Book Review – Poor Charlie’s Almanack (Traditional Chinese version)

Poor Charlies Almanack - Authorized Chinese translation
Source: www.poorcharliesalmanack.com

Today, I finally finished this book – Poor Charlie’s Almanack – after 3 months (I also finished another book – Morningstar’s Why moat matters – during this period).

Although this book is not easy to read (partly because of the nature of the content, and partly because I am reading the traditional Chinese version, instead of the English one), and at first I was having second thoughts on how much would I actually get out from this book, I managed to finish it in the end and I would say it is actually very worth it.

Overall, this book allows me to understand Charlie Munger as a person, and (take a peek at) what’s going on inside his mind, better, just like how the other two books (The Essays of Warren Buffett, and Tap Dancing to Work) that I have read helped me to really get into Warren Buffett’s mind and get to know him better and understand his thoughts better, and have some glimpse of his personal life. Charlie is really a very different guy from Warren, is an impressive thinker, a lateral and multi-disciplinary thinker, with diverse interests and powerful mental models ready on hand anytime.

There are many useful points that I learned from this book, but I would just list down the few that are more important to me (to really appreciate the ideas/concepts, you would have to read the book, or at least, articles discussing them in detail):

  • Inverse thinking – Inverse. Always inverse. Thinking in an inverse way will help you to cover more grounds, and at times give you answers that you cant obtain by not thinking inverse.
  • Thinking and mental models – Learning how to think is at least equally important, if not more, than thinking itself. And mental models would help us much in thinking, in terms of organising our thinking well and retaining and linking knowledge better.
  • Checklists – For god’s sake, have checklists and use them as a tool to aid our thinking. Our human brain is just not powerful enough to remember everything and help us to cover all the important points, when we are processing information or making decisions, especially when human are very susceptible to all sorts of cognitive/behavioural biases ingrained in our genes (which hit us without even ourselves being aware of them). Having and using a checklist will help us greatly in life, and save us from a lot of troubles and help us in making less mistakes. Pilots use checklists to help them, so why shouldn’t we. And Charlie Munger has his own checklists too (since then, I have developed my own checklist of around 140 questions as it stands now (which will, of course, evolve over time), that I shall go through and ponder about before I make my investments in any company).
  • Study psychology, and learn and master the various cognitive biases that we are susceptible to – The good thing about Charlie is that he manages to show us how we can use psychology theories and ideas in our near life (instead of just theories that matter in academia or in clinics), and how important they are. The 25 cognitive biases that he discusses in Chapter 11 of the book are so invaluable and useful in our daily lives (not just investing, although they matter a lot and are very useful in investing too), that I shall list them down here (which itself is a checklist that we (or at least I) should use):
    1. Reward and punishment superresponse tendency 奖励和惩罚 超级反应倾向
    2. Liking/loving tendency 喜欢、热爱倾向
    3. Disliking/hating tendency 讨厌、憎恨倾向
    4. Doubt-avoidance tendency 避免怀疑倾向 – (法官)必须让自己习惯带上客观的面具
    5. Inconsistency-avoidance tendency 避免不一致性倾向 – 在做出决定前,先考虑反方意见 , 来避免第一结论偏见 (first conclusion bias); 处在巅峰期的爱因斯坦非常善于摧毁自己的思想 ; 确认偏见(confirmation bias),这是一个贬义词; 要避免不一致性倾向造成的【维持现状偏见】
    6. Curiosity tendency 好奇心倾向
    7. Kantian fairness tendency 康德式公平倾向
    8. Envy/jealousy tendency 艳羡、妒忌倾向 – 许多大型律师事务所担心这种效应会造成混乱,所以给资深合伙人的薪酬一向都差不都…【驱动这个世界的不是贪婪,而是妒忌】
    9. Reciprocation tendency 回馈倾向
    10. Influence-from-mere-association tendency 受简单联想影响的倾向 – 在这种条件反射中,创造出新习惯的反射行为,是由以前得到的奖励直接引起的; 但条件反射还有另外一种,其反射行为单纯是由联想引发的。例如人会根据以前的经验得到这种结论: 同样商品中,价格最高的,品质最好
    11. Simple, pain-avoiding psychological denial 简单的避痛苦的心理否认 – 现实太过痛苦,令人无法承受,所以人会扭曲各种事实,知道它们变得可以承受
    12. Excessive self-regard tendency 自视过高的倾向 – 禀赋效应 (endowment effect) – 人做出决定之后,就会觉得自己的决定很好,甚至比做决定之前还要好; 当你评价自己…和你过去及未来的行为时,要强逼自己更加客观
    13. Overoptimism tendency 过度乐观倾向 – “一个人想要什么,就会相信什么” —得摩斯梯尼
    14. Deprival-superreaction tendency 被剥夺超级反应倾向
    15. Social-proof tendency 社会认同倾向 – 学会忽略别人的错误示范,因为很少有比这个更值得掌握的技能
    16. Contrast-misreaction tendency 对比错误反应倾向 – 如果把青蛙丢到热水里…; 【小小漏洞,能沉大船】这句格言的功效是很大的,因为大脑经常会错失能沉大船的小漏洞
    17. Stress-influence tendency 压力影响倾向
    18. Availability-misweighing tendency 错误衡量易得性倾向 – 避免这的主要对策,通常是按程序办事,包括使用总是很有帮助的检查清单; 另一种对策就是模仿达尔文那种特别重视反面证据的做法; 记住这个伟大的原理: 别因为一样事实或一个点子很容易取得,就以为特别重要
    19. Use-it-or-lost-it tendency 不用就忘倾向 – 如果他减少练习的项目,因而减少了能掌握的技能,就会陷入【铁锤人倾向】的错误。他的学习能力也会下降,因为他需要用来理解新经验的理论框架,已经出现了缺口
    20. Drug-misinfluence tendency 化学物质错误影响倾向
    21. Senescence-misinfluence tendency 衰老—错误影响倾向
    22. Authority-misinfluence tendency 权威—错误影响倾向 – 把鱼竿丢进大海的这个例子证明,跟随权威人物的心理倾向是很强大的,能够使人的脑袋变成浆糊
    23. Twadle tendency 废话倾向 – 小心废话让你不敢正经事
    24. Reason-respecting tendency 重视理由倾向 – 不幸的是,重视理由倾向是如此强大,乃至一个人随便给出毫无意义或不正确的理由,也能使他的命令和要求更容易被遵从
    25. Lollapalooza tendency 鲁拉帕路萨倾向 – 数种心理倾向共同作用造成极端后果
25 Cognitive Biases - The Psychology of Human Misjudgement - Charlie Munger-page-001
Source: http://www.25cognitivebiases.com

Lastly, I really respect and admire Charlie’s dedication, hardworking and lead-a-simple-life attributes, as brought out by William H. Borthwick’s commentaries on Charlie (as quoted below), which I think is the way to go in life.

“在明尼苏达还有许多这样宝贵的小故事,因为当时查理工作太忙了,在那儿是我们唯一可以真正以他在一起度过的时光。平时工作时,他总是天没亮就出门,吃晚饭时才回家,接着研究标准普尔指数,然后跟华伦(巴菲特)通一两个小时电话。”
-威廉。波斯伟克(William H. Borthwick)

P.S. Much appreciation to Daniel from 10% per annum for being kind enough to provide me with this wonderful gift. Thanks Daniel! 🙂

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