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Worldly Wisdom from a Legend – Charlie Munger
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Charlie MungerLast week, the world lost a legend, Charlie Munger.
Munger was a longtime business partner and friend of fellow billionaire Warren Buffett, whom he worked with for nearly 45 years. Charlie is known as one of the forefathers of the idea of mental models, which is something I’ve appreciated reading from him for the last 20+ years. His Worldly Wisdom consists of a set of mental models framed as a latticework to help solve critical business problems. Warren and Charlie would often say the secret to the success of Berkshire Hathaway and their wealth was to remove ignorance and make fewer mistakes. To honor Charlie, I want to share 11 of my favorite tendencies he says we should all understand to help us do that: ReciprocationHumans have a subconscious tendency to reciprocate favors and disfavors. When you go into a store, they offer you a bottle of water or, in a high-end jewelry store, they offer you a glass of champagne. The goal is to trigger your desire to reciprocate or buy. When you accept the water or champagne, you take a step towards a purchase. The answer is simple, unless you intend to buy, do not accept.
Also, do not accept the free dinner in Las Vegas with a promise to watch the time share presentation. OveroptimismWhen life is going well, we are too optimistic. We make decisions with the thought it will all turn out well. Consider for a minute, the investments made the last two years, 13 years into a market bull run. Now, they appear to be mistakes. When life is going well, whether personally, professionally, or financially, you cannot let it go to your head. Practice the Stoic concept of premeditatio malorum. Imagine what can go wrong and what can be taken away from you. With this lens, consider more balanced decisions. Pain avoidanceFor many people, reality can be painful. To avoid this pain, we turn to chemicals:
We abuse substances to take away the pain. Instead, before you take the chemicals, ask yourself what am I trying to avoid and sit with it. Liking & LovingWe are conditioned from birth to like and love. For example, a mother is conditioned to love her child. A downside is we want to be liked and loved, which is what social media and advertisers use against us. They play on your desire to be liked. To combat this, do not tie your success or self-regard to results or external materials. Learn to find happiness and contentment inside yourself. With social media, focus on the process and creation, not the likes and retweets. Process > results, always. Envy & JealousyWe are conditioned, through evolution, to envy and jealousy. What started for early humans as a desire to have available food has become a desire to have what we see others have. Unfortunately, with social media, we see too much of what others have. When we see the Kardashians, we want their lifestyle – It’s the Kardashian Effect. When we see someone with 1 million followers on Twitter, we want 1 million followers. A behavior that served our ancestors no longer serves us. Learn to look internally, value what you have and disregard what you don’t. Kantian FairnessKant believed we behave in a way that, if followed by others, will make the human system better for all of us – the categorical imperative. The problem becomes when we expect the world to always be fair. To follow the rules of fairness. We cannot expect life to always be fair. We cannot expect people to always behave in the right way. When we realize life isn’t fair, and people will not always be fair, we are less likely to be surprised and are more likely to be prepared. Doubt-AvoidanceWe are programmed to remove doubt from our lives. One way we remove doubt is to make quick decisions, which sets us up for mistakes. To prevent this:
Disliking & HatingWe are programmed to like and love. We are also programmed to dislike and hate and it can be used against us. Consider how politicians use our hate to program us against our neighbors. We will make poor decisions when dealing with people we dislike. To combat this tendency, we must separate a person from a concept. If we dislike a person, we don’t need to dislike their ideas. If we dislike a political party, we do not need to dislike every position they have. By doing this, we can remove polarization. Excessive Self-RegardMany people believe their success is a result of their work and their failures a result of bad luck. We believe people like us are better than others, which leads to cliques and a lack of diversity. We also often overestimate our abilities to our detriment, as is the case with sports betting. To combat this:
Reward & PunishmentIncentives are superpowers….the most important rule in management is to get the incentives right Our desire for rewards and against punishment is used against us daily:
To combat this tendency, design the right incentive programs for your teams. Ask yourself, how is my desire for rewards and punishment avoidance being used against me. Have a plan and focus on the process to achieve it. Also, focus on internal, not external, factors. Influence From AssociationThis tendency has positive and negative angles, which cause you problems. For example, advertisers of beer or cigarettes show a very lively and desirable scene and your brain associates their product with that image. As well, if you dislike someone or a company, you will downplay their success and overplay their failures. To combat this tendency, once again separate people, companies, and parties from ideas and performance. Also, recognize when an advertiser tries to use it against you. TL;DR:Charlie, thank you for the 99 years of wisdom you’ve given this world. If you want to make fewer mistakes in your life, understand these 11 tendencies from Charlie Munger to succeed:
TGG PodcastCharlie Munger died one month before his 100th birthday, but This week on the Growth Guide Podcast, we talked to a 102-year-old practicing doctor. The true mother of holistic medicine shared these ๐ฆ๐ถ๐ ๐ฆ๐ฒ๐ฐ๐ฟ๐ฒ๐๐ ๐๐ผ ๐๐ฒ๐ฎ๐น๐๐ต ๐ฎ๐ป๐ฑ ๐๐ฎ๐ฝ๐ฝ๐ถ๐ป๐ฒ๐๐:
To learn the rest, you’ll need to listen to the Podcast.
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