Wednesday, August 17, 2016

Charlie Munger: This is the way you win big in the world...

One of the many excerpts I've saved from Peter Bevelin's excellent All I Want To Know Is Where I'm Going To Die So I'll Never Go There, and a great addition to a checklist or compilation of mental models:
Munger   "Really big effects, lollapalooza effects, will often come only from large combinations of factors. For instance, tuberculosis was tamed, at least for a long time, only by routine combined use in each case of three different drugs." 
"This is the way you win big in the world -- by getting two or three forces working together in the same direction." 
Seeker   "Since I have lost big, tell me more about how I can win big." 
Munger   "Extreme success is likely to be caused by some combination of the following factors:
a) Extreme maximization or minimization of one or two variables. 
b) Adding success factors so that a bigger combination drives success, often in non-linear fashion, as one is reminded by the concept of breakpoint and the concept of critical mass in physics. Often results are not linear. You get a little bit more mass, and you get a lollapalooza result. 
c) An extreme of good performance over many factors. 
d) Catching and riding some sort of big wave."
Seeker   "What do you mean with 'big wave'?" 
Munger   " businesses come in, there are huge advantages for the early birds. And when you're an early bird, there's a model that I call 'surfing' -- when a surfer gets up and catches the wave and just stays there, he can go a long, long time. But if he gets off the wave, he becomes mired in shallows...But people get long runs when they're right on the edge of the wave -- whether it's Microsoft or Intel or all kinds of people, including National Cash Register in the early days."