Worldy Wisdom – Charlie Munger
Book Notes and Takeaways via Duncan Kelm
Three ways to avoid pure misery
- Don’t ingest chemicals to alter your mood or perception
- Addiction can happen to any of us through a subtle process where the bonds of degradation are too light to be felt until they are too strong to be broken
- Dismiss envy
- Envy will cause misery
- Lose resentment
- Work hard to quiet resentment, give up vengeance
Four ways to add to value to yourself
- Be reliable
- Faithfully do what you have engaged to do
- Learn from other’s experiences
- Learn from both the good and bad experiences of others
- Learn from the best work done before yours
- Learn how to bounce back
- Pick yourself up quickly and move forward
- Don’t expect to have a plan for everything
- You need to be fluid
Minimizing objectivity will help you lessen the compromises and burden of owning worldly goods
The sacrifices, wisdom, and value system transfer from one generation to the next and should always be appreciated
The safest way to get what you want is to try to deserve what you want
- By and large, the people who’ve had this ethos win in life, and they don’t win just money and honors. They win the respect, the deserved trust of the people they deal with
The acquisition of wisdom is your moral duty
Without lifetime learning you are not going to do very well
Go to bed every night a little wiser than you were that morning
This habit will help immensely particularly with a long road ahead
You can only progress when you commit to this method of learning
“Nothing has served me better in my long life than continuous learning”
Once you have the ideas, you must continuously practice their use
Like a concert pianist, if you don’t practice you can’t perform well
Cicero said “A man who doesn’t know what happened before he is born goes through life like a child”
Learn from history, learn from others
Problems will frequently become easier from inversion
- Invert and analyze
Avoid extremely intense ideology because it cabbages up one’s mind
“I feel that I am not entitled to an opinion unless I can state the arguments against my position better than the people who are in opposition. I think I am only qualified to speak once I have reached that state”
Life is very likely to provide terrible, unfair blows
- How you recover is what separates people
Envy, resentment, revenge, and self-pity are disastrous modes of thought
Appeal to interest, not to reason, even when your motives are lofty
Intense interest in any subject is indispensable if you’re really going to excel in it
Seek good judgement by collecting instances of bad judgement, then pondering ways to avoid such outcomes
Man is easily fooled, either by cleverly thought out manipulation, by circumstances occurring by accident, or by very effective manipulation practices that man has stumbled into during “practice evolution” and kept in place because they work so well
Psychological tendencies to be aware of
Reward and punishment super response tendency
Incentives and pain are some of the greatest motivators
Never, ever, think about something else when you should be thinking about the power of incentives
Repeat behaviors that work
Promptly rewarded good work is much better than delayed rewards in changing and managing behavior
Man is generally moral, however driven by both conscious and subconscious incentives, he drifts into immoral behavior in order to get what he wants
Widespread incentive-caused bias requires that one should often distrust the sales process (Wells Fargo opening accounts without client permission)
Invert and analyze
Granny rule; eat your carrots before you get dessert
In business this means getting rid of the hard tasks before rewarding themselves by proceeding to pleasant tasks
Liking and loving tendency
Liker or lover will tend to ignore faults, or comply with wishes, of their affectionate lover
Distorting facts to facilitate an easier path for the person they have affection for is an issue
Dislike and hating tendency
Ignoring virtues in the object they dislike
Dislike people, products, and actions merely associated with the object of dislike
Distort facts to facilitate hatred
Doubt-avoidance tendency
Puzzlement and stress over what is not known
Think religion
Inconsistency-avoidance tendency
Another way of stating confirmation bias
Avoiding facts and thinking that creates inconsistency in your hypothesis
Be like Darwin who would intensely seek evidence that disconfirmed his hypothesis
Envy/jealousy tendency
It is not greed that drives the world, but envy
Jealousy is a powerful motivator and will influence many to make choices or decisions based on the jealousy of others
Reciprocation tendency
Giving a gift or showing generosity is very powerful and tends to illicit a response in kind
Man’s belief in reciprocate-favor tendency has been practiced for eons
Reciprocation tendency subtly causes many extreme and dangerous consequences, not just on rare occasions but pretty much all the time
Influence-from-mere-association tendency
- Trained by previous experiences in life to believe that when several similar items are presented for purchase, the ones with the highest price will have the highest quality
- Buyers who pay higher prices often receive higher status
- Carefully examine each past influence, looking for accidental, non-causative factors associated with such success that will tend to mislead
- Look for dangerous aspects of the new undertaking that were not present when past success occurred
- “Keep your eyes wide open before marriage, and half shut thereafter” Ben Franklin
- See it like it is and love it anyway
- Avoid Persian Messenger Syndrome – killing the messenger
- Proper antidote is to welcome bad news and address it promptly
Pain avoiding psychology
- The reality is too painful to bear, so one distorts the facts until it becomes bearable
Excessive self-regard tendency
- Excessive self-regard diminishes the foolish bettor’s accuracy in appraising his relative degree of talent
- Fixable but unfixed bad performance is bad character, and tends to create more of itself, causing more damage to the excuse giver with each tolerated instance
- In demanding places, like athletics and big tech companies, you are almost sure to be discarded in due course if you keep giving excuses instead of behaving as you should
Deprival-super reaction tendency
- Loss seems to hurt much more than the gain seems to help
- Pain avoidance compounds this
Social proof tendency
- An automatic tendency to think and act as you see others around you thinking and acting
- Must learn to go the other direction
- Resisting the social contagion of bad behavior can be very hard
- In social proof, it is not only action by others that misleads but also their inaction
- Learn how to ignore the examples from others when they are wrong, because few skills are more worth having
Contrast misdirection
- When compared to something else it is not analyzed and considered independently
- Good example are car and house sales
- $10,000 is a lot of money, but when looking at a $1,000,000 house it begins to look far smaller
Stress influence tendency
- Light stress can improve performance, heavy stress will almost assuredly cause dysfunction
- Learn how to manage this stress – exercise
Use it or lose it tendency
- All skills diminish with disuse
- Throughout life, a wise man engages in practice of all his useful rarely used skills, many of them outside his discipline, as a sort of duty to his better self
- The hard fact of use-it-or-lose-it tendency tempers its harshness for the diligent
- Diligently focus and hone your knowledge every day and you will be a better person at the end of that day
Be aware of these tendencies and know when they are manipulating you and those around you
The financial consultants at Arrow Point Wealth Management are registered representatives with and securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
This material has been prepared for informational purposes only, and is not intended as specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.