A Latticework of Mental Models

Inversion is the most famous of Munger’s tools, but it lives inside a larger idea — that clear thinking comes from many disciplines, not one.

Munger warned against the man with a hammer, to whom every problem looks like a nail. His antidote was to build a latticework of mental models: a working grasp of the big ideas from many fields — the compounding of mathematics, the incentives of economics, the biases of psychology, the feedback loops of biology — and the habit of running every problem past all of them. Inversion is one model in that lattice, but it is the one that most reliably rescues us from ourselves.

If you read a single book on how Munger thought, make it Poor Charlie’s Almanack — the collected speeches and talks in which he lays the whole latticework out, dry wit and all. It reads as much like a manual for living wisely as one for investing well.

And, as with Buffett, the final ingredient is temperament. Munger held that the ability to sit quietly with cash, doing nothing, waiting years for the rare fat pitch, is worth more than any formula. “The big money,” he said, “is not in the buying and the selling, but in the waiting.” Inversion tells you what to avoid; temperament gives you the patience to actually avoid it.

The Shrewd insight: Independence and self-honesty are the whole game. Think for yourself, invert your problems, and refuse to fool yourself — and you have most of what made Munger, Munger.

Where these ideas live

Munger’s thinking is best absorbed in conversation — argued over and applied to real companies — which is exactly what happens every day on the Berkshire Hathaway board at Shrewd’m. It is the largest and longest-running gathering of value investors anywhere, running all the way back to the A.O.L. days, and among its members are a good number of former hedge-fund managers, seasoned professionals and unusually successful private investors who post simply because they love the craft and enjoy sharing it. The depth of discussion there — on Munger’s models, on inversion, on the psychology of misjudgment — is genuinely hard to find anywhere else, the sort of first-hand insight no textbook carries.

If inversion has hooked you — and it tends to — the best next step is to read among people who have spent decades practising it. It costs nothing, and you become a Shrewd in good standing simply by joining the conversation.

— Manlobbi