1. Who is Munger
Charlie·Munger, Born January 1, 1924, American Investor, Warren·Buffett's golden partner, Berkshire·Vice Chairman of Hathaway.
The 96-year-old old man, In the past 46 years, and Buffett teamed up to create the best investment record The book value of Berkshire's stock has created an investment myth with an average annual compound rate of return of 20.3%, and The stock price per share rose from $19 to $84,487.
2. Munger's Quotations and Thinking
2.1 Reverse thinking
If you want to understand how to get happiness in life, Charlie first studied how life can become painful; We need to study how companies can become stronger and bigger, Charlie first studied how companies decayed; Most people care more about how to succeed in stock market investment, Charlie is most concerned about why most people fail in stock market investment.
2.2 Find the circle of competence
"Find out what you do best, Then persevere, Happy to do it well."This is Charlie's usual way of life.
Just be prepared, Seize a few opportunities in life, Take appropriate action quickly, and Do simple and logical things, Wealth in this life will be greatly increased.
The opportunities mentioned above are rare, They usually fall on constantly looking and waiting, People who are full of curiosity and keen to analyze various possibilities."
2.3 Interdisciplinary model + multiple thinking
"What is a mental model?? Put this way, The first rule is that you must have a multiple-thinking model——Because if you can only use one or two, The psychology of human nature shows, You will distort reality, Until it fits your mental model, Or at least until you think it fits your model.
From the perspective of the person holding the hammer in his hand, The world is like a nail."This is a dumb way to deal with problems. Encountered different companies, You need to check different factors and apply different mental models.
Soft science should strengthen the basic scholarly spirit and methods imitating hard science. Here the hard sciences, Are exponential, physics, and the Four disciplines of chemistry and engineering.
Munger spent a lot of energy, mastering the basic academic spirit and methods of hard science, He used this method to learn various soft sciences and increase interdisciplinary universal wisdom.
If you switch from engineering to business, you will find that probabilistic thinking conflicts with mechanical determinism thinking, If professors who study these two disciplines meet, Probably pinch.
But the moment when I feel the conflict, You will find that your thinking system begins to change from point thinking to line thinking.
If I were a two-dimensional creature, I don’t understand how three-dimensional creatures see the world, One more subject will give you another measure. "Three-body". It talked about looking at 3D from 4D, It's like a divided piece of paper is mapped in a mirror of infinite reflection.
The most important examples of these models include the redundant backup model of engineering, the Mathematical compound interest model, The tipping point of physics and chemistry, the Overturning moment, the Autocatalysis model, the Modern Darwinian Comprehensive Model of Biology, And the cognitive misjudgment model of psychology.
If you haven’t made the basic but somewhat less natural mathematical probability methods a part of your life, Then in the long life, You will be like a one-legged man in a kicking competition.
However, these disciplines——Especially psychology——Constitute the foundation on which his system rests.
Munger made a special mention in chapter four of this book, Human Misjudgment Psychology, I especially like this part, Because I saw a lot of people, including professionals who have inevitable results due to misjudgment or cognitive bias. Even if I understand the underlying reason, It's hard to overcome, Because of human nature.
Recommend Nobel Prize Winners in Economics, Daniel Kahneman's "Thinking, Fast and Slow", Reading this book will help understand Munger’s interdisciplinary foundation, It's delicious to read the two books together.
"Let me explain why education is so bad now. Part of the reason is the status quo of old age and death between different disciplines. E.g, Psychology is most useful only when combined with the principles of other disciplines.
But if your professor doesn’t understand the principles of other subjects, Then he cannot complete this necessary integration."
2.4 Curiosity
I want to talk about how to cultivate the temperament to hold stocks without anxiety. Character alone is not enough. You need to have a lot of thirst for knowledge for a long, long time.
Must have a keen interest in figuring out the reasons behind what is happening. If you can maintain this mentality for a long time, Your ability to pay attention to reality will gradually improve. If you don't have this mentality, even if you have a high IQ, Also doomed to fail.
2.5 Patience
"What you need is not a lot of action, But great patience. You must stick to the principle, Wait till the opportunity comes, You just grab it hard. These years, Berkshire makes money by betting on certain things."
Many people like to do short-term, and I know I don’t have that IQ, If you do a lot of short-term results, you can only pay tuition fees and pay commission fees.
But human nature is deeply attracted by greed and stimulation, Whether it’s a stock or a fund, Research a good product and hold it for a long time, Let him go, I don't move, Hope to hold on.
2.6 Crazy derivatives
"Derivatives system is simply neurotic, It's totally irresponsible. The fixed assets that people think are not real fixed assets. It's too complicated, I can't make it clear here——But you can’t believe that the amount involved is in the trillions of dollars.
You won't believe how complicated it is. You can't believe how difficult accounting for derivatives is. You can’t believe how motivating people’s wishful thinking about the value and liquidation capabilities of the company will be."
Catch the cat's tail, The man who lifted the cat upside down Will learn lessons he can't learn elsewhere.——Mark ·Twain.
2.7 The efficient market hypothesis
The efficient market hypothesis has a very questionable premise, That is, investors participating in the market are sufficiently rational and able to respond quickly and reasonably to all market information.
The theory says it is sound in law, Functions well, has High transparency, and has A fully competitive stock market, All valuable information has been timely, accurate, and Fully reflected in the stock price trend, including the current and future value of the company, Unless there is market manipulation,
Otherwise, it is impossible for investors to obtain excess profits higher than the market average by analyzing past prices.
I gave a name to those who believe in the extremely efficient market theory——Called "Neuropathy".
That is a logically self-consistent theory So that they can make beautiful math problems. So I think this kind of theory is very attractive to those with high mathematical talents. But its basic assumptions are not in line with real life. So the answer is: The market is both partially efficient And partially inefficient.
2.8 Munger's checklist
a. Double-track analysis
- Look rationally, What factors really dominate the interests involved?
b. Investment and decision checklist
- Charlie's informal checklist, Lists various factors worth considering in detail.
c. Super simple common concept
- Solve the obvious questions first.
- Use mathematical skills.
- Reverse Thinking(Consider the problem in turn).
- Apply basic interdisciplinary wisdom, Never completely rely on others.
- Pay attention to the combined effect of multiple factors——The lollapalooza effect.
d. Based on psychology
- 25 standard causes of his famous human misjudgment.
2.9 Revisiting economics
"I think the current stock price has been irrationally raised, This view is the same as what you have learned from professors who have misunderstood their children, like listening to the gospel. "Effective market". the theory is just the opposite.
Your professors misled their children to believe too much in the economics "Rational man" Hypothesis, In psychology, the Irrational person "Little is known about the theory, Also lacks actual life experience.
Humans are like lemmings, In some cases "Collective irrationality" Propensity. This tendency causes smart people to have many irrational thoughts, Did a lot of irrational behavior.
So, Economics should imitate the basic methods of physics, But you should never pursue a theory as accurate as a physics formula.
The economics community puts too much emphasis on macroeconomics, And insufficient attention on microeconomics. I think this is wrong. It’s like not knowing anatomy and chemistry But wanting to master medicine. Besides, Microeconomics is fun.
It can help you understand macroeconomics correctly, It's as fun as playing acrobatics. On the opposite, I don’t think people can have so much fun studying macroeconomics. The most important reason is that they often make mistakes Because the system they want to understand is too complicated."
2.10 Importance of reading
"The smart people I met in my life(Smart people from all walks of life)Nothing is not read every day——No, not a single one. Warren reads a lot, and I read a lot, which May surprise you. My kids laugh at me. They think I am a book with two legs.
I am a fan of biographical books myself. I think if you want people to know useful and great concepts, It is best to connect these concepts with the lives and personalities of the great men who proposed them.
I think if you can and Adam·Smith makes friends, Then you can definitely learn economics better. with "Deadman" making friends, sounds fun, But if you do become friends with the great dead in your life, Then I think you will live a better life and get a better education. This method is much better than simply giving some basic concepts."