Charlie Munger is a huge advocate for “inversion”.
When it comes to making decisions, including investment ones, always invert. Flip the question around, and you’ll get a better perspective.
For instance, it is important, if not more important to ask “How can I AVOID making mistakes when investing?” rather than “How can I achieve the highest returns?”.
If you learn how to avoid ruin at all costs, you can have higher chances of succeeding compared to others.
Thinking in reverse is a powerful tool. Not only in the world of investing but also in our lives.
During our own quiet self-reflections, we might find ourselves asking “How can I live a happy life”?
But instead of searching for answers for “How to be happy?”, the key question you should ask the exact opposite.
“How can I lead a a life full of misery?”
And this is exactly what Charlie Munger has enlightened Harvard’s graduating class of 1986 – how to guarantee misery.
Let’s turn back the time, and find out what are the 4 prescriptions of misery from Munger:
(1) Be unreliable
Do not faithfully do what you have engaged to do.
Don’t match your words with your actions.
Always overpromise and underdeliver.
Munger used the story of the tortoise and the hare to demonstrate how unreliable people fare.
“Instead of being outrun by one fine turtle, you will be outrun by hordes and hordes of mediocre turtles and even by some mediocre turtles on crutches,” he said.
(2) Do not learn from others’ mistakes
Don’t learn from the masters, or the best work done before you.
Don’t learn from other people’s mistakes and failures.
Munger said that common disasters of mankind, such as drunk driving, reckless driving, business failures due to repeating obvious mistakes made by predecessors.
Minimise vicarious learning of good and bad from others.
By doing so, this is a sure-shot producer of misery and second-rate achievement.
You can see the results of not learning from others mistakes by simply looking at you.
(3) Let life knock you down
Life is going to throw you random curveballs at times.
When you face adversity, refuse to stand back up.
Do not learn how to handle mistakes and failures.
Be like the defeated lobster.
Go down and stay down when you get your first, second, or third severe reverse in the battle of life.
(4) Let addiction take over
Ingest chemicals that change your mood and behaviour.
Munger shared his personal experience, “The four closest friends of my youth were highly intelligent, ethical, humorous types, favoured in person and background,” he said. “Two are long dead, with alcohol a contributing factor, and a third is a living alcoholic, if you call that living.”
Although your level of susceptibility is different, anyone can be prone to addiction.
The chains of habit are too weak to be felt until they are too strong to be broken.
Here are the 4 things to avoid that Munger said “guarantees” a miserable life:
- Be unreliable
- Do not learn from others & past mistakes
- Let life knock you down
- Let addiction take over
To conclude, Munger ended his speech with the following,
Gentlemen, may each of you rise high by spending each day of a long life aiming low.
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