Excellent Book: Charlie Munger For All Seasons
Many of us who have run companies big or small may have experienced situations where we were too busy to explain. “Just do it” as we often say. Or in family on occasions with children, we just say “Do it” without explaining why.
Why is it important to ask the 5 Ws and an H?
- You have got to ask Why, Where, Who, What, When and How. It’s important from the psychological aspect of being.
- It makes the person think through what he has to say or do.
- It tackles problems in a comprehensive and holistic manner. It’s like McKenzie’s MECE (Mutually Exclusive, Collectively Exhaustive) will not be complete without taking into account the 5Ws and an H.
- For a child, it helps him learn.
- It makes you more human and humane instead of coming across as a dictator or a lacunae at the posterior of a donkey.
- And if you work for Braun or Munger, you could lose your job or at least won’t be held in high esteem. You wouldn’t want to do that.
What has Charlie Munger to say on this? Here it is.
This is an extract from “A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business”, Charles Munger, USC Business School, 1994.
CM: In terms of the limitations of accounting, one of my favorite stories involves a very great businessman named Carl Braun who created the CF Braun Engineering Company. It designed and built oil refineries—which is very hard to do. And Braun would get them to come in on time and not blow up and have efficiencies and so forth. This is a major art.
And Braun, being the thorough Teutonic type that he was, had a number of quirks. And one of them was that he took a look at standard accounting and the way it was applied to building oil refineries and he said, “This is asinine.”
So he threw all of his accountants out and he took his engineers and said, “Now, we’ll devise our own system of accounting to handle this process.” And in due time, accounting adopted a lot of Carl Braun’s notions. So he was a formidably willful and talented man who demonstrated both the importance of accounting and the importance of knowing its limitations.
He had another rule, from psychology, which, if you’re interested in wisdom, ought to be part of your repertoire—like the elementary mathematics of permutations and combinations.
His rule for all the Braun Company’s communications was called the five W’s—you had to tell who was going to do what, where, when and why. And if you wrote a letter or directive in the Braun Company telling somebody to do something, and you didn’t tell him why, you could get fired. In fact, you would get fired if you did it twice.
You might ask why that is so important? Well, again that’s a rule of psychology. Just as you think better if you array knowledge on a bunch of models that are basically answers to the question, why, why, why, if you always tell people why, they’ll understand it better, they’ll consider it more important, and they’ll be more likely to comply. Even if they don’t understand your reason, they’ll be more likely to comply.
So there’s an iron rule that just as you want to start getting worldly wisdom by asking why, why, why, in communicating with other people about everything, you want to include why, why, why. Even if it’s obvious, it’s wise to stick in the why.