Poor Charlie's Almanack - Charlie Munger

"He once said that he was nonconformist enough in his behavior and opinions that made sense to chart a very straight course in attire. His going along with normal social customs and his sense of humor, he said, were what allowed his otherwise sometimes prickly temperament to harmonize with other people." (pg. 50)

Talk One: Harvard School Commencement Speech (1986)

Starting from a Johnny Carson speech about prescriptions for guaranteed misery in life, Charlie delivers this talk at Philip Munger's graduation. The prescriptions for sure misery included:
1. Ingesting chemicals in an effort to alter mood or perception
2. Envy
3. Resentment
Charlie then adds 4 other points:
4. Be unreliable
5. Learn everything you possibly can from your own experience
6. Go down and stay down when you get your first, second or third severe reverse in the battle of life
7. Ignore a story he was told when he was very young: "I wish I knew where I was going to die, and then I'd never go there."
Another highlight of the speech in the value of inversion. "Invert, always invert" involves thinking about what you don’t want to happen, and then avoiding those outcomes. By inverting the problem, you can find ways to sidestep errors and focus on what will lead to better results.

Talk Two: A Lesson on Elementary, Worldly Wisdom as it related to Investment Management and Business (1994, The University of Southern California Marshall School Of Business)

The art of stock picking as a subdivision of the art of worldly wisdom
Charlie stresses the importance of having a diverse set of mental models which must come from multiple disciplines "because all the wisdom of the world is not to be found in one little academic department."
Some mental models for better stock picking include:
- mathematics: the Fermat/Pascal system, decision trees, permutations and combinations
- accounting: understanding its limitations
- psychology: if you're asking people something, always tell them why - the 5 W's, the psychology of misjudgment
- microeconomics: scaling advantages - social proof, specialization; disadvantage for Berkshire: magazines going to a narrower specialization: "Bigger is not always better"; competitive destruction; surfing - an early bid business catching a wave and staying on top for a long, long time (the cash register example).

Other ideas: play within your own circle of competence, bet on the quality of the business rather than the quality of the management

Talk Two: A Lesson on Elementary, Worldly Wisdom as it related to Investment Management and Business Revisited (1996, Stanford Law School)

"What you need is a latticework of mental models in your head."

"Great declarers in bridge think: "How can I take the necessary winners?" But they think it through backward, too: "What could possibly go wrong that could cause me to have too many losers?"".

"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. But there are also cases where you must recognize that you have no wisdom to add and that your best course is to trust some expert. In effect, you've got know what you know and what you don't know. What could possibly be more useful in life than that?."

"... appealing to his interest is likely to work better as a matter of human persuasion than appealing to anything else." (pg. 149)

Talk six: Investment Practices of Leading Charitable Foundations (1994)

I have more skepticism regarding the orthodox view that huge diversification is a must for those wise enough, so that indexation is not the logical for equity investment.
...
In the US, a person or institution with almost all wealth invested long-term in just three fine domestic corporations is securely rich. (...)
I go even further. I think it can be a rational choice, in some situations, for a family or foundation to remain 90% concentrated in one equity.

Talk seven: Philanthropy Roundtable (2000)

BEZZLE = contraction of EMBEZZLE (the increase in any period of undisclosed embezzlement) J.K. Galbraith saw that undisclosed embezzlement, per dollar, has a very stimulating effect on spending. After all, the embezzler spends more because he has more income, and his employer spends as before because he doesn't know any of his assets are gone.

"The man who needs a new machine tool and hasn't bought it is already paying for it."

Talk nine: Academic Economics: Strengths and Faults after considering interdisciplinary needs (2003, University of California)

Regarding the "man-with-a-hammer-syndrome" => have a full kit of tools

"And you've got to have one more trick: You've got to use those tools checklist-style, because you'll miss a lot if you just hope that the right tool is going to pop up unaided whenever you need it."

"The craving for perfect fairness causes a lot of terrible problems in system function. Some systems should be made deliberately unfair to individuals because they'll be fairer on average for all of us. Thus, there can be virtue in apparent non-fairness. (...).
The lack of justice for one guy who wasn't at fault is way more than made up by a greater justice for everybody when every captain of a ship always sweats blood to make sure the ship doesn't go around."

"If you can get really good at destroying your own wrong ideas, that is a great gift."

Talk ten: USC Gould School of Law Commencement Address (2007)

"Without lifetime learning, you people are not going to do very well."

"In life, just as in algebra, inversion will help you solve problems that you can't otherwise handle."

"I feel that I'm not entitled to have an opinion unless I can state the arguments against my position better than the people who are in opposition. I think that I am qualified to speak only when I've reached that state."

Talk eleven: The Psychology of Human Misjudgment (2005, selection from other 3 talks)

In this talk Munger discusses 25 psychology-based tendencies that can often mislead. Among these:

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