This is a collection of essays, speeches, and lessons from the mind of Charlie Munger. Peter Kaufman (who gave one of my favorite talks of all time) edited the work. Here are a few insights for work and for life…

Essentially, Charlie advocated a multi-disciplinary approach to business and life grounded in simple mental models. This consists of learning the essential ideas from a variety of perspectives (economics, psychology, management, philosophy, etc.) and developing a sort of constellation of frameworks and models in your mind to use in processing reality.

Here’s a simple example: “Don’t ask the barber if you need a haircut.” You will rarely find a consulting project that doesn’t end with a recommendation for more consulting services or a real estate presentation that doesn’t end with a recommendation to buy property. Here’s another example - why is it that there are a million little restaurants but only a handful of big social media companies? It has to do with compounding effects and network effects — the more people who use a social media platform the more valuable it becomes. This leads to compounding then a critical mass of users which creates a winner take all dynamic. Restaurants do not benefit from more and more people, in fact a restaurant the size of a convention center would probably be a disaster. So the market remains fragmented.

Charlie advocates going through life a learner and building out a simple (but not too simple) latticework of models to help you navigate reality.

• If you don’t have numerical fluency you’re a one-legged man in an ass-kicking contest.
• This two-part rule works wonders: (1) Take a simple, basic idea and (II) take it very seriously.
• Take your work seriously, but never yourself. Munger’s advice for happiness is have low expectations, have a sense of humor, and surround yourself with the love of friends and family.
• Instead of basic analysis, consider the inner workings of whatever you’re trying to figure out in the context of an entire “ecosystem”… “When we try to pick out anything by itself, we find it hitched to everything else in the universe.” — John Muir Facts are not enough, you need a latticework of mental models. Apply the “fundamental full attribution ethos” — deploy the big ideas from the various disciplines and give full attribution to the key ideas you are using.
• Do not diversify. Wait until you have absolute certainty (with a massive margin of safety) and then place a large, decisive bet. Consider yourself as having a punch card with 10 bets to make the rest of your life.
• Succeed in life by avoiding trouble. Pursue happiness by avoiding unhappiness. “All I want to know is where I’m going to die so I’ll never go there.”
• “A scientific theory should be as simple as possible, but no simpler.” — Einstein
• Look for a business (or craft) with a moat (defensible competitive advantage) that will last generations. This is natural selection at work in the present day.
• Addiction is a subtle process where the bonds of degradation are too light to be felt until they are too strong to be broken. — Charlie Munger
• Charlie Munger gives a prescription for misery: (I) ingest chemicals to alter mood, (II) practice envy, (III) cultivate resentment, (IV) be unreliable, (V) go down and stay down, and (VI) don’t invert (do not think through things forwards, backwards, and from multiple perspectives).
• Use the Braun Company’s 5W Rule — Every order must include who will do what, where, when, and why. If you issue a communication without sharing the why more than once, you’re fired.
• Economics is an ecosystem - think of natural selection.
• Normal distribution, critical mass, back-up systems, feedback/compounding, and breakpoints are big ideas from engineering.
• Advantages of scale should not be underestimated. A big reason for this is cost reduction along the experience curve. Other times it is about basic physics. Other times it is about having passed a barrier to entry. The big get bigger - many industries are winner take all. Sometimes though scaling down and intensifying is best - think of a special interest publication like Golf Digest or something. Franchises are often a great combination of large and small scale advantages. And of course, look for monopolies wherever possible.
• First mover often has an advantage. Look to catch a big wave.