Author: Charlie Munger
Source: "Poor Charlie's Almanac"
Compilation: Old A
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I have met countless people in my life, but I have never met someone like Charlie. During the years I have been with Charlie, I have been fortunate enough to know him closely. Charlie also firmly believes in this point. Even in the biographies of ancient and modern Chinese and foreign figures I have read, I have not found a similar person. Charlie is such a unique person, and his uniqueness and expression are also reflected in his thoughts. In terms of his personality.
----Buffett
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Regarding investment and decision-making, Charlie gives 10 checklist principles that can help him make the best decisions. Charlie does not pay attention to applying the following principles in the order they are listed, nor does the order in which they appear has any bearing on their importance. Each principle must be viewed as part of the overall complex investment process.
1. Risk: All investment evaluations should start from measuring risk (especially credit risk) to
measure the appropriate margin of safety;
avoid dealing with people with questionable moral character;
insist on asking for appropriate compensation for predetermined risks;
always remember inflation and interest rate risks;
avoid making big mistakes;
avoid continuous loss of capital.
2. Independence: "Only in fairy tales, the emperor is told that he has no clothes."
Objective and rational attitude requires independent thinking;
remember, whether you are right or wrong does not depend on whether others agree with you or against you -- --The only thing that matters is whether your analysis and judgment are correct;
following the crowd will only bring you closer to the average (only moderate performance);
3. Prepare: "The only way to win is work, work, work, work and hopefully have a little insight."
Develop yourself as a lifelong self-learner through extensive reading;
cultivate curiosity and strive to be a little smarter every day;
more important than the willingness to win is the willingness to prepare;
master the mental models of various disciplines proficiently;
If you want to be smart, the question you have to keep asking is "why, why, why".
4. Humility: Acknowledge your ignorance is the beginning of wisdom
Act only within your well-defined circle of competence;
identify and check negative evidence;
resist the desire for false precision and false certainty
; Fool yourself, and remember that you are the most important person fooled by yourself.
5. Rigorous Analysis: Using scientific methods and effective checklists can minimize errors and oversights
Distinguish between value and price, process and action, wealth and size;
remember the simple rather than the deep;
become a business analyst, Rather than market, macroeconomic or securities analysts;
consider overall risks and benefits, always pay attention to potential second-order effects and higher-level influences; think
forward and backward-think backwards, always Think in reverse.
6. Allocation: Proper allocation of capital is the most important job of the investor Remember
that the best use is always measured by the second best use (opportunity cost);
Bet hard (allocate capital) when it's in your favor;
don't "fall in love" with an investment -- even if you put your heart and soul into it, act on a case-by-case basis.
7. Patience: Restrain human beings' natural preference for action
"Compound interest is the eighth wonder of the world" (Einstein), don't interrupt it when it is not necessary; avoid
unnecessary transaction taxes and friction costs, never for Act and act;
keep a clear head when luck comes;
enjoy the result and enjoy the process, because you live in the process.
8. Determination: When the right time comes, act with determination.
When others are greedy, be fearful. When others are fearful, be greedy.
Opportunities don’t come often, so when they come, take them.
Opportunities Only for those who are prepared: investing is such a game.
9. Change: learn to change and accept the complexity that cannot be eliminated in life,
recognize 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 concept";
Face reality, even if you don't like it - especially when you don't.
10. Focus: Don't complicate things, remember what you have to do
remember that reputation and integrity are your most valuable possessions - and can be wiped out in an instant;
avoid self-importance and boredom ;
Don't overlook the obvious by getting too concerned with the details;
Never exclude unnecessary information;
Face your big problems, don't hide them;
Charlie's most basic code of conduct, the most fundamental philosophy of life: preparation, discipline, patience, determination.
Each is independent, but together they add up to a powerful critical mass that catalyzes the lollapalooza effect that Munger is famous for.
The following passage provides a good overview of the investment philosophy of the highly focused "Munger School": We tend to put a lot of money where we don't have to make additional decisions. If you buy something because it is undervalued, you will have to sell it when its price rises to where you expected it to be. That's hard. But if you can buy a couple of great companies, then you can sit back and relax. That's a good thing.
Charlie Munger has worked hard to cultivate and perfect his unique approach to life and business. Through these learning methods and the good habits he developed and maintained throughout his life, he achieved extraordinary success.
Today, you can too.
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