Using superior thinking to get ahead
[Referring to his opening remarks in which Munger said “At least three times in my life, I’ve gone into the other field and succeeded.” I asked what those three times were. He replied:]
The first two are easy: real estate development and managing money. I can’t claim to have clobbered the locals in the third, so I don’t want to talk about it. [Laughter]
Can you give an example of giving up a closely held idea?
Even as fanatical as I am about throwing away a wrong idea and grasping a successful one, I have a hard time coming up with a recent example. Certainly I’ve become way more disenchanted with certain people and that seems to happen all the time. In that sense, I seem to keep learning a lot. I’ve discarded so many ideas long ago that I don’t have many left.
Anytime you catch something just barely, where if you hadn’t caught it you’d be in terrible trouble, you’re using a checklist, even if not consciously.
I’m answering the question I’m capable of answering, instead of the one you asked. I invert: I try to figure out what I don’t like and try to avoid it. It’s worked wonders for me.
Lesson 26. My favorite human misjudgment is self-serving bias: how the brain subconsciously will decide that what’s good for the holder of the brain is good for everyone else. If the little me wants it, why shouldn’t the little me have it?
What is your favorite human misjudgment?
My favorite human misjudgment is self-serving bias: how the brain subconsciously will decide that what’s good for the holder of the brain is good for everyone else. If the little me wants it, why shouldn’t the little me have it? People go through life like this. I’ve underestimated this phenomenon all my life. People go bonkers taking care of their own self-interest. It’s a sea of miscognition. People who write the laws, people who treat patients, who experiment with rats, all suffer horribly from this bias.
Hardly anything could be more important to the study of law than the study of psychology, but there’s a taboo against it. You see many people who’ve gotten straight A’s at law school, but they screw up in dealing with self-serving bias.
I would say that the current head of the World Bank [Paul Wolfowitz] had an elementary question: as head of the Bank, a lot of people hate you, so how bright do you have to be to distance yourself from a question of a large raise from your live-in girlfriend? He sent it to the lawyers, they hemmed and hawed, and he lost his moorings. Even a child shouldn’t make his obvious mistake. Similarly, I’d guess President Clinton would have had a better record if he’d had better insight on certain subjects. Note that I carefully picked one from each party. [Laughter]
Lesson 27. Not Good To Teach “an obsolete cataract operation” when a new, better one had been developed “Because it’s so wonderful to teach!” It’s a really human thing to cling to things most practiced.
Nuttiness in the world
I once asked a doctor why he was still doing an obsolete cataract operation when a new, better one had been developed. He said, “Because it’s so wonderful to teach!” He only changed when patients voted with their feet. And this was at one of the best medical schools!
There’s a lot of miscognition. If you can just tune out all of the big folly, you’d be surprised how well you can do. There’s a lot of nuttiness. Who gives up an operation he likes doing and is really good at? It’s a really human thing to cling to things most practiced. This happens even in physics. A lot of people cling to bad ideas. If the brightest people in the world do this, imagine everyone else. If you can train yourself not to do this, you’ll be way ahead. If you come all the way to
Pasadena from New Delhi to hear a guy well into his 84th year say something so obvious, not everyone would agree this is wise. [Laughter]
Lesson 28. Do What You Reasonably Could with the talent, time and resources you have available.
I just wanted to do the best I could reasonably do with the talent, time and resources I had available. That’s what I was doing then and now. Everything is based on opportunity costs. Academia has done a terrible disservice: they teach in one sentence in first-year economics about opportunity costs, but that’s it. In life, if opportunity A is better than B, and you have only one opportunity, you do A. There’s no one-size-fits-all. If you’re really wise and fortunate, you get to be like Berkshire. We have high opportunity costs. We always have something we like and can buy more of, so that’s what we compare everything to. All of you are in the game of taking the lot you have right now and improving it based on your opportunity costs. Think of how life is simplified if you approach it this way.
Lesson 29. I didn’t buy a new car until I was about 60 and I was very rich before then. I wanted independence.
ADVICE ON LIFE AND OTHER COMMENTS
[After his microphone stopped working temporarily:] I’ve worn out the patience of my listeners, but I’ve never worn out a microphone before. [Laughter]
Munger’s need for “glorious independence”
There’s a poem by Burns, the great Scottish poet, where he urges Scots to work hard, even connive, to get a glorious independence. You don’t have to listen to me very long to know my views wouldn’t be welcome everywhere, so I decided I needed glorious independence, which required that I be a man of independent means. I didn’t buy a new car until I was about 60 and I was very rich before then. I wanted independence for the same reason George Bernard Shaw sent his mom out to work: I wanted to make a mental man of myself. Warren kids me about this.
Lesson 30. I said I would sell the best hour of the day to myself in order to improve myself. Only then would I sell the rest of my time to my clients.
I said I would sell the best hour of the day to myself in order to improve myself. Only then would I sell the rest of my time to my clients. Of course, when I was in a demanding situation, I’d make an exception. To make a man of yourself intellectually, you need to work at it. I don’t think even [famed mathematician] Johnny von Neumann did it naturally. For many people it’s good that they’re extra busy. They’re not good thinkers, so you get more out of them if they just keep doing what they’re doing. But if you’re a person of good cognition, you can learn a lot more if you put your mind to it. I don’t think there’s any substitute for just sitting and thinking.
Notes from 2007 Wesco Financial Annual Meeting – By Whitney Tilson