Skip to main content

Charlie Munger

Invert, always invert — most problems are best solved backwards.

Munger's edge was never stock-picking — it was building a latticework of mental models from every discipline and letting them combine into judgment that compound interest can't replicate.

Worldly Wisdom​

The thesis: no single model is enough. Wisdom is a latticework — a web of 80-90 models from physics, biology, psychology, economics, and history. When multiple models point the same direction, conviction is warranted. When they diverge, slow down.

Misjudgment Heuristics​

  • Tokenomics: incentives and disincentives strongly influence behavior.
  • Liking/Loving: people favour individuals and symbols they like, potentially leading to biased decisions.
  • Disliking/Hating: people ignore positive qualities in those they dislike, distorting perception.
  • Doubt-Avoidance: stress leads to hasty decisions; deliberate delays can counteract this.
  • Inconsistency-Avoidance: people avoid change and inconsistency, hindering adaptability.
  • Curiosity: people seek more information, but overindulgence can complicate decision-making.
  • Kantian Fairness: desire for fairness and reciprocity in human interactions.
  • Envy/Jealousy: negative emotions can affect decision-making and relationships.
  • Reciprocation: people reciprocate behaviors, both positive and negative.
  • Influence-from-Mere-Association: people perceive things based on associations, requiring careful consideration.
  • Simple, Pain-Avoiding Psychological Denial: avoiding painful truths can lead to poor decisions.
  • Excessive Self-Regard: overestimating abilities can lead to arrogance.
  • Overoptimism: exaggerated optimism can lead to underestimating risks.
  • Deprival-Super-reaction: strong reactions to deprivation can result in irrational decisions.
  • Social-Proof: people tend to follow the actions of others, even if it's not the best course of action.
  • Contrast-Mis-reaction: reacting strongly to contrasts can lead to distorted perceptions.
  • Stress-Influence: stress can lead to quick, poorly thought-out decisions.
  • Availability-Mis-weighing: giving undue weight to readily available information.
  • Use-It-or-Lose-It: people tend to use skills and knowledge actively, or they lose them.
  • Senescence-Misinfluence: aging can impact judgment and decision-making.
  • Authority-Misinfluence: people tend to be influenced by authority figures.
  • Twaddle: using complex language to obscure the truth.
  • Reason-Respecting: people tend to be influenced by reasoning.
  • Lollapalooza: the combination of multiple tendencies leading to extreme outcomes.

Real-World Cases​

  • Berkshire Hathaway's success reflects Munger's insights in compensation structures and investment decisions.
  • Munger and Buffett's emphasis on critical thinking and humility contributes to their success.
  • Munger's awareness of cognitive biases and tendencies informs decision-making in various domains.
  • Guidance for individuals and organizations seeking rational decision-making.

Context​

  • Decisions — Munger's inversion and checklist thinking applied to decision-making
  • Mental Models — the latticework he built across disciplines
  • Agency — worldly wisdom as the foundation of autonomous action
  • Perspective — seeing what others miss through a broader model set

Questions​

When is a single mental model enough, and when does the lollapalooza effect demand you hold the whole latticework at once?

  • Which of Munger's 24 misjudgment tendencies do you most reliably underweight in your own decisions?
  • If worldly wisdom requires breadth across physics, biology, economics, and psychology — what does a minimum viable latticework look like for a specific domain?
  • Munger inverted problems to find answers: what problem in your current work becomes clearer when you ask "what would guarantee failure?"