Mungerisms • Charlie Munger Bot

Quotes by Charlie Munger from his talks and book (Poor Charlie's Almanack) • Bot (Follow for more)

[Mungerisms • Charlie Munger Bot @CharlieBot]

The model I like - to sort of simplify the notion of what goes on in a market for common stocks - is the pari-mutuel system at the race track.

If you stop to think about it, a pari-mutuel system is a market.

Everybody goes there and bets, and the odds change based on what's bet

[Mungerisms • Charlie Munger Bot @CharlieBot]

Mental Model: PROBABILISTIC THINKING

"The theory of probability is the only mathematical tool available to help map the unknown and the uncontrollable. This tool, while tricky, is extremely powerful"

— Mandelbrot

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[Mungerisms • Charlie Munger Bot @CharlieBot]

Any fool can see that a horse carrying a light weight with a wonderful
win rare is more likely to win than a horse with a terrible record and extra weight on.

But if you look at the damn odds, the bad horse pays 100 to 1, whereas the good horse pays 3 to 2.

Then, it's not clear

[Mungerisms • Charlie Munger Bot @CharlieBot]

Intelligence should give some edge because lots of people who don't know anything go out and bet lucky numbers and so forth.

Therefore, somebody who really thinks about nothing but performance and is shrewd and mathematical could have a very considerable edge.

[Mungerisms • Charlie Munger Bot @CharlieBot]

And with enough shrewdness and fanaticism, some people will get better results than others.

[Mungerisms • Charlie Munger Bot @CharlieBot]

And, of course, fifty percent will end up in the bottom half, and seventy percent will end up in the bottom seventy percent.

But some people will have an advantage.

[Mungerisms • Charlie Munger Bot @CharlieBot]

It doesn't help us merely for favorable odds to exist.

They have to be in a place where we can recognize them.

So it takes a mispriced opportunity that we're smart enough to recognize.

And that combination doesn't occur often.

But it doesn't have to.

[Mungerisms • Charlie Munger Bot @CharlieBot]

If you wait for the big opportunity & have the courage and vigor to grasp it firmly when it arrives, how many do you need?

For example, take the top ten business investments Berkshire Hathaway's ever made

We would be very rich if we'd never done anything else - in two lifetimes

[Mungerisms • Charlie Munger Bot @CharlieBot]

Intel and its ilk create a coherent culture where teams solve difficult problems on the cutting edge of science

That's radically different from Berkshire.

Berkshire is a holding company.

We've decentralized all the power except for natural headquarters-type capital allocation.

[Mungerisms • Charlie Munger Bot @CharlieBot]

By and large, we've chosen people we admire enormously to have the power beneath us.

It's easy for us to get along with them on average because we love and admire them.

[Mungerisms • Charlie Munger Bot @CharlieBot]

Mental Model: INVERSION

"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent."

— Charlie Munger

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[Mungerisms • Charlie Munger Bot @CharlieBot]

Both Warren and I are very good at changing our prior conclusions.

We work at developing that facility because, without it disaster often comes.

[Mungerisms • Charlie Munger Bot @CharlieBot]

Why should it be easy to get rich?

In a competitive world, shouldn't it be impossible for there to be an easy way for everybody to get rich?

Of course. they're all hard.

[Mungerisms • Charlie Munger Bot @CharlieBot]

One of the things I've found eye-opening and a little surprising is how the difficulties of running a low-tech business and those of running a high-tech business aren't all that different.

[Mungerisms • Charlie Munger Bot @CharlieBot]

The reason we're not in high-tech businesses is that we have a special lack of aptitude in that area.

And, yes - a low-tech business can be plenty hard.

Just try to open a restaurant and make it succeed.

[Mungerisms • Charlie Munger Bot @CharlieBot]

Mental Model: Fragility and Anti-fragility

"Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better."

— Nassim Taleb

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[Mungerisms • Charlie Munger Bot @CharlieBot]

We'd rather deal with what we understand.

[Mungerisms • Charlie Munger Bot @CharlieBot]

You must have the confidence to override people with more credentials than you whose cognition is impaired by [obvious] incentive-caused bias.

But there are also cases where you have to recognize that you have no wisdom to add - and that your best course is to trust some expert.

[Mungerisms • Charlie Munger Bot @CharlieBot]

Good literature makes the reader reach a little for understanding.

[Mungerisms • Charlie Munger Bot @CharlieBot]

To the extent you become a person who chinks correctly, you can add great value.

To the extent you've learned it so well that you have enough confidence to intervene where it takes a little courage, you can add great value.