Thinking is important but is even more important is how to think. All successful people whether they are scientists, politicians, writers or sportspersons tend to think through mental models they have developed culled from their experience and understanding of the world. Charlie Munger is one such astute financial wizard and we will examine his methods.
Munger once said that Warren Buffet was able to become the icon he is for investing by dint of his ability to remain a life-long “learning machine”. He adds that a typical day in Buffet’s life is spent in reading and thinking half the time just sitting in a chair. Arguably, he would not have been able to make Berkshire Hathaway, the zenith of financial success, without his learning.
Just as he characterized Buffet, Munger is also known for his life-long passion for learning. His penchant for drawing inimitable wisdom from different fields of study such as economics, psychology, biology, chemistry, history, literature and mathematics is admirable. He also understands the importance of mental exercising and passing on wisdom to become a better learner.
Charlie Munger avers, “Without life-long learning, you are not going to do very well. You’re not going to get very far in life based on what you already know.”
Learning is the only way we can come up with new modes of thought and mental models. We just need openness to learn to access the huge of pile of learning left by our ancestors in the form of books. “The dead outnumber the living fourteen to one, and we ignore the accumulated experience of such a huge majority of mankind at our peril,” said Niall Ferguson.
Advantages of Constant Learning
It is imperative for investors to keep learning and this habit, says Munger, has helped him and Buffet to sharpen their thinking and ability to make decisions. Learning new things organizes fresh limbic pathways which would help you in improving your decision-making capacity besides equipping you with an ability to lead a better and full life.
Having an aptitude for learning builds for us a solid foundation of knowledge that assists us in cultivating the right thinking. It is far better and efficient way of learning to read about the lives of great persons gleaning timeless wisdom from their failures and successes without much pain. Moreover, our individual lives are too limited to experience everything. Learn from others gives us access to varied experiences enriching us with accumulation knowledge in the quickest way.
Acing the Investing Game
It is said that knowledge is power and nothing is truer in the stock market. There is a buyer and seller in every security at every price and time. The person with better knowledge of the market will win in the end. It is crucial to know more than the opponent who is standing on the opposite side.
In the investing, the winner knows more about the market than the rest. It goes without saying that one can win this game only if you know more than the other. This is what Munger and Buffet have done and told other to do.
Investors who are “learning machines” in the words of the stoic of Omaha will be leaner thinkers so quick respond to the opportunities besides they will have excellent understanding of business, industry, risk and management. It is true of investing or any other field one who learns and knows more than the other person against whom he is competing he is said to have got the edge or competitive advantage.
Cultivate Multi-Disciplinary Approach to Understand Complex Problems
While confronted with complex problems it is beneficial to employ multi-disciplinary approach to think. Such scenarios are tailor-made for individuals who have acquired and cultivated wide array of thinking tools or mental models through constant learning and consolidation of their knowledge into deployable skills.
Munger considers “mental models” as an important thinking tool which requires taking ideas and wisdom from different disciplines like mathematics, biology, chemistry , semiotics, philosophy, psychology , deconstruction, and so on and combining them into models for use as tools for thinking clearly and be able to decide better.
Charlie Munger said,” Be a continuous learning machine.” If one takes this seriously and decides to learn something new every day, this would definitely take you far ahead in your life. And, it is a far better feeling to go to bed a little wiser every day. As in investing, knowledge also reaps compounding effects which will have transformational effects on your life fundamentally changing the way you think and take decisions.
On Cultivating Rationality
On being asked to explain the secret of success in one word, Munger replied in word, “rational”. No doubt, rational thinking is an effective tool for taking the right decisions. In order to imbibe and develop rationality, you are supposed to learn continuously questioning everything and acquiring the right knowledge.
The ace investor also talked of the idea of “deconstruction “positing learning new things juxtaposing them with opposite arguments resulting in the modification or total destruction of older notions. Change requires hard work combined with ability to question things constantly and refining of ideas into coherence which again possible with learning.
