Best Book I've Ever Read

I am a Group Product Manager at LinkedIn and share book summaries in an email newsletter each month. Sign up here.

Below is my latest newsletter. Enjoy!

--

Charlie Munger’s Poor Charlie’s Almanack is among the best books I have ever read. Munger’s density of insights per page is incredible. Even though finishing this textbook-sized behemoth meant a lighter backpack on my commutes, I was still sad to finish it because I was enjoying it so much.

Some of my favorite quotes and lessons (in bold) include:

Be an independent thinker

“Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group, then to hell with them”

Keep reading and learning

“In my whole life, I have known no wise people over a broad subject matter who didn't read all the time - none, zero”...“Learn economics by making Adam Smith your friend - you can make friends with the eminent dead.” “The man who doesn’t read good books has no advantage over the man who can’t read them” “People who may not be the smartest or most diligent, but who are learning machines and go to bed a little wiser than they were in the morning, get ahead”

Do not ruminate or have self-pity

“Cicero...in favor of never complaining about personal misfortune” … “Even if your child is dying of cancer, self pity will not help” … “Friend has a stack of cards and when he sees someone acting with self pity, he gives a card that says: ‘your story touched my heart. Never have I heard anyone with as many misfortunes as you.’”

Learn the fundamental disciplines (math, physics, engineering, and chemistry), then biology and physiology, then psychology, then the other disciplines, and use all of them.

“You must know the big ideas in big disciplines and use all of them - not just a few” … ““You need latticework of mental models that gradually fit together in a way that enhances cognition”… “Models from hard science and engineering are the most reliable” “Next most reliable models come from biology / physiology...And then psychology, which is an ungodly important subject if you're going to have worldly wisdom” “Without numerical fluency, in the part of life most of us inhabit, you are like a one legged man in an ass kicking contest”

Attribute the most fundamental discipline and continue hypothesizing and testing

“1) rank disciplines in terms of fundamentalness . 2) master and routinely use all four disciplines (giving intense attention to those more fundamental than your discipline) 3) don’t practice cross disciplinary absorption without attribution or “principle of economy” (eg. use the most fundamental material to explain) 4) when 3) doesn’t give useful insights, hypothesize and test new principles”

Get rid of old ideas (even your most cherished ones.) Be open to change.

“Every year you must destroy one of your best loved ideas”… “People cling on to failed ideas; it's not bringing in new ideas that's the problem. It's getting rid of the old ones” … “Darwin paid special attention to disconfirming evidence, particularly when it disconfirmed something he loved”

Continuously improve via small steps

“Cicero believed in self improvement so long as breath”...“You'll be amazed how good you get if you go step by step with curious persistence” … “Epictetus promoted daily regime of rigorous self examination”

Inverse your thinking by first thinking of what to avoid

“Invert, always invert - many hard problems are best solved when they are addressed backwards” “Problems often get easier to solve through inversion: turn problems in reverse and you often think better- example: instead of asking “how can I help India?” Ask “how can I hurt India?”

First analyze rationally, and then consider the psychological factors

“Two track analysis: one is the factors that govern the interest involved, rationally considered. Two is the subconscious influences where the brain is automatically forming conclusions – psychological factors – that often malfunction”

Invest in great businesses at fair prices

“A great business at a fair price is superior to a fair business at a great price”

Prepare diligently, and when opportunity presents itself, fully commit to investment

“Decisiveness - when opportunity presents itself - act decisively with conviction - the game is opportunity meeting the prepared mind” … “Best way to invest is to make a few bets, and when you do, really load up”

Think about second order effects

“Consequences have consequences, etc. making it important to pay attention to second order and higher level effects”

Be a bottoms-up thinker

“Charlie monitors no macro-stats; rather by being exposed to an enormous amount of material at the micro level, it informs him on what's happening at the macro:

Be Concise

“On speech: no one ever wished it longer”

Work hard

“The way to win is to work, work, work, work and hope to have a few insights”

Only Work for People you Admire

“Career advice: don’t sell anything you wouldn’t buy; don’t work for someone you don’t respect and admire; only work with people you enjoy”

Appeal to one’s interest

“If you would persuade, appeal to interest and not to reason”

Do not overweigh what can be counted

“Practically everybody (in business) overweighs the stuff that can be numbered because it yields to the statistical techniques they’re taught in academia and doesn’t mix hard to measure stuff that may be more important” “Availability misweighing tendency - Mans imperfect limited capacity easily drifts into working with what’s easily available to it…”

Be Reliable and Keep Commitments to Create Web Of Deserved Trust

“If you’re unreliable, it doesn’t matter what your virtues are, you’re going to crater immediately” … “In your own life you want to maximize a seamless web of deserved trust:

Understand Opponent’s Perspectives

I’m not entitled to have an opinion unless I can state the arguments against my position better than the people in opposition

Invest in star performers

“Competitive life requires maximizing experience of people who have most aptitude and most determination as learning machines...You don’t want to choose a brain surgeon for your child by picking straws”

On Importance of Hard Focus

“Intense interest in a subject is indispensable if you’re going to excel at it”

Master your Emotions

“Control thy passion lest they take vengeance on thee...Do not seek to bring things to pass in accordance to your wishes, but wish them as they are...It’s not what happened to you, but how you react to it that matters...No man is free who is not a master of himself”

Incentives are Powerful

“Perhaps the most important rule in management is get incentives right”

Psychological misjudgments: Humans are reluctant to be inconsistent, tendency to reciprocate, tendency for excessive self-regard, too much deference to authority, twaddlers interfere

“Inconsistency avoidance - in all human habits, constructive and destructive, the brain is reluctant to change” … “Reciprocation tendency - automatic tendency to reciprocate favors and disfavors” “Excessive self regard tendency - 90% of Swedish drivers judge themselves to be above average”...”Authority misinfluence tendency - man born mostly to follow leaders with only a few people doing the leading...Twaddle tendency - keep people who don’t matter from interfering with the work of the people that do”

Antidote to psychological misjudgment: objectivity, welcome bad news, devil’s advocate, courtesy to different opinions

“Antidote: carefully examine past success for accidental, non causative factors and look for dangerous aspects of new undertaking”...”Antidote to Persian messenger syndrome is develop habit of welcoming bad news” ““Antidote to excessive self regard is to force yourself to be more objective when thinking about yourself, your property, and value of your past and future activity” … “Antidote to groupthink is extreme culture of  courtesy and able and articulate disbelievers”

Antidote to psychological misjudgment: checklists, skepticism

“Antidote is checklists, emphasize disconfirming evidence, and emphasize factors that don’t produce easily available numbers…Another antidote is hire skeptical, articulate people who advocate opposite of incumbent notions””

Be Weary of Over-Confidence (although justified pride is OK)

“Excessive self regard is counterproductive in cognition, it can cause some weird success from overconfidence that happens to cause success. Never underestimate the man who overestimates himself” “Self regard in form of justified pride or justified trustworthiness is largely constructive”

People will overreact when deprived of something they expect

“Deprival super reaction tendency - humans react with intense irrationality to even a small loss, or threatened loss of property, love, friendship, territory, opportunity, status, etc.”

Combining Psychology Misjudgments results in extreme outcomes

“Lollapalooza tendency - the tendency to get extreme consequences from confluence if psychological tendencies acting in favor of a particular outcome”

===

To summarize my lessons from Charlie Munger:

• Be an independent thinker
• Keep reading and learning.
• Do not ruminate or have self-pity
• Learn the fundamental disciplines (math, physics, engineering, and chemistry), then biology and physiology, then psychology, and then the other disciplines, and use all of them.
• Attribute the most fundamental discipline and continue hypothesizing and testing
• Get rid of old ideas (even your most cherished ones.) Be open to change.
• Continuously improve via small steps
• Inverse your thinking by first thinking of what to avoid
• First analyze rationally, and then consider the psychological factors
• Invest in great businesses at fair prices
• Prepare diligently, and when opportunity presents itself, fully commit to investment
• Think about second order effects
• Be a bottoms-up thinker
• Be Concise
• Work hard
• Only Work for People you Admire
• Appeal to one’s interest
• Do not overweight what can be counted
• Be Reliable and Keep Commitments to Create Web Of Deserved Trust
• Understand Opponent’s Perspectives
• Invest in star performers
• On Importance of Hard Focus
• Master your Emotions
• Incentives are Powerful
• Psychological misjudgments: Humans are reluctant to be inconsistent, tendency to reciprocate, tendency for excessive self-regard, too much deference to authority, interfere
• Antidote to psychological misjudgment: objectivity, welcome bad news, devil’s advocate, courtesy to different opinions
• Antidote to psychological misjudgment: checklists, skepticism
• Be Weary of Over-Confidence (although justified pride is OK)
• People will overreact when deprived of something they expect
• Combining Psychology Misjudgments results in extreme outcomes

This email was largely inspired by Barking Up The Wrong Tree and Farnam Street Blog.

Hope you enjoyed it.

My newsletter has much more detailed notes. Sign up here.