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Charlie Munger is probably best known as the vice president of Berkshire Hathaway, Inc. and a long-term business partner of Warren Buffett.

In addition to his successful entrepreneurial career as an investor and his various philanthropic ventures, Charlie Munger is also known for his thinking skills and especially for his emphasis on developing multiple mental models to overcome complexity and make wise and sound decisions.

He is incredibly well read and has studied many disciplines besides business, such as psychology, history, biology, physics, and economics.

Like all of us, Charlie Munger has had his share of personal setbacks, an early divorce in the era when divorce carried enormous social stigma, severe financial setbacks, the death of his son at the age of 9, cataracts when he was 52 followed by failures. surgery that caused blindness in his left eye and the removal of that eye.

His insights into life in general and business in particular are extremely insightful and often correct with unusual consistency.

In this article, we’ll look at some of the core principles of your thinking skills so that we can embrace them and incorporate these principles into our thinking skills toolkit as we learn to think more effectively.

“It’s remarkable the long-term advantage that people like us have gained by consistently trying to be not stupid, rather than trying to be very smart.”

“… developing the habit of mastering the multiple models that underlie reality is the best you can do.”

Charlie Munger – Mental Models

How to think effectively? According to Charlie Munger:

“… developing the habit of mastering the multiple models that underlie reality is the best you can do.”

Munger refers here to mental models.

Two broad categories of mental models that are particularly helpful are those that help us understand how:

[1] The world works and thus predict the future.

[2] Our mental processes can lead us astray through cognitive biases.

Our world is multidimensional and our problems are complex. Most problems cannot be solved using a single model, so it follows that the more models you have in the toolkit, the better equipped you are to solve your problems because you can see the problem from a variety of perspectives and increase the chances that you will come up with a better solution.

But if you don’t have the models, you become the proverbial man with a hammer who finds every problem like a nail.

Another important consideration is how you prioritize your learning. Trying to keep up with the latest information will lead us to chase our tails, therefore Charlie Munger says we should focus on things that change slowly:

“Models that come from science and engineering are the most reliable models on this Earth.”

Charlie Munger – How to Prioritize Mental Model Learning

“The more basic knowledge you have … the less new knowledge you will have to acquire.”

# Go back to basics. Understanding a simple idea in depth creates more lasting insight and creates a solid foundation for complex ideas later on.

# Build your base. Take the time to do a Feynman One Pager on an idea that you think you know very well. While easy, this process will reveal any gaps in your knowledge.

# The multidisciplinary mind understands the basic ideas. You don’t need to understand the latest study in biology, but you sure have a better understanding of the concept of evolution because it applies to so much more than animals.

# Understanding the basics allows us to predict what matters. Simply put, people who understand the basics are better at understanding second-order and subsequent consequences.

# What has been will continue to be. The longer a technology lives, the more it can be expected to live.

# Time can predict the value. While products and humans have a mathematical life expectancy that decreases every day, some things, like books, increase their life expectancy with each passing day.

In the words of Charlie Munger: “… take a simple idea and take it seriously.”

The “Lollapalooza effect”

But learning and applying models is not enough, we also need to understand how they interact and combine, and most notably when autocatalysis or [as Charlie Munger calls it] the lollapalooza effect occurs.

The lollapalooza effect occurs when two or more forces operate in the same direction and often a simple sum is not obtained, but a nuclear explosion is obtained once a certain point of interaction between those forces is reached, such as a point breaking point or critical point. -the mass is reached.

In the field of psychology, the phenomenon in which different biases overlap and intertwine with each other is the “Lollapalooza effect.” It occurs when multiple different mental trends and patterns combine to act in the same direction. This makes them especially powerful behavior drivers and can lead to both positive and negative results.

The lollapalooza effect can have huge negative effects, but it can also cause hugely positive payoffs. Therefore, understanding the interconnectedness of the models is critical.

Munger claimed that while psychologists have been good at identifying individual biases, they are less good at figuring out how they interact and manifest in the real world, because controlled experiments are difficult to conduct in that setting.

More on critical thinking skills: Charlie Munger

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