As I’m re-reading the chapter about Charlie Munger inside “Richer, Wiser, Happier” by William Green, I can’t help but feel in awe of how much I can learn from this legend by studying his words again. Here’s the summary of the 7 lessons I’ve learned from Charlie Munger.
**1. Be Humble and Avoid Being Foolish**
Often, we tend to become too complacent in our results when the market is in our favor. Our greed and complacency can blind us to think that “this time is different.”
Charlie Munger said: “I find that all you have to do to get ahead in life is to be non-idiotic and live a long time. It’s harder to be non-idiotic than most people think.”
**2. Invert. Always Invert.**
It’s common for us to ask how to improve to get better results, but Charlie Munger’s invert thinking mental model can prove to be even more useful to help us become better.
When William asks Charlie Munger how to apply this method of thinking to practical problems such as deciding whether to get married or buy a particular stock, he recommends asking, “Is this going to be a disaster?” instead of asking, ‘Is it going to be wonderful?’
**3. Avoid Devastating Downside. Don’t Make Foolish Bets.**
Munger often preaches about the importance of avoiding behavior with marginal upside and devastating downside. He once observed, “Three things ruin people: drugs, liquor, and leverage.” The category of activities that exhibit this type of dangerous asymmetry also includes drunk driving, extramarital affairs, and cheating on taxes or expense reports. Regardless of our moral views, these are foolish bets.
In life we tend to try our luck to test certain limits. This reminded me that some bets are just not worth taking in the first place. Once again, avoiding stupidity helps us to win in life in the long run.
**4. There’s No Need to Rush**
We often like to make quick decisions so that we can get things done. After all, productivity is what we value a lot in today’s world. But Munger highlights that “tendency to quickly remove doubt” by rushing to make a decision—a habit that’s often triggered by stress.
**5. Be Open Minded**
There are always valuable insights we might have missed. Our past experience doesn’t mean that we are right, so we should stay open-minded.
Charlie Munger said, the reluctance to reexamine our views and change our minds is one of the greatest impediments to rational thinking. Instead of keeping an open mind, we tend consciously and unconsciously to prioritize information that reinforces what we believe.
**6. Find an Accountability Partner**
One way that Charlie Mungerr guards against irrationality is by emulating the “extreme objectivity”
He once remarked, “If Berkshire has made modest progress, a good deal of it is because Warren and I are very good at destroying our own best-loved ideas. Any year that you don’t destroy one of your best-loved ideas is probably a wasted year.”
**7. Be Kind**
I can see the kindness in his eyes and his love towards his disciples. Can you?
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