The Decision-Making Principles of Charlie Munger
Charlie Munger was a very talented man. A great investor, and amazing at analysing the risk, upside, downside and perceived benefit.
We can learn from his wisdom. Below are some of his best principles and thought exercises he applied when making a decision. If only we could all be so balanced!
- Status: We tend to favour people and symbols we like, sometimes overlooking their faults. Respect your opinion and beliefs
- Pressure tested: Stress can drive hasty decisions. Combat this by scheduling deliberate delays for more thoughtful choices. Tim Ferris shares a similar notion that he will not make an immediate decision, especially in a meeting if he feels he is being pressured.
- Inconsistency-Avoidance We prefer consistency, even if it means sticking to bad habits. Be aware of these patterns to expand your choices.
- Curiosity: Human curiosity drives innovation and progress. Embrace it for personal and societal growth. Curiosity, staring, asking why, and analysing are some of the most desirable human skills, and too many forget this.
- The world isn’t fair: Stop expecting perfect fairness; adapt your behaviour to life’s ups and downs. There are ups and downs, swings and roundabouts, you can’t control the future only be on the journey.
- Know your biases: Influence-from-Mere-Association Evaluate things independently rather than relying on associations or past experiences. Step away, take time, talk it through, then act. It will be a smarter choice.
- Stamina: Simple, Pain-Avoiding Psychological Denial Face the truth to deal with problems before they escalate. There is always a challenge large or small it’s how you respond to them, which is what will separate you.
- Half glass full or half empty: Overoptimism Balance optimism with pragmatism; consider potential challenges. People love to criticise, its easy, but being over-optimistic is dangerous. Check yourself.
- Pause: Deprival-Superreaction Reacting strongly to losses can cloud judgment. Stay focused on the next steps. We all have options in any situation, being too emotional limits those options.
- Mindlessness: Social-Proof Question whether the crowd is right; don’t blindly follow others in uncertain situations. What works for others might not work for you.
- Use-It-or-Lose-It: Continuously use and apply skills and knowledge to prevent decline. Keep learning, keep reading, and keep busy. What other option is there?
- Power: Authority-Misinfluence Question opinions based on logic, not just because they come from authoritative figures. No one knows everything regardless of experience, and many get it wrong. The problem is too many listen and don’t think.
- Time wasting: Twaddle Value your time; set limits on time-wasting activities. Everyone is competing for your attention, let yourself daydream or even be bored. Go for a walk. Prioritise you.
Applying these principles in a key decision will mean you make a decision with confidence.
Thanks for reading, Luke Get in touch on Twitter and LinkedIn Services on GumRoad I help founders and agencies grow their businesses. Previous clients include Google, Meta, and Airbnb.