Charlie Munger on the Importance of Worldly Wisdom and Consistently not being Stupid

by Ju Huang

25iq

“I think part of the popularity of Berkshire Hathaway is that we look like people who have found a trick.  It’s not brilliance.  It’s just avoiding stupidity.”http://www.scribd.com/fullscreen/110302239?access_key=key-28dmiqkoda00xd7b7mae 

A Lattice of Mental Models

Understanding how humans make decisions is critical for any investor.  Unless careful attention is devoted to decision making processes the brain can be a mistake-making machine.

“It is remarkable how much long-term advantage people like  [Warren Buffett and myself] have gotten by trying to be consistently not stupid, instead of trying to be  very intelligent.”http://www.wiley.com/WileyCDA/WileyTitle/productCd-0471446912,descCd-tableOfContents.html

One way to “be less stupid” is to adopt what Charlie calls a “lattice of mental models” approach to evaluating decisions.  He believes that by using a range of different “models” from different disciplines like psychology, history, mathematics, physics, biology and economics, a person can use the combined output to produce something he calls “Worldly Wisdom.”

Munger’s method is to…

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