Charlie Munger: the Safest Way to Get what you Want is to Try and Deserve What you Want


  Munger on people think too little

“From 1733 to 1758, Ben Franklin dispensed useful and timeless advice through Poor Richard's Almanack. Among the virtues extolled were thrift, duty, hard work, and simplicity. Subsequently, two centuries went by during which Ben's thoughts on these subjects were regarded as the last word. Then Charlie Munger stepped forth.”

[Warren Buffett]

In a Commencement Speech at USC Law in May 2007, Charlie Munger set the tone by acknowledging the importance of wisdom acquisition, in his view a moral duty, Confucius' idea of filial piety, and the value of knowledge transfer from one generation to the next.

He says:

I'm going to try and just give an account of some ideas and attitudes that have worked well for me. I don't claim that they are perfect for everybody, although I think many of them are pretty close to universal values and many of them are can't fail ideas.

Charlie Munger's core ideas

Getting what you want

The first one he got at a very early age, he says, the idea that the safest way to try and get what you want is to try and deserve what you want.

It's such a simple idea. It's the golden rule, so to speak. You want to deliver to the world what you would buy if you were on the other end.

There is no ethos, in my opinion, that is better for any lawyer or any other person to have. By and large, the people who have this ethos win in life. And they don't win just money, just honors and emoluments; they win the respect, the deserved trust of the people they deal with. And there is huge pleasure in life to be obtained from getting deserved trust.

And so the way to get it is to deliver what you'd want to buy if the circumstances were reversed.

We may be tempted by the observation that often clever people of dubious skill become quite popular. Munger says:

Now, occasionally you'll find a perfect rogue of a person, who dies rich and widely known. But mostly these people are fully understood by the surrounding civilization, and when the cathedral is full of people at the funeral ceremony, most of them are there to celebrate the fact that the person is dead.

And that reminds me of the story of the time when one of these people died and the minister said, “It's now time for someone to say something nice about the deceased.” And nobody came forward, and nobody came forward, and nobody came forward. And finally, one man came up and he said, “Well, his brother was worse.”

We all mostly learn by example, so we want to be a good example for those who come after us.

A second idea Munger got very early and that was very useful to him, there is no love that's so right as admiration based love; and that love should include the instructive dead.

Becoming hooked to lifetime learning

In talking about the moral duty of wisdom acquisition and the value of learning he says, there's a corollary to that proposition, which is very important: it means that you're hooked for lifetime learning.

And without lifetime learning you people are not going to do very well. You are not going to get very far in life based on what you already know. You're going to advance in life by what you're going to learn after you leave here.

If you take Berkshire Hathaway—which is certainly one of the best regarded corporations in the world, and may have the best long-term investment record in the entire history of civilization—the skill that got Berkshire through one decade would not have sufficed to get it through the next decade, with the achievements made. Without Warren Buffett being a learning machine, a continuous learning machine, the record would have been absolutely impossible.

The same is true at lower walks of life. I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines—they go to bed every night a little wiser than they were when they got up. And boy does that habit help, particularly when you have a long run ahead of you.

Quoting Alfred North Whitehead on the rapid advance of civilization, Munger notes that it came about with the “invention of the method of invention.” Says Munger:

if civilization can progress only when it invents the method of invention, you can progress only when you learn the method of learning.

Continuous learning expands our horizons. When we make learning a habit, we uncover new opportunities. Children feel the excitement of learning more strongly than the fear of the unknown. For adults the balance is reversed —we stop learning when we’re afraid of leaving the safety of what we know.

There is a method to learning continuously.

if you take Warren Buffett, if you watched him with a time clock, I would say half of all the time that he spends is just sitting on his ass and reading. And a big chunk of the rest of the time is spent talking one-on-one, either on the telephone or personally, with highly gifted people whom he trusts and who trust him. In other words, it looks quite academic, all this worldly success.

This is why Berkshire is so successful. The key is going to bed a little wiser than when you woke up that day. But being a voracious reader is not enough. Munger also talks about the importance of transferring what we know to others.

As David Weinberger says in Too Big to Know, “the smartest person in the room is the room.”

Creating a mental latticework

Another idea hugely useful was something that pushed him into his multidisciplinary approach to learning:

learning all the big ideas in all the big disciplines, so I wouldn't be a perfect damn fool who was trying to think about one aspect of something that couldn't be removed from the totality of the situation in a constructive fashion.

And what I noted, since the really big ideas carry ninety-five percent of the freight, that it wasn't at all hard for me to pick up all the big ideas in all the disciplines and make them a standard part of my mental routines.

Once you have the ideas, of course, they are no good if you don't practice. If you don't practice, you lose it. So I went through life constantly practicing this multidisciplinary approach. Well, I can't tell you what that's done for me; it's made life more fun, it's made me more constructive, it's made me more helpful to others, it's made me enormously rich—you name it. That attitude really helps.

Because it helps us widen our lens and think about different angles, this approach may help us see an issue or problem better than the experts in that particular field. In that case, Munger suggests we keep our cards close to the chest, lest we create difficulties for ourselves:

One of my colleagues—also a number one in his class in law school, a great success in life, clerked for the supreme court, etc.—but he knew a lot and he tended to show it as a very young lawyer.

And, one day, the senior partner called him in and said, “Listen Chuck, I want to explain something to you. Your duty under any circumstances is to behave in such a way that the client thinks he's the smartest person in the world. And if you've got any little energy or insight available after that, use it to make your senior partner look like the smartest person in the world. And only after you've satisfied those two obligations do you want your light to shine at all.”

Well, that may have been good advice for rising in a large firm. It wasn't what I did; I always obeyed the drift of my nature. And if other people didn't like it, well I didn't need to be adored by everybody.

On this front, things get a lot easier when we carve a path we can call our own. In that case, carving the path becomes the challenge. It helps to learn the big ideas of the people who came before us, says Munger.

According to Roman philosopher, statesman, lawyer, political theorist, and Roman constitutionalist Marcus Tullius Cicero, “A man who doesn't know what happens before he is born goes through life living like a child.”

But the point is to learn for the purpose of using our knowledge:

there are all these other things that you should know in addition to history—and those other things are the big ideas in all the other disciplines. And it doesn't help you just to know them enough just so you can prattle them back on an exam and get an “A.”

You have to learn these things in such a way that they're in a mental latticework in your head and you automatically use them for the rest of your life. If you do that, I solemnly promise you that one day you'll be walking down the street, and you'll look to your right and left, and you'll think, “My heavenly days, I'm now one of the few most competent people of my whole age cohort.” If you don't do it, many of the brightest of you will live in the middle ranks or in the shallows.

We wallow in the shallows when we skim and skip, thinking we can always rely on search to find what we are looking for, failing to understand that the value is about making things rather than finding them—search engines do a fine job with the latter.

Understanding the power of inversion

If instead of trying too hard to answer the question of what will make us successful we looked at what will really fail, that is inversion. Says Munger:

The way complex adaptive systems work and the way mental constructs work, problems frequently get easier, and I'd even say usually are easier to solve if you turn them around in reverse. In other words, if you want to help India, the question you should ask is not, “How can I help India?” you think, “What's doing the worst damage in India? What would automatically do the worst damage and how do I avoid it?”

You'd think they are logically the same thing, they're not.

Those of you who have mastered algebra know that inversion frequently will solve problems which nothing else will solve. And in life, unless you're more gifted than Einstein, inversion will help you solve problems that you can't solve in other ways.

[…]

What will really fail in life? What do you want to avoid? Such an easy answer: sloth and unreliability. If you're unreliable it doesn't matter what your virtues are, you're going to crater immediately. So doing what you have faithfully engaged to do should be an automatic part of your conduct. You want to avoid sloth and unreliability.

Munger cautions graduates on holding onto extreme ideology, “because it cabbages up one's mind.” When something becomes the only lens through which we see the world, we are in danger of messing up with our own mind.

Stating the arguments against our own position

Can we make an argument against our position? If we can do that, we are on our way to owning an opinion. Says Munger:

I have what I call an iron prescription that helps me keep sane when I naturally drift toward preferring one ideology over another. And that is, I say, “I'm not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people do who are supporting it.”

I think, only when I've reached that state am I qualified to speak. Now, you can say that's too much of an iron discipline. It's not too much of an iron discipline. It isn't even that hard to do. It sounds a lot like the iron prescription of Ferdinand the Great: “It's not necessary to hope in order to persevere.” That probably is too tough for most people. I don't think it's too tough for me, but it's too tough for most people.

But this business of not drifting into extreme ideology is a very, very important thing in life. If you want to have more correct knowledge and be wiser than other people, a heavy ideology is very likely to do you in.

It's important to know both sides of an argument to be wise.

Identifying our self-serving bias

Mozart was a genius, but he was also quite miserable. Why? He overspent his income. He couldn't get away with that, we shouldn't try.

Generally speaking, envy, resentment, revenge, and self-pity are disastrous modes of thought. Self-pity gets pretty close to paranoia, and paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity.

I have a friend who carried a big stack of linen cards, about this thick, and when somebody would make a comment that reflected self-pity, he would take out one of the cards, take the top one off the stack, and hand it to the person. And the card said, “Your story has touched my heart. Never have I heard of anyone with as many misfortunes as you.”

[…]

I suggest that every time you find you're drifting into self-pity—and I don't care what's the cause, your child could be dying of cancer—self-pity is not going to improve the situation. Just give yourself one of those cards.

Since self-pity is a standard condition, when we avoid it, we are automatically at great advantage over everyone else. We can train ourselves to recognize our own self-serving bias:

thinking that what's good for you is good for the wider civilization and rationalizing all these ridiculous conclusions based on this subconscious tendency to serve one's self. It's a terribly inaccurate way to think. And, of course, you want to drive that out of yourself because you want to be wise, not foolish.

Munger adds an important corollary to this core idea, allowing for the human condition to exist, because that is something we cannot change:

You also have to allow for the self-serving bias of everybody else, because most people are not going to remove it all that successfully, the human condition being what it is. And if you don't allow for self-serving bias in your conduct, again, you're a fool—you just aren't competent.

A story to illustrate:

I watched the brilliant, Harvard Law Review-trained general counsel of Salomon lose his career. And what he did was: when the CEO was aware that some underling had done something wrong, the general counsel said, “Gee, we don't have any legal duty to report this, but I think it's what we should do, it's our moral duty.”

And the general counsel was totally correct. But, of course, it didn't work. It was a very unpleasant thing for the CEO to do and he put it off, and put it off, and put it off. In due course, why, the thing eroded into a major scandal and down went the CEO and the general counsel with him.

The correct answer in situations like that was given by Ben Franklin. He said, “If you want to persuade, appeal to interest not to reason.” The self-serving bias is so extreme.

If the general counsel had said, “Look, this is going to erupt in something that will destroy you, take away your money, take away your status—it's a perfect disaster,” it would have worked. You want to appeal to interest. You want to do it with lofty motives, but you should not avoid appealing to interest.

A self-serving bias occurs when people attribute their successes to internal or personal factors but attribute their failures to situational factors beyond their control.

Avoiding perverse incentives

Incentives are a powerful force and they could lead us astray. Munger talks about the dangers of billable quotas, for example. He also says don't work under someone you don't admire or don't want to emulate:

Perverse associations—also to be avoided. And you particularly want to avoid working directly under somebody you really don't admire and don't want to be like. It's very dangerous. We're all subject to control to some extent by authority figures—particularly authority figures that are rewarding us. And that requires some talent.

The way I solved that is I figured out the people I did admire and I maneuvered cleverly, without criticizing anybody, so I was working entirely under people I admired. And a lot of law firms will permit that if you're shrewd enough to work it out. And your outcome in life will be way more satisfactory and way better if you work under people you really admire. The alternative is not a good idea.

Maintaining objectivity

To maintain objectivity, Munger says we should get into routines.

we all remember that Darwin paid special attention to disconfirming evidence, particularly when it disconfirmed something he believed and loved.

Well, objectivity maintenance routines are totally required in life if you're going to be a correct thinker. And there we're talking about Darwin's attitude—special attention to the disconfirming evidence—and also to checklist routines. Checklist routines avoid a lot of errors. You should have all this elementary wisdom and then you should go through a mental checklist in order to use it.

There is no other procedure that will work as well.

Having a mental checklist is very helpful to stay the course.

Learning to think for ourselves

To illustrate this concept, Munger uses a sports analogy:

John Wooden, when he was the number one basketball coach in the world. He just said to the bottom five players, “You don't get to play, you're sparring partners.”

The top seven did all the playing. Well the top seven learned more—remember the learning machine—because they were doing all the playing.

And when he got to that system, why, Wooden won more than he'd ever won before. I think the game of life, in many respects, is getting a lot of practice into the hands of the people that have the most aptitude to learn and the most tendency to be learning machines.

Coach John Wooden drew a difference between winning and succeeding. Says Munger:

if you want the very highest reaches of human civilization that's where you have to go.

You do not want to choose a brain surgeon for your child among fifty applicants, all of them just take turns during the procedure; you don't want your airplanes designed that way, you don't want your Berkshire Hathaway's run that way.

You want to get the power into the right people.

It's not enough to talk a good game, we must learn to play one by learning through deliberate practice. Which doesn't mean practicing with the intent of learning, as it may seem.

In Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else, Geoff Colvin says Deliberate Practice is designed to improve performance, works through repetition, relies on constant feedback for improvement, it's hard and thus mentally demanding, requires a good understanding of goals to ladder steps to get there.

Munger says:

I frequently tell the story of Max Planck, when he won the Nobel prize and went around Germany giving lectures on quantum mechanics. And the chauffeur gradually memorized the lecture and he said, “Would you mind, professor Planck, just because it's so boring staying in our routines, would you mind if I gave the lecture this time and you just sat in front with my chauffeur's hat?” And Planck said, “Sure.”

And the chauffeur got up and he gave this long lecture on quantum mechanics, after which a physics professor stood up in the rear and asked a perfectly ghastly question. And the chauffeur said, “Well, I'm surprised that in an advanced city like Munich I get such an elementary question. I'm going to ask my chauffeur to reply.”

The reason for telling the story is to make a stronger point on knowledge. Munger says in this world we have two kinds of knowledge:

One is Planck knowledge—the people who really know; they've paid the dues, they have the aptitude.

Then we've got chauffeur knowledge—they have learned to prattle the talk; and they have a big head of hair, they may have fine timbre in the voice, they really make a hell of an impression, but in the end they've got chauffeur knowledge. I think I've just described practically every politician in the United States.

And you are going to have the problem in your life of getting the responsibility into the people with the Planck knowledge and away for the people who have the chauffeur knowledge. And there are huge forces working against you.

Being able to rattle off the ideas of others is not sufficient, we need to internalize knowledge for ourselves so we can synthesize our own ideas.

Richard Faynman, who was a practical thinker, enjoyed working from first principles and personal reasoning to understand how things came to be. Along the same lines, he believed that to know something for ourselves, we need to do the work necessary to figure it out

Munger says it helps when we have a strong interest in a subject:

Another thing that I found is that an intense interest in the subject is indispensable if you are really going to excel in it. I could force myself to be fairly good in a lot of things, but I couldn't be really good in anything where I didn't have an intense interest.

[…]

Another thing you have to do, of course, is have a lot of assiduity. I like that word because it means sit down on your ass until you do it.

Partnering well

This is partly a product of being deserving, partly an outcome of good selection, but is also due to sheer luck:

two partners that I chose for one little phase of my life had the following rule when they created a little design-build construction team.

They sat down and said, “Two man partnership, divide everything equally, here's the rule: whenever we're behind in our commitments to other people we will both work fourteen hours a day until we're caught up.”

Well, needless to say, that firm didn't fail. The people died honored and rich. It's such a simple idea. It's just such a simple idea.

Understanding the role of luck

Sometimes things just don't go as we expect. We may not control what happens to us, but we can do something about how we respond.

Another thing, of course, is life will have terrible blows in it, horrible blows, unfair blows—doesn't matter. And some people recover and others don't.

And there, I think, the attitude of Epictetus is the best. He thought that every mischance in life was an opportunity to behave well, every mischance in life was an opportunity to learn something, and that your duty was not to be submerged in self-pity, but to utilize the terrible blow in a constructive fashion.

That is a very good idea. And you may remember the epitaph which Epictetus left for himself: “Here lies Epictetus, a slave, maimed in body, the ultimate in poverty, and favored of the gods.”

Well, that's the way Epictetus is now remembered. He's had big consequences. And he was favorite of the gods. He was favored because he became wise and he became manly. Very good idea.

Being opportunistic means being ready

Along with prudence, Munger believes in opportunism. He says:

My grandfather was the only federal judge in his city for nearly forty years. And I really admired him. I'm his namesake. And I'm Confucian enough that, even now, I sit here and I'm saying, “Well, Judge Munger would be pleased to see me here.”

So I'm Confucian enough, all these years after my grandfather is dead, to carry the torch for my grandfather's values. And, grandfather Munger was a federal judge at a time when there were no pensions for widows of federal judges. So if he didn't save from his income, why, my grandmother would have been in penury.

And being the kind of man he was, he under-spent his income all his life and left her in comfortable circumstances. Along the way, in the thirties, my uncle's bank failed and couldn't reopen. And my grandfather saved the bank by taking over a third of his assets—good assets—and putting them into the bank and taking the horrible assets in exchange. And, of course, it did save the bank.

While my grandfather took a loss, he got most of his money back eventually. But I've always remembered the example. And so when I got to college and I came across Houseman, I remember the little poem from Houseman, and that went something like this:

“The thoughts of others
Were light and fleeting,
Of lovers' meeting,
Luck or fame.
Mine were of trouble,
And mine were steady;
And I was ready
When trouble came.”

Because being prudent to him equals earning the ability to be opportunistic.

You can say, who wants to go through life anticipating trouble? Well, I did—all my life I've gone through life anticipating trouble. And here I am, well along on my eighty-fourth year, and like Epictetus, I've had a favored life. It didn't make me unhappy to anticipate trouble all the time and be ready to perform adequately if trouble came. It didn't hurt me at all. In fact, it helped me.

Creating a seamless web of trust

When a handshake is as good as a contract, we know we are on solid ground to build upon. Says Munger:

The last idea that I want to give you, as you go out into a profession that frequently puts a lot of procedure, and a lot of precautions, and a lot of mumbo-jumbo into what it does, this is not the highest form which civilization can reach.

The highest form that civilization can reach is a seamless web of deserved trust. Not much procedure, just totally reliable people correctly trusting one another.

That's the way an operating room works at the Mayo Clinic. If a bunch of lawyers were to introduce a lot of process, the patients would all die.

So never forget, when you're a lawyer, that you may be rewarded for selling this stuff, but you don't have to buy it. In your own life, what you want is a seamless web of deserved trust. And if your proposed marriage contract has forty-seven pages, my suggestion is you not enter.

He concludes his speech with a quote. He says, “I'm like old Valiant-For-Truth in Pilgrim's Progress”:

“My sword I leave to him who can wear it.”

Watch the full video of the talk below.

 

For learning more about how to look at problems using Munger's lens, including the psychology of human misjudgment, read Poor Charlie's Almanack.

If you'd like the net proceeds from sales of Poor Charlie's Almanack go to benefit The Munger Research Center of the Huntington Library in San Marino, California, buy the book (new) here.