Note:
I must warn the reader that this book is not for everyone. If you are closed-minded and unwilling to read and learn from the lessons in this book, then you should not read it. If you are only looking for a quick way to make money, then this book is not for you.
KEY NOTES:
people who can think independently, gain control of their emotions, and avoid psychological errors have an advantage as investors.
The quote above is not only applicable to investors; it applies to every aspect of life. If you cannot control your emotions, you may make a mistake that you will regret later on, or even immediately.
Munger has read hundreds of biographies. Learning from the success and failure of others is the fastest way to get smarter and wiser without a lot of pain.
I completely agree with Charlie on this point. Biographies are books that many people do not read enough, for reasons I cannot explain. These books should be viewed as a shortcut to learning from other people’s experiences. Hopefully, the next time you read a biography, you will also pick up on the historical context of the person’s life and learn about the events that were happening during that time. This way, you can kill two birds with one stone by gaining a better understanding of history and learning about the person’s successes and mistakes.
“Take a simple idea and take it seriously.”
You might think that this is something you hear a lot, but I think it is worth mentioning. Netflix is a great example of this concept. The company started by sending DVDs to people’s homes and offering no late fees. As we now know, they have come a long way from that simple idea.
If it was easy to be like him and think like him, then there wouldn’t be just one Charlie Munger. Turning oneself into a learning machine with multiple mental models … is very hard work, and the few people who succeed at doing it may still fail to benefit from it if they don’t have the right temperament.
The most challenging aspect of this is maintaining consistency and being open to the idea of continuously adapting to new technologies and ideas that are constantly changing.
I’m a great believer in solving hard problems by using a checklist. You need to get all the likely and unlikely answers before you; otherwise it’s easy to miss something important.
Several other successful people have pointed out this habit. Author Stephen R. Covey has written The 7 Habits of Highly Effective People. If you haven’t read this book, I would definitely add it to my list.
Part of the benefit of creating a checklist is the process of writing down your ideas. I have always loved the point Buffett made about the importance of making the effort to actually put your ideas in writing. In Buffett’s view, if you cannot write it down, you have not thought it through.
The four fundamental principles of value investing as created by Ben Graham are as follows: 1. Treat a share of stock as a proportional ownership of the business. 2. Buy at a significant discount to intrinsic value to create a margin of safety. 3. Make a bipolar Mr. Market your servant rather than your master. 4. Be rational, objective, and dispassionate.
“Knowing what you don’t know is more useful than being brilliant.”
As Socrates once said, “To know thyself is the beginning of wisdom.”
It’s a very simple set of ideas and the reason that our ideas have not spread faster is they’re too simple. The professional classes can’t justify their existence if that’s all they have to say. —CHARLIE MUNGER, BBC INTERVIEW, 2009
First Principle: Treat a Share of Stock as a Proportional Ownership of a Business
Maybe you are thinking of buying your first stock. When you begin, you are at least doing some small amount of research. Unfortunately, the more time you spend in the stock market, the more you will follow up on news and speculation. Don’t forget to look at the company’s actual worth you are interested in.
to the man with a hammer, the world looks like a nail.
Imagine you have a toolbox and the only tool you have is a hammer. If you need to fix your sink, it is not logical to use the hammer to do so, as it is likely that the sink needs a gasket or some other type of tool to fix it properly. The moral of this story is that you should have a toolbox full of different tools so that you can solve your problems using a variety of solutions rather than relying on the same one repeatedly.
Munger likes to say that a year in which you do not change your mind on some big idea that is important to you is a wasted year.
Brands only increase value if they increase customer willingness to pay or reduce the cost to provide the good or service.”2 The creation of a great brand is a rare thing that requires considerable skill—and arguably a big dose of luck as well.
In short words, anyone who can create a brand. Will always have a competitive advantage over a lot of completion.
Companies that have been granted a patent, trademark, or other type of intellectual property by the government have in effect been given a legal monopoly. This barrier to entry can create a substantial moat for the owner of the intellectual property.
Patents are something that I think people do not talk about as often as they should. For example, Jeff Bezos once tried to patent the “buy now” button. Luckily, this patent was not approved, but can you imagine the impact it would have had on today’s e-commerce economy if it had been? If you look at today’s biggest companies and celebrities, they have extensive lists of patents.
The 23 tendencies
- Reward and Punishment Superresponse Tendency. Almost everyone thinks he fully recognizes how important incentives and disincentives are in changing cognition and behavior.
- Liking/Loving Tendency
- Disliking/Hating Tendency
- Doubt-Avoidance Tendency
- Inconsistency-Avoidance Tendency
- Curiosity Tendency
- Kantian Fairness Tendency
- Envy/Jealousy Tendency
- Reciprocation Tendency
- Influence-from-Mere-Association Tendency
- Simple, Pain-Avoiding Psychological Denial
- Excessive Self-regard Tendency
- Over-Optimism Tendency
- Deprival Super-Reaction Tendency
- Social-Proof Tendency
- Contrast-Misreaction Tendency
- Stress-Influence Tendency
- Availability-Misweighing Tendency
- Use-It-or-Lose-It Tendency
- Drug-Misinfluence Tendency
- Senescence-Misinfluence Tendency
- Authority-Misinfluence Tendency
- Lollapalooza Tendency
Book Review 5.0 Stars
Erika Funny 
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