Some things make a significant impact on your life and change the lens of how you see the world. For me, one thing that made a big impact on how I learn, analyze, and make decisions was when I discovered the mental models of Charlie Munger and how he applies them to live a life that matters.
Charlie Munger is the billionaire, closest partner, and right-hand man to Warren Buffett. He is not only one of the most exceptional investors the world has ever seen but also a foremost thinker of our time. During the 2007 USC Law Commencement speech, Charlie Munger shared his most useful principles, ideas, and values with humility and grace. This compelling essence of wisdom is the framework he uses to make most of his business and personal decisions in life.
Here are the core ideas he shared:
The safest way to try and get what you want is to try and deserve what you want.
It’s such a simple idea. It’s the golden rule, so to speak. You want to deliver to the world what you would buy if you were on the other end. There is no ethos, in my opinion, that is better for any lawyer or any other person to have.
By and large, the people who have this ethos win in life and they don’t win just money, just honors and emoluments. They win the respect, the deserved trust, of the people they deal with, and there is huge pleasure in life to be obtained from getting deserved trust. And so the way to get it is to deliver what you’d want to buy if the circumstances were reversed.
Love and admire the right people, alive or dead.
A second idea that I got very early was that there is no love that’s so right as admiration-based love and that love should include the instructive dead. Somehow, I got that idea, and I lived with it all my life, and it’s been very, very useful to me.
Wisdom acquisition is a moral duty.
Another idea that I got, and this may remind you of Confucius too, is that wisdom acquisition is a moral duty. It’s not something you do just to advance in life. (...)
And there’s a corollary to that proposition which is very important. It means that you’re hooked for lifetime learning, and without lifetime learning, you people are not going to do very well. You are not going to get very far in life based on what you already know. You’re going to advance in life by what you’re going to learn after you leave here. (...)
The same is true at lower walks of life. I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than when they got up, and boy, does that help—particularly when you have a long run ahead of you.
So, if civilization can progress only when it invents the method of invention, you can progress only when you learn the method of learning. I was very lucky. I came to law school having learned the method of learning and nothing has served me better in my long life than continuous learning.
Have a multidisciplinary attitude and ideas.
Another idea that was hugely useful to me was that I listened in law school when some wag said, “A legal mind is a mind that when two things are all twisted up together and interacting, it’s feasible to think responsibly about one thing and not the other.”
Well, I could see from that one sentence that was perfectly ridiculous, and it pushed me further into my natural drift, which was into learning all the big ideas and all the big disciplines so I wouldn’t be a perfect damn fool who was trying to think about one aspect of something that couldn’t be removed from the totality of the situation in a constructive fashion. And what I noted, since the really big ideas carry 95 percent of the freight, it wasn’t at all that hard for me to pick up all the big ideas and all the big disciplines and make them a standard part of my mental routines.
Once you have the ideas, of course, they are no good if you don’t practice. You don’t practice, you lose it. So, I went through life constantly practicing this model of disciplinary approach. Well, I can’t tell you what that’s done for me. It’s made life more fun. It’s made me more constructive. It’s made me more helpful to others. It’s made me enormously rich. You name it, that attitude really helps.
(...)
There are all these other things that you should know in addition to history, and those other things are the big ideas in all the other disciplines. And it doesn’t help you just to know them enough just so you can prattle them back on an exam and get an A. You have to learn these things in such a way that they’re in a mental latticework in your head and you automatically use them for the rest of your life.
Apply inversion thinking and solving problem principles.
The way complex adaptive systems work and the way mental constructs work; problems frequently get easier and I would even say usually are easier to solve if you turn around in reverse. In other words, if you want to help India, the question you should ask is not, “How can I help India?” You think, “What’s doing the worst damage in India? What would automatically do the worst damage and how do I avoid it?”
You’d think they are logically the same thing, they’re not. Those of you who have mastered algebra know that inversion frequently will solve problems which nothing else will solve. And in life, unless you’re more gifted than Einstein, inversion will help you solve problems that you can’t solve in other ways.
But to use a little inversion now, “What will really fail in life? What do you want to avoid?”
Be reliable and diligent.
If you’re unreliable, it doesn’t matter what your virtues are, you’re going to crater immediately. So doing what you have faithfully engaged to do should be an automatic part of your conduct. You want to avoid sloth and unreliability.
Eliminate the tendencies of self-serving bias, envy, resentment, and self-pity.
Generally speaking, envy, resentment, revenge, and self-pity are disastrous modes of thought. Self-pity gets pretty close to paranoia and paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity.
I have a friend who carried a big stack of linen cards about this thick, and when somebody would make a comment that reflected self-pity, he would take out one of the cards, take the top one off the stack and hand it to the person, and the card said, “Your story has touched my heart. Never have I heard of anyone with as many misfortunes as you.”
Well, you can say that’s waggery, but I suggest that every time you find you’re drifting into self-pity—I don’t care what the cause, your child could be dying of cancer, self-pity is not going to improve the situation—just give yourself one of those cards. It’s a ridiculous way to behave and when you avoid it you get a great advantage over everybody else, almost everybody else, because self-pity is a standard condition and yet you can train yourself out of it.
And, of course, a self-serving bias, you want to get out of yourself: thinking that what’s good for you is good for the wider civilization and rationalizing all these ridiculous conclusions based on the subconscious tendency to serve one’s self. It’s a terribly inaccurate way to think and, of course, you want to drive that out of yourself because you want to be wise, not foolish.
You also have to allow for the self-serving bias of everybody else, because most people are not gonna remove it all that successfully, the only condition being what it is. If you don’t allow for self-serving bias in your conduct, again, you’re a fool.
Avoid Perverse incentive system.
You don’t want to be in a perverse incentive system that’s causing you to behave more and more foolishly or worse and worse. Incentives are too powerful a controller of human cognition and human behavior, and one of the things you are going to find in some modern law firms is billable hour quotas. I could not have lived under a billable hour quota of 2,400 hours a year. That would have caused serious problems for me. I wouldn’t have done it and I don’t have a solution for you for that. You have to figure it out for yourself, but it’s a significant problem.
Work with people you admire.
And you particularly want to avoid working directly under somebody you really don’t admire and don’t want to be like. It’s very dangerous. (...)
The way I solved that is I figured out the people I did admire and I maneuvered cleverly, without criticizing anybody, so I was working entirely under people I admired. (...) . And your outcome in life will be way more satisfactory and way better if you work under people you really admire. The alternative is not a good idea.
For a correct thinker, learn to maintain your objectivity.
Objectivity maintenance. Well, we all remember that Darwin paid special attention to disconfirming evidence, particularly to disconfirm something he believed and loved. Well, objectivity maintenance routines are totally required in life if you’re going to be a correct thinker. And they were talking about Darwin’s attitude—special attention to the disconfirming evidence—and also to checklist routines. Checklist routines avoid a lot of errors. You should have all this elementary wisdom and then you should go through and have a checklist in order to use it. There is no other procedure that will work as well.
Give the power to the right people, people who have the most aptitude to learn.
I think the game of life, in many respects, is getting a lot of practice into the hands of the people that have the most aptitude to learn and the most tendency to be learning machines. And if you want the very highest reaches of human civilization, that’s where you have to go. You do not want to choose a brain surgeon for your child among fifty applicants, all of them just take turns during the procedure. You don’t want your airplanes designed that way. You don’t want your Berkshire Hathaway’s run that way. You want to get the power into the right people.
Footnote: You can find the complete transcript published on James Clear.