? If yes, proceed; does the management team consist of capable and honest individuals? If yes, proceed; is the price reasonable? If it passes this filter, then we can start writing checks.

What Buffett refers to as "understanding" is the ability to predict. Buffett defines "understanding" as having a fair degree of confidence in answering where a business will be in ten years. "Our only channel of making money is whether we can evaluate a company. If we cannot evaluate a carbon steel company, we will not buy it. But that does not mean it is not a good deal, nor does it mean it does not sell at its value; it simply means we do not know how to evaluate it."

Another example of combining rules and filters would be this: Real-world experience often tells us that dealing with morally inferior people often brings trouble. Therefore, one principle is: "Avoid dealing with people of poor character." A filter would be: "Maintain a good performance record and character." If this principle is understood thoroughly, relevant questions can be posed: "What is this person's character like?"

The process of elimination means the accumulation of effort. For instance, in addressing viewpoints that contradict fundamental scientific perspectives, it is necessary to find proof to substantiate them. Skip over those that can cause significant pain, which are unimportant or unknown, are unlikely to occur, cannot be realized, cannot be used for prediction or explanation, are unverifiable, have been negated, are overly simplistic decisions, erroneous assumptions, and issues beyond our capabilities or outside our scope.

The field of science also requires the process of elimination. In order to avoid getting entangled in observations or experiments with incomplete information, scientists consider in advance what types of experiments are most important and convincing: what do we want to obtain or prove? How can we achieve our goals? What situations must not occur? By asking these questions, they narrow down the possibilities. This is similar to Buffett's advocacy—eliminate some possibilities and then focus on a few that are likely.

Using a checklist process can help reduce our losses in conjunction with other tools, focusing on key points. If these key points are not properly checked, they may harm us. Charlie Munger suggests we should use models in the form of checklists: generally speaking, we should master some intellectual models, and it is necessary to take the time to create a checklist and go through it from start to finish to check for any omissions. If two or three important items are not on the checklist—assuming you are a pilot, it is very likely you will crash. Similarly, if a complete checklist of items is not used when analyzing a company, it is likely to lead to a wrong investment.

When designing a checklist, the following questions should be considered: different issues require different checklists; a checklist should encompass every key item that ensures safety and avoids accidents; it should be practical, simple, and convenient; it must align with reality. However, never overly rely on checklists. They can sometimes give us a false sense of security. Checklists work on the premise that everything is foreseeable, but sometimes unexpected things happen, and overlooked items may be the main cause of problems. It is often more rational to act according to our pre-existing principles, filters, and checklists than to act on passion, but we should not create too many rules, filters, or mindless items; we must always be aware of our ultimate goal.

Editor/Somer