Poor Charlie’s Almanack | Alessandro Desantis

Highlights

“What I’m against is being very confident and feeling that you know, for sure, that your particular action will do more good than harm. You’re dealing with highly complex systems wherein everything is interacting with everything else.”
“Quickly eliminate the big universe of what not to do; follow up with a fluent, multidisciplinary attack on what remains; then act decisively when, and only when, the right circumstances appear.”
“I’m no genius. I’m smart in spots, and I stay around those spots.”
While poor outcomes are excusable in the Munger–Buffett world—given the fact that some outcomes are outside of their control—sloppy preparation and decision-making are never excusable because they are controllable.
Above all, never fool yourself, and remember that you are the easiest person to fool.
The Fermat/Pascal system is dramatically consonant with the way the world works. And it’s a fundamental truth. So you simply have to have the technique.
At Harvard Business School, the great quantitative thing that bonds the first year class together is what they call decision tree theory. All they do is take high school algebra and apply it to real life problems. And the students love it. They’re amazed to find that high school algebra works in life.
Personally, I’ve gotten so that I now use a kind of two track analysis. First, what are the factors that really govern the interests involved, rationally considered? And second, what are the subconscious influences where the brain, at a subconscious level, is automatically doing these things—which, by and large, are useful but which often misfunction?
That’s such an obvious concept—that there are all kinds of wonderful new inventions that give you nothing as owners except the opportunity to spend a lot more money in a business that’s still going to be lousy. The money still won’t come to you. All of the advantages from great improvements are going to flow through to the customers.
So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.
Some of the worst dysfunctions in businesses come from the fact that they balkanize reality into little individual departments, with territoriality and turf protection and so forth. So if you want to be a good thinker, you must develop a mind that can jump the jurisdictional boundaries. You don’t have to know it all. Just take in the best big ideas from all these disciplines.
You must have the confidence to override people with more credentials than you whose cognition is impaired by incentive-caused bias or some similar psychological force that is obviously present.
Nobody expects you to know everything about everything. I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge. To me, they’re like the bee dancing its incoherent dance. They’re just screwing up the hive.
The rest was my own greed, but my success in serving greed partly allowed me to make easier the process of being honorable and sensible. Like Ben Franklin observed, “It’s hard for an empty sack to stand upright.”
The third helpful notion is that it is not enough to think problems through forward. You must also think in reverse, much like the rustic who wanted to know where he was going to die so that he’d never go there. Indeed, many problems can’t be solved forward. And that is why the great algebraist Carl Jacobi so often said, “Invert, always invert,” and why the Pythagoreans51 thought in reverse to prove that the square root of two was an irrational number.
If A is narrow professional doctrine and B consists of the big, extra-useful concepts from other disciplines, then clearly the professional possessing A plus B will usually be better off than the poor possessor of A alone. How could it be otherwise?
Thus it follows, as the night the day, that in our most elite broadscale education, wherein we are trying to make silk purses out of silk, we need for best results to have multidisciplinary coverage of immense amplitude, with all needed skills raised to an ever-maintained practice-based fluency, including considerable power of synthesis at boundaries between disciplines, with the highest fluency levels being achieved where they are most needed, with forward and reverse thinking techniques being employed in a manner reminding one of inversion in algebra, and with checklist routines being a permanent part of the knowledge system.
Instead, it turns out that the truly big ideas in each discipline, learned only in essence, carry most of the freight. And they are not so numerous, nor are their interactions so complex, that a large and multidisciplinary understanding is impossible for many, given large amounts of talent and time.
Smart, hardworking people aren’t exempted from professional disasters from overconfidence. Often, they just go aground in the more difficult voyages they choose, relying on their self-appraisals that they have superior talents and methods.
It is, of course, irritating that extra care in thinking is not all good but also introduces extra error. But most good things have undesired side effects, and thinking is no exception.
Early Charlie Munger is a horrible career model for the young because not enough was delivered to civilization in return for what was wrested from capitalism.
couldn’t stand reaching for a small idea in my own discipline when there was a big idea right over the fence in somebody else’s discipline. So I just grabbed in all directions for the big ideas that would really work.
you’ve got to know all the big ideas in all the disciplines more fundamental than your own. You can never make any explanation that can be made in a more fundamental way in any other way than the most fundamental way. And you always take them with full attribution to the most fundamental ideas that you are required to use. When you’re using physics, you say you’re using physics. When you’re using biology, you say you’re using biology. And so on and so on.
The only antidote for being an absolute klutz due to the presence of a man-with-a-hammer syndrome is to have a full kit of tools. You don’t have just a hammer, you’ve got all the tools.