Principles from Charlie Munger
Unraveling the Impulse to Speak Without Purpose
Estimated reading time (5 minutes)
Happy Friday, everyone.
Every Friday, I share one principle that can help you in your life or business, one thought-provoking question, and one call to action toward that principle.
Principle of the Week
“Make friends with intelligent dead people. Adam Smith, Darwin, Cicero, Ben Franklin —whoever interests you. Read their writing. Steal their ideas. They don’t need them anymore.”— Charlie Munger
Charles T Munger was an American businessman, investor, and philanthropist. He was the vice chairman of Berkshire Hathaway, the conglomerate controlled by Warren Buffett; Buffett has described Munger as his closest partner and right-hand man. Munger has passed away at the age of 99.
Here’s an interesting story about Charlie, as told by Warren Buffet.
“In 1985, a major investment banking house undertook to sell Scott Fetzer, offering it widely — but with no success.
Upon reading this strikeout, I wrote Ralph Schey, then and now Scott Fetzer’s CEO, expressing an interest in buying the business. I had never met Ralph, but within a week, we had a deal.
Unfortunately, Scott Fetzer’s letter of engagement with the banking firm provided a $ 2.5 million fee upon sale, even if it had nothing to do with finding the buyer. I guess the lead banker felt he should do something for his payment, so he graciously offered us a copy of the book on Scott Fetzer that his firm had prepared.
With his customary tact, Charlie responded: “I’ll pay $2.5 million not to read it.”
Charlie Munger's response, "I'll pay $2.5 million not to read it," reveals a blend of humor, candidness, and a no-nonsense attitude. Munger, known for his sharp wit and straightforward communication style, didn't hesitate to express his disinterest in unnecessary information.
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Question to Ponder
During the Berkshire Hathaway shareholder meetings, Charlie Munger is known to answer “I have nothing to add” to most of the questions asked by Warren Buffett. Think about a time you were in a meeting. Did you fall prey to Say-Something Syndrome even though you didn’t have anything to say?
Call to Action
The "Say Something Syndrome" encapsulates the all-too-common inclination to speak without a clear intention or value addition. In the world of business and decision-making, Charlie Munger's mental models and frameworks offer insights that can act as a remedy to this syndrome.
The Inversion Principle:
Before speaking, invert the situation. Ask yourself what not to say or what harm your words might cause. Consider the opposite perspective. This thoughtful inversion can guide you towards more purposeful and considerate communication. Charlie often advises, "Tell me where I'm going to die so I won't go there."
The Lattice of Mental Models:
Expand your mental models. Before contributing to a conversation, draw on a diverse set of models and perspectives. This approach enriches your understanding, enabling you to offer insights that align with the complexity of the situation.
Circle of Competence:
Stick to what you know. Munger emphasizes understanding the limits of your expertise. Before speaking on a topic, evaluate whether it falls within your circle of competence. This ensures that your contributions are grounded in knowledge and experience. Munger once said, "The first rule is that you can't really know anything if you just remember isolated facts and try and bang 'em back. If the facts don't hang together on a latticework of theory, you don't have them in a usable form."
The Two-Step Process:
Implement a two-step process before speaking. First, pause and reflect on your words. Second, ask yourself if what you're about to say is not only true but also necessary and beneficial. This intentional process helps filter out unnecessary remarks. He once remarked, "I have no time for it [sloppy thinking]. You only want to be smart in spots where it counts. I have a way of handling a lot of problems, simply by not letting them exist."
Use Silence as a Tool:
Embrace the power of silence. Instead of rushing to fill a conversational void, use pauses strategically. Allow moments of silence to encourage deeper reflection, both for yourself and others. This deliberate approach fosters more meaningful and impactful communication. Munger's speaking style often involves thoughtful pauses. He understands that silence can be a powerful tool, allowing ideas to settle and conversations to unfold with greater depth.
Add value in a respectful, courteous, and responsible manner:
The delivery of value is as important as the quality of value being delivered. How you deliver an answer will always stick with the audience. If you are the smartest person and you are showing off this, it will not rub off well with the audience. Be courteous, responsible, and respectful in how you deliver value. Charlie Munger taught his son an important lesson on respect and responsibility: 'When You Borrow A Man's Car, Always Return It With A Full Tank Of Gas'
Video of the Week
Lasting lessons from Charlie Munger. RIP Charlie.
Wisdom maxims from Charlie Munger
Charlie—who trained as a meteorologist and a lawyer and never took a single college course in economics, marketing, finance, or accounting—became one of the greatest business and investing geniuses of the twentieth and twenty-first centuries.
Three. Rules for a career: 1) don’t sell anything you wouldn’t by yourself; 2) don’t work for anyone you don’t respect and admire; and 3) work only with people you enjoy.
Good, simple ideas are rare. When you find one, bet heavily.
Avoiding stupid mistakes is more important than being smart.
Avoiding a bad habit is easier than breaking a bad habit.
Do the unpleasant tasks first.
Stop multitasking. Concentrate.
Many complex problems are solved best when approached backward.
Clip your business and personal expenses. Small leaks sink big ships.
Don't confuse intelligence with invincibility.
Find out what you are best at. Then pound away at it forever.
Only invest where you have an edge.
Avoid mob rule. Avoid demagogues. Avoid dogma. Avoid bureaucracy.
Optimize for independence.Use money to buy freedom and time.
Develop durability.
Self-pity has no utility.
Self-improvement has no end.
If you want to learn more principles, I interview founders on my podcast, The First 100, where they share how they acquired their first 100 paying customers. This week:
Episode 114 - The First 100 with Dylan Serota, the CEO and Co-founder of Terminal
Episode 115 - The First 100 with Yi Shi, the founder of Flash Intel
And that’s a wrap for now!
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