Tuesday, July 8, 2014

Charlie Munger: The Importance of Multiple Mental Models

From Poor Charlie's Almanack, and what I think is the single most important idea I carry with me when it comes to going through life:
You must know the big ideas in the big disciplines and use them routinely--all of them, not just a few. Most people are trained in one model--economics, for example--and try to solve all problems in one way. You know the old saying: To the man with a hammer, the world looks like a nail. This is a dumb way of handling problems.

You need a different checklist and different mental models for different companies. I can never make it easy by saying, "Here are three things." You have to derive it yourself to ingrain it in your head for the rest of your life.

You can't learn those one hundred big ideas you really need the way many students do--where you learn 'em well enough to bang 'em back to the professor and get your grade, and then you empty them out as though you were emptying a bathtub so you can take in more water next time. If that's the way you learn the one hundred big models you're going to need, [you'll be] an "also ran" in the game of life. You have to learn the models so that they become part of your ever-used repertoire. 

By the way, there's no rule that you can't add another model or two even fairly late in life. In fact, I've clearly done that. I got most of the big ones quite early [however].

The happier mental realm I recommend is one from which no one willingly returns. A return would be like cutting off one's hands.