First, the ability circle
Charles Munger said: If you are really capable, you will know exactly where the boundary of the competence circle is. If you ask (whether you are beyond your ability circle), you are outside your ability circle.
Warren Buffett said: If we have any skill, it is that we can figure out when we are operating in the center of the competence circle and when we are approaching the edge.
Old thomas watson said: I am not a genius. I have a few smart points, and I will stay at these points.
Do what you can, including investment, of course.
Second, reverse thinking.
Charles Munger always thinks backwards. His way of thinking comes from this peasant proverb: I just want to know where I will die in the future, so I will never go there.
1986, Charlie delivered "the only speech in my life" at the graduation ceremony of Harvard University in Los Angeles. In this speech, he used the principle of reverse thinking to convincingly explain how a graduate lived a miserable life from the opposite side. After understanding these methods that make life miserable, you can get a happy life as long as you avoid them.
In investment, the first thing Charlie has to check is what risks there will be in investment. On the basis of avoiding all possible risks, he can have a deeper understanding of the opportunities and benefits of investment. Think about my previous stock market investment. Actually, I don't have a strong sense of risk. In many cases, this idea turns out to be that it doesn't matter even if you are deeply involved. If it's a big deal, I'll buy shares, and when it comes back, I'll miss many other better opportunities.
Entrepreneurship is actually the same. Can you use reverse thinking to consider where the risks are? If we can avoid risks as much as possible, the chances of survival of enterprises are greater. If we can think more about the factors that lead to the failure of enterprises, we can try our best to avoid these things in the operation of enterprises. According to statistics, more than 90% of startups will not live for three years, and it is better than most enterprises to be able to operate normally for more than three years.
Third, the pluralistic thinking mode.
In this book, it is a multi-thinking mode that runs through the whole book. Charlie said that you must know the important theories of important disciplines and use them often-all of them, not just a few. Most people only develop the thinking mode of one subject, such as economics, and try to solve all problems in one way. You know there is a proverb that says, "For a man with a hammer in his hand, the world is like a nail." This is a stupid way to deal with this problem.
The world we live in is composed of various aspects, and many disciplines have been formed through human development. For our daily life, we must understand their important theories and apply them to our daily life and work.
For example, mathematical compound thinking, permutation and combination thinking, probability thinking and so on. Critical point model of physical chemistry, entropy increasing model, biological evolution theory, modern Darwin comprehensive model, human misjudgment model of psychology, redundant backup model of engineering, etc. I understood the importance of multiple thinking models from the beginning when I came into contact with poor Charlie highlights. I also sorted out some thinking models in my official WeChat account, which will make my mind clearer and more rational after sorting them out and applying them in practice.
Chaos University founded by Professor Li Shanyou is based on Charles Munger's multiple thinking mode. Each thinking model will be explained step by step in the course, and offline activities will also organize a thinking model competition for the participating students to think deeply and practice. Chaos University is highly recommended. Anyone who wants to improve their cognition should come to study.
Four, double-track analysis method
Personally, I have formed the habit of using dual-track analysis, Charlie said. First of all, rationally speaking, what factors really control the interests involved? Secondly, when the brain is in a subconscious state, what subconscious factors will automatically form-these subconscious factors are generally useful but often fail (under certain circumstances)?
Generally speaking, there are two ways of stock valuation:
The first is the way people evaluate the value of wheat-how much practical value wheat has in the eyes of users. The second method is the way people evaluate the value of artists such as Rembrandt. To some extent, Rembrandt's works are considered to be of high value because their prices have been rising all the way in the past.
When making decisions, we should not only rationally analyze actual value interests, but also consider psychological factors. In the stock market, it is very difficult to analyze the value completely according to reason. It is often said that the stock market, especially the domestic A-share market, needs anti-human perseverance and profitability. In addition to the stock market, in fact, in our daily life and work, we will also encounter many times when we need to make decisions. Learning to use dual-track analysis will increase our decision-making efficiency and probability.
Fifth, the psychology of human misjudgment.
In this book, there is a long passage written by Charles Munger about the psychology of human misjudgment. In 2005, 8 1 year-old Charlie radically revised his speech before 15 from memory, forming 25 articles about human misjudgment psychology that we have seen so far.
The various tendencies of human misjudgment provide a detailed explanation for the second analysis method of dual-track analysis, and describe the situation that people will have various behavioral tendencies.
You can find a detailed introduction to this on the Internet. Of course, I strongly recommend you to read Poor Charlie's Collection. The influence of Robert Siodini has had a great influence on Charlie. Interested friends suggest that you also have a look.
Six, some classic golden sentences
The best way to get something is to deserve it.
If you want to convince others, you should resort to interests, not appeal to reason.
Tell others to do things and explain the reasons at the same time.
If you mix raisins with shit, you will still get shit. Similarly, if you mix value investment with speculation, you will still get speculation.
Tell the truth and you won't have to remember your lies.
Focus-don't complicate things, remember what you have to do.
Patience-Restrain human's natural preference for action.
Change-learn to change and accept the complexity that cannot be eliminated in life.
Know and adapt to the true nature of the world around you, don't expect it to adapt to you, constantly challenge and actively correct your favorite ideas.
Face the reality, even if you don't like it-especially when you don't.
Whether you are right or wrong does not depend on whether others agree with you or deny you. The only thing that matters is whether your analysis and judgment are correct.
Seven, Charlie's investment list
I will extract Charles Munger's investment list from the "Poor Charlie" series as follows:
First, risk-all investment evaluation should start with measuring risk (especially credit risk).
1, and calculate the appropriate safety margin.
2. Avoid dealing with people with moral problems.
3. Insist on providing appropriate compensation for pre-determined risks.
Always remember the risks of inflation and interest rate.
5. Avoid making big mistakes and avoiding sustained financial losses.
Second, independence-"Only in fairy tales will someone tell the king that he is actually naked."
1. An objective and rational attitude requires independent thinking.
Remember, whether you are correct has nothing to do with whether others agree with you-the only thing that can determine whether you are correct is whether your analysis and judgment are correct.
3. Going with the crowd will only bring you closer to the average (you can only get average performance).
Third, preparation-"The only way to win is to work, work and work again, hoping to gain some insights."
1, through a lot of reading, cultivate yourself into a lifelong self-learner; Cultivate curiosity and try to be smart every day.
More important than the will to win is the will to be prepared.
3. Mastering the thinking mode of major disciplines.
If you want to be smart, you must keep asking questions. The question is "Why? Why? Why? "
Humility-admitting your ignorance is the beginning of wisdom.
1, only in their clearly defined ability circle.
2. Identify uncertain evidence.
3. Resist the desire to pursue false spirit and false certainty.
Most importantly, don't fool yourself, remember that you are the easiest to be fooled by yourself.
5. Strict analysis-using scientific methods and effective lists can minimize errors and omissions.
1, determine the value, process and wealth.
It's better to remember the obvious things, not those abstruse things.
3. Be a business analyst, not a market analyst, a macroeconomic analyst or a securities analyst.
4. Consider the overall risks and benefits, and always pay attention to the potential second-order effects and higher-level impacts.
5. Think forward and backward-think in reverse, always think in reverse.
Allocation of intransitive verbs-Rational allocation of capital is the primary task of investors.
1, remember whether there is a better way to use it (opportunity cost) is the standard to measure whether capital is used to the greatest extent and best.
2. There are few good ideas-if the odds are very favorable to you, make a big bet (allocate capital).
Don't "fall in love" with investment projects-it depends on the situation and the opportunity.
7. Patience-Restrain human's natural preference for action.
1, "Compound interest is the eighth wonder in the world." (Einstein said) Never interrupt compound interest unless necessary.
2. Avoid unnecessary transaction taxes and friction costs, and never act for the sake of action.
Keep a clear head when luck comes.
4. Enjoy the results of the investment and enjoy the process, because you live in this process.
Eight. Decisiveness-Take decisive and convincing actions when the appropriate situation arises.
1. Fear when others are greedy, and be greedy when others are afraid.
2. Opportunities are rare. When the opportunity arises, we should seize it.
Opportunities are reserved for those who are prepared: this is the rule of the game.
Nine, change-learn to change your life and accept the inevitable complexity.
1. Understand and adapt to the true nature of the world around you. Don't expect the world to adapt to you.
2. Constantly challenge and actively correct your "like concept".
3. Recognize the reality, even if you don't like it-especially when you don't like it.
Ten, focus-don't complicate things, remember what you originally wanted to do.
1. Remember that fame and integrity are your most valuable assets-they will disappear in the blink of an eye.
2. Avoid arrogance and boredom.
Don't pay too much attention to details and ignore obvious things.
4. Don't rule out unnecessary information: "A levee of a thousand miles will collapse in an ant's nest".
Face up to your big trouble and don't hide it.