From Peter Bevelin’s “All I want to know is where I’m going to die so I’ll never go there.”
How to Make Decisions:
“People chronically misappraise the limits of their own knowledge; that’s one of the most basic parts of human nature. Knowing the edge of your circle of competence is one of the most difficult things for a human being to do. Knowing what you don’t know is much more useful in life and business than being brilliant.” – Munger (p. 204)
‘The first principle is that you must not fool yourself and you’re the easiest person to fool.” “The ethos of not fooling yourself is one of the best you could possibly have. It’s powerful because it’s so rare.” – Munger (p. 2)
“How can smart people so often be wrong? They don’t do what I’m telling you to do: use a checklist to be sure you get all the main models and use them together in a multimodular way.” – Munger (p. 219)
“I’m a great believer in solving hard problems by the use of a checklist, because you get all the issues in front of you that way- and otherwise it’s too easy to miss something important…Now if there are two or three items that are very important that aren’t on your checklist- well, if you’re an airplane pilot, you can crash.” – Munger (p. 220)
“It is easy to see that a quickly reached conclusion…combined with a tendency to resist any change in that conclusion, will naturally cause a lot of errors in cognition for modern man.” – Munger (p. 96)
“I would say if Charlie and I have any advantage it’s not because we’re so smart, it is because we’re rational and we very seldom let extraneous factors interfere with our thoughts.” -Buffet (p. 9)
“Studying counter-evidence is a highly useful activity, though not one always greeted with enthusiasm at citadels of learning.” Charlie and I believe that when you find information that contradicts your existing beliefs, you’ve got a special obligation to look at it- and quickly.” Buffett (p. 99)
“Similarly, other modern decision makers will often force groups to consider skillful counterarguments before making decisions.” – Munger (p. 101)
“Darwin’s result…he always gave priority attention to evidence tending to disconfirm whatever cherished and hard-won theory he already had.” (p. 99)
“If you minimize objectivity, you ignore not only a lesson from Darwin but also one from Einstein. Einstein said that his successful theories came from ‘Curiosity, concentration, perseverance, and self-criticism’…By self-criticism, he meant becoming good at destroying your own best-loved and hardest-won ideas.” – Munger (p. 100)
“It’s my working hypothesis that it is, but then I go and look for the facts, and I try not to be selective about the facts that I use as input…always observe that rule about not letting the hypothesis determine the story…you have to give up that hypothesis if it turns out not to be correct or if it’s misleading.” – Buffet (p. 100)
“The approach and strategies are very similar in that you gather all the information you can and then keep adding to that base of information as things develop. You do whatever the probabilities indicated based on the knowledge that you have at that time, but you are always willing to modify your behavior or your approach as you get new information.” – Buffett (p. 102)
“When a better tool comes along (idea or approach), what could be better than to swap it for your old, less useful tool? Warren and I routinely do this, but most people, as Galbraith says, forever cling to their old, less useful tools.” – Munger (p. 98)
“I generally try to approach a complex task by first disposing of the easy decisions…It is usually best to simplify problems by deciding big ‘no-brainer’ questions first.” “The other thing we do, if the problem is really hard and important, we rag it. We keep working at it, and come back to it and so forth. You have a lot of time to do that because of all the things you avoid that other people do.” – Munger (p. 207)
“You tend to forget you own mistakes when reputation is threatened by remembering.” – Munger (p. 206)
“Part of making good decisions in business is recognizing the poor decisions you’ve made and why they were poor.” – Buffett (p. 206)
“It is important to study failure as much as you study success.” – Buffett (p. 218)
“At most corporations, if you make an acquisition and it turns out to be a disaster, all the people, paperwork, and presentations that caused the foolish acquisition are quickly forgotten. Nobody wants to be associated with the poor outcome by mentioning it. But at Johnson and Johnson, the rules makes everybody revisit old acquisitions, comparing predictions with outcomes. That is a very smart thing to do.” – Buffett (p. 206)
“Chris Davis (Davis Funds) has a wall of shame. He celebrates the things they did that lost them a lot of money. What is also needed is a wall of shame squared for things you didn’t do that would have made you rich. Forgetting your mistakes is a terrible mistake if you are trying to improve your cognition. Reality doesn’t remind you. Why not celebrate stupidities in both categories?” – Munger (p. 212)
“I think you’re a better manager or investor if you look at each decision that you’ve made of importance and see which ones worked out and which ones didn’t- and figure your batting average. Then, if your batting average gets too bad, you better hand the decision-making over to someone else.” – Buffett (p. 206)
“You shouldn’t make decisions when you were tired and how tiring it is to make decisions…I can’t remember an important decision Warren has made when he was tired.” – Munger (p. 207)
“Don’t overlook the obvious by drowning in minutiae.” – Munger (p. 221)
“Decisions in life are all about opportunity costs…And wise people think in terms of personal opportunity costs…in other words, it’s your alternatives that matter. That’s how we make all of our decision.” -Munger (p. 208)
“You can’t avoid wrong decisions. But if you recognize them promptly and do something about them, you can frequently turn the lemon into lemonade.” – Munger (p. 102)
“A checklist is no substitute for thinking.” – Buffett (p. 222)
“You have to come to your own conclusions, and you have to do it based on fact that are available. If you don’t have enough facts to reach a conclusion, you forget it. You go on to the next one. You have to also have the willingness to walk away from things that other people think are very simple.” – Buffett (p. 222)
“The danger is that you have more risk of operating outside of your circle of competence. I don’t think we’re ever gone outside our circle of competence. We find things across a fairly wide range that we think is within our circle of competency.” – Munger (p. 209)
“It’s ego. It’s greed. It’s envy. It’s fear. It’s mindless imitation of other people. I mean there are a variety of factors that cause that horsepower of the mind to get diminished dramatically before the output turns out.” – Buffet -(p. 8)