Poor Charlie’s Almanack isn’t exactly a bestseller, but those who’ve read it absolutely swear by it—and for good reason. The book captures the wit and wisdom of Charlie Munger, Warren Buffett’s longterm partner. Charlie’s perspective on life is practical, clear, and refreshingly no-nonsense. Here are my top three learnings from the book.
1. Latticework of Mental Models
If you want to understand the world better, build a latticework of mental models from a variety of disciplines. What are mental models? They’re the “big ideas” that explain how things work. For example, loss aversion from psychology explains why we hate losing more than we love winning.
Just knowing these ideas is not enough. You have to use them. Regularly. Everything is interconnected and you must see the interconnectedness with those models. As a frame of reference, Charlie estimates he has about 100 different mental models from different disciplines.
If no one’s teaching you this stuff, then you should teach yourself!
Try creating your own latticework of a hundred models. It’s much harder than it appears!
2. Saying No 90% of the Time Isn’t Missing Out
We live in the age of FOMO. But Charlie argues that if you say no 90% of the time, you’re not missing much. Okay we’re oversimplifying this a bit. Charlie does tell us to say no to things. But at the same time, he also emphasizes how important it is to be focused and patient. Saying no isn’t enough- unless you know when to say yes.
Think of it this way: imagine an oracle whispers to you that a particular stock is going to quintuple in value. Naturally, you’d want to invest big. But to make that move, you’d first need patience to save up, and then the guts to go big when the opportunity strikes.
Life works the same way. Don’t worry too much about saying no- but be aggressive when the once in a lifetime opportunities come.
3. Destroy Your Best-Loved Ideas Every Year
Charlie has no room for sentimentality when it comes to ideas. To him, ideas are tools, not treasures. If a tool gets rusty, you toss it and grab a better one. Charlie goes a step further: “…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.”
Any time you realize you’re clinging on to an old idea- toss it!
Bonus: Charlie One-Liners
How can we skip the legendary Charlie Munger one-liners? Here are some of my favourites:
- “It’s the work on your desk…. It’s the work on your desk. Do well with what you already have and more will come in.”
- “Do the job right the first time.”
- “Invert! Always invert!”
- “The best a young man can hope for is to get old before he dies!”
- “… consistently try to be not stupid, instead of trying to be very intelligent!”