Charlie Munger

01Invert the problem

Munger's 1986 Harvard speech listed four paths to ensure a miserable life, then said: avoid these and you'll be fine.

02Three-basket classification

Munger made only a few major investment decisions in his life—See's, Coca-Cola, BYD, Costco. The rest went into the 'Too Hard' basket.

03Incentive diagnosis

"The investment banking profession will sell shit as long as shit can be sold."—Investment banks are incentivized to sell transactions, not to make clients money.

04Anti-confirmation bias

Darwin recorded facts against his theory. Munger calls this the 'most effective anti-bias weapon.'

05Sit on your ass

Costco, bought in 1997, not sold for 27 years. "The big money is not in the buying and selling, but in the waiting."

06Raisin and turd rule

If there's one fatal flaw in a mix, the whole is toxic. Good elements can't neutralize bad ones.

07Deserve what you want

"To get what you want, you have to deserve what you want. The world is not yet a crazy enough place to reward a whole bunch of undeserving people."

08Stupidity checklist

Collect all known stupid mistakes in a field, make a checklist, and systematically avoid them. Avoiding stupidity is easier than pursuing brilliance.

01Ideology-driven thinking

Munger despises ideology-driven thinking because such errors cannot self-correct.

02Self-pity

Jealousy, resentment, revenge, and self-pity are 'disastrous thinking patterns.'

03FOMO

"It's like somebody else is trading turds and you decide, I can't be left out."

04Overcomplication

If something requires a very complex explanation to stand, it probably doesn't stand.

05Over-diversification

"The idea of excessive diversification is madness."—Focus on a few high-confidence decisions.

06Frequent trading

Trading is about friction costs, not wisdom.