for the last 5 years I've been writing a memo to myself I have found this to be an excellent way to learn the memo is in the form of a discussion between four characters it's a story about a fictitious seeker and his visit to the library of wisdom where he meets another fictitious character the librarian along
with Warren Buffett and Charlie Munger what has been reinforced in writing this memo is the efficiency Simplicity Clarity and common sense of judgment that are the Hallmarks of Buffett and Munger both have remarkable ability to eliminate Folly simplify things boil down issues to their Essence get right to the point and focus on simple and
Timeless truths they are the Einstein of business and wisdom if there is one goal of this book it is to better understand how they think that is from the very brief introduction of the book I'm going to talk to about today which is all I want to know is where I'm going to die so I'll never go there Buffett and
Munger a study in Simplicity and uncommon common sense and it was written by Peter bevelin so I wasn't expecting to read this book right away it was actually recommended by my friend Eric jensson Eric jensson is also the author of the book that I covered on episode 199 which is the almanac of nval ravikant but anytime Eric recommends a
book I immediately order it this book came a few days later I pick it up crack it open trying to take a peek see what the book was all about I start reading it and I never stopped and I think the reason it resonated with me immediately is because when you read the book it I feel it as if Warren Buffett and Charlie
Munger are speaking directly to you and I told you this before but the reason I've read every single book I can find on Warren Buffett or Charlie merer is because I really feel like they're the very wise grandfather figure that I never had one of my grandfathers died when I was too young to remember him and
the other one was a psychopath and a monster and dumber than a bucket full of rocks and so when I listen to monger and Buffett speak or I read their writing I really do view it as hey this is the wise grandfather figure that I never had they have six decades more life experience than I do they seen all kinds of different things and they've learned
from that experience and then they push that knowledge and information that they've acquired over their very long lives down to Future generations and so almost all my highlights are Munger and Buffett talking directly to you and I it is very surprising that they start the book on the subject of mistakes and so
it starts off with Monger saying mistakes are fact of life I'm not nashing my teeth over them or suffering or enduring them I regard it as perfectly normal to fail and to make bad decisions Buffett comes in remember this is going to be like a dialogue between them I guess just to tell you so the what's interesting about this book
compared to the rest of the books that I've read on both monger and Buffett is they quote heavily so he uses obviously any of like the books written about Munger and Buffett but also a lot of it is from the annual meetings that buffet and Monger both put on and so the author organized all this so we can read it in
like a conversational format so you have Monger that says that buff it says everyone makes mistakes I've made a lot and I'm going to make more that's the nature of making a lot of decisions try to to live your life totally free of mistakes is a life of inaction stupidity is inevitable it happens to everyone
wrong decisions are part of life being able to make them work out anyway is one of the abilities of those who are successful and so that's one main theme that they repeat over and over again is the fact that since mistakes are inevitable you have to structure your life and your business to be able to survive the inevitable bad decisions
that you're going to make and Buffett has a funny little memorable way to describe their approach to being able to survive mistakes uh he says the sign above the players's entrance to the field at Notre Dame reads play Like A Champion today I sometimes joke that the sign at the field in Nebraska reads remember your helmet Charlie and I are
remember your helmet kind of guys we like to keep it simple and then they go into the fact that avoiding problems is better than being forced to solve them this is a really amazing way that Charlie Monger describes this idea he says wisdom is prevention then Buffett says it wasn't raining when Noah built
the ark and he didn't even look that that smart for 39 days but there are some things you have to think ahead on and prevention is enormously important and so if wisdom lies in prevention how do you gain wisdom and Monger says if wisdom is what you want you're going to get it by sitting on your ass if you
really want to be an outlier in terms of achievement sit on your ass and read and do it all the time and then muger goes into the fact that because they spend so much time gaining wisdom and preparing that allows them to actually make decisions really quickly uh when you have the few great opportunities in your
life they presented to you he says we actually make decisions very rapidly but that's because we spent so much time preparing ourselves by quietly sitting and reading and thinking Buffett chimes in he says unfortunately bertran Russell's observation about life in general applies with unusual force in
the financial world most men would rather die than think and many do and then Munger says if you get into the mental habit of relating what you're reading to the basic underlying ideas being demonstrated you gradually accumulate some wisdom so then they asked the question but how do you guys have so much time to read I always
believe that you were very busy and all the time and you had meetings all the time buff it says at birkshire we don't have any meetings or committees and I can think of no better no way to become no better way to become more intelligent than sit down and read I hate meetings frankly I have created something that I
enjoy he's obviously talking about his company I have created something that I enjoy I happen to enjoy reading a lot and I happen to enjoy thinking about things Monger says we both hate this is something that I've really uh adopted I think it's one of the best ideas that they have and it's this idea that you have to schedule time to think and you
cannot he Monger is going to say something funny which like most people most business people schedule themselves like a dentist he's like well if you do that every single minute of your day from the time you wake up till you go to bed is accounted for when the hell are you thinking and I'll get into why Jeff
Bezos picked up on this is such an important thing in one second Monger says we both hate to have too many forward commitments in our schedules we both insist on a lot of time being available almost every day to just sit and think I've heard very stories over the years about this but for example like let's say you wanted to meet with
Warren Buffett you wanted to schedule something and say you know hey can you meet you know the third week of next month he's just going to say no if you want to meet me Friday call me Thursday and I'll tell you if I'm available I interact with a lot of Founders it's completely different than how most Founders schedule their time maybe we
should be learning from their experience Monger says we schedule time to think most people schedule themselves like a dentist uh it's so easy to get so busy that you no longer have time to think and you pay a huge price for that and so when I got to this part I thought of something that I read that Jeff Bezos
said one time this is in the the book invent and wander the collected writings of Jeff Bezos I covered it all the way back on episode 155 but bezo said I need eight hours of sleep I think better I have more energy my mood is better and think about it as a senior executive what do you really get paid to do you
get paid to make a small number of high quality decisions if I make like three good decisions a day that is enough and they should just be as high quality as I can make them Warren Buffett says he's good if he makes three decisions a year here and I really believe that and I think what Bezos would tell you what
Buffett would tell you what Monger would tell you he like how the hell do you expect to make high quality decisions if you're not spending any time deep in thought and you're Focus this leads to directly into one of my favorite Parts something that they repeat over and over again the dangers of multitasking they
say over and over again what worries me and Charlie most is a lack of focus Monger says this modern generation which has gotten so good at doing two or three things at once multitasking all confidently predict will end up worse than people uh more or like Warren Buffett with solitary reading time and less trying to do three things at once I
think people that are multitasking pay a huge price I think Edwin land uh founder Polaroid somebody talked about over and over again on the podcast that's Steve Jobs hero he would agree with exactly what they're saying he talks about the powers of intense concentration hour after hour who actually release things
inside of people that they didn't even know existed I send this uh video of Johnny IV to a bunch of my founder friends and in like three minutes he talks about hey Steve Jobs was the most remarkably focused person I knew and so so this idea of the importance of focus appears over and over and over again if
you just pick up any of these biographies you're going to see it just jump out jump out at you it's so obvious I think people that multitest pay a huge price I think when you multitest so much you don't have time to think about anything deeply you're giving the world an advantage you shouldn't practically
everybody is drifting into this mistake this is amazing that what Monger says I did not succeed in life by intelligence I succeeded because I have a long attention span and then mugger goes in this is not rocket SCI this is very obvious said yet people don't do it uh Johnny IV in that video the reason I sent it around so much is he talks about
listen this seems really simple but I'm shocked at how so few people do it so I always when whenever I hear something like that it's like this is really important high priority repeat it over and over again and yet it goes completely against human nature and you know goes against human nature because
most people don't do it I'm like okay that like like uh alarms go off in my mind like okay that is extremely important that's something you need to master right and so Monger goes into this he goes it's just this simple we''ve have enough good sense when something was working working well we keep doing it the fundamental algorithm
of Life repeat what works moving ahead there's going to be three main ideas spread across a couple Pages they're going to repeat these ideas a lot which is very surprising one is something that I think you know of well but it's it's worth repeating you should aim to be consistently not stupid then they talk a
lot about do not let the thoughts of others interfere with your own and then something that I talk about that that comes up a lot in conversations with other Founders is it's so difficult to build a successful business and then what happens and what Munger and Buffett already talking about is like first of all it's very difficult to build a very
successful business and most likely the down your downfall once you're able to achieve something that's extreme extremely rare is not that you're going to be taken over by a competitor or something like that it's that you're going to mess it up and they talk about that people there's something in human nature where people are Driven Crazy by
extreme success and of course they're able to describe all of these ideas in you know just a few sentences the first thing here is mongers saying hey the one thing that surprised me all my life is how many people with high IQs do massively stupid things someone once said what most distinguishes the foolish
and the intelligent is the foolish consistently commits the same stupidities while the intelligent always find new ones so that's really funny obviously Munger then continues while an excess of self-regard is often counterproductive in its effects on cognition it can cause some weird successes from overconfidence that
happens to cause success so what does that mean that's kind of a weird language there this is he he breaks it down into a maximum that I've heard Monger repeat several times and he says never underestimate the man who overestimates himself Buffett chimes in he says I would say if Charlie and I have any advantage it is because we're
rational and we very seldom let extraneous factors interfere with our own thoughts that that you're going to hear Buffett and Munger say variations of this idea over and over again let me go back to what Buffett saying he like hey we try to be rational we don't let the we try to mute the outside world right we're not going to let the outside
world interfere with our own thoughts we do not let other people's opinion interfere with our own and then Monger goes back into this thing don't mess it up you need patience and discipline and an ability to take losses and adversity without going crazy you need an ability to not be driven Crazy by extreme
success and then they go on from multiple multiple pages about one of their favorite ideas this is idea of inversion I've covered this idea a lot in the other monger and Buffett episodes I will list all of them in the show notes Down Below in case you want to check out uh you know I don't even know how many there are there might be like
eight or 10 or something like that you can also go to Founders podcast.com and see like all the show notes in case it doesn't show up on your podcast player but I'm going to try to avoid covering things I've covered in past podcast because I just assume when I make the podcast that you're just like me that
you're a maniac and that when you find something that you're interested in like I I was interested you know in in Charlie moer Warren Buffett I'll read every single book and get my hands on I would listen to every single podcast so I will list them all and obviously if you're interested in learning more from
more buff and Charlie just listen to them and you know listen to them again and so they're going to talk about inversion throughout the entire book Monger starts off that is very much my approach to wisdom I go around figuring out what doesn't work and then I avoid it invert always invert I sought good judgment mostly by collecting instances
of bad judgment then pondering ways to avoid such outcomes so that is in his personal like his personal life right but he also talks about it's extremely useful in studying why other people fail in business to examine how businesses become big and strong Charlie first studies how businesses decline and die
Buffett says we have been a student of other people's Folly and it has served us well and then Buffett has a great line on how do you actually practice this this is in this is fantastic it is an inversion process you start out with failure and then engineer its removal and this is one of my favorite ideas in
the book another way to think about an idea I've already been previously exposed to it's like oh you should figure out what you don't like to get to what you do like and so it says Monger says the mental process that has really worked for me in my whole life uh and I use it all the time is turning everything into reverse I figure out
what I don't like instead of figuring out what I like in order to get what I like and so they go on giving examples of inversion over and over again and and interspersed through all these examples of inversion they say stuff like this hey I think a lot this is buff it I think a lot of people make things more
complicated than they need to really think you should keep things simple in both business and Investments it's usually far more profitable to Simply stick with the easy and obvious than it is to resolve the difficult and then they end this section of the book with why they're saying this this is something you and I have talked about
for years repetition is persuasive they said some things may seem a little repetitious but repetition is the mother of learning and so if you pick up this book and read it and I hope I can encourage you to do so you're going to be maybe surprised but a large part of this book is actually on the human
psychology and then observable human nature throughout history and if you think about this like okay why would some of the greatest Founders and investors of all time in monger and Buffett why would they be so obsessed with that because business is people right your your business partners are people your customers are people and so
they just have a a lot of it is like avoiding they talk about you know there's a lot of lowquality traits in human beings and low quality people on this Earth You need to avoid them again I think they they give you a simple way to do this and so Buffett talks about like well when you're picking people to
do business with he just has this thing he's like you know if you need like a 50 page contract to protect yourself from the person you're dealing with you need to walk away from that deal immediately he says I like to deal with people where I feel a one-page contract would do the job and one apparent almost contradiction when you read they talk
about hey you know we spend so much time studying history reading biographies learning from the experiences of others and then they keep repeating that most people do not learn from other people and monger's got a great illustration at this point he goes you can tell that most people don't learn from uh the the
the experience of other people because there's little originality in the disasters of mankind we'll get there in one second Buffett said the trick is to learn most lessons from the experience of others Monger says the more hard lessons you can learn vicariously rather than through your own hard experience
the better you can see the results of not learning from other people's mistakes by simply looking around you how little or originality there is in the common disasters of mankind he goes on to list some drunk driving deaths incurable venial diseases uh conversion of bright college students into brainwash zombies as members of
destructive Cults business failures through this is such a great line business failures through repetition of obvious mistakes made by predecessors and so on I just love that idea it's like you can tell people are not learn or most people are incapable of learning from the experience of other people because there's no originality in the
common disasters of mankind they just repeat over and over again I think you'll learn a lot from other people in fact I think you learn basically if you can learn basically everything from other people you don't have to get too many new ideas on your own you can just apply the best of what you see and then
a few pages later they essentially give an enthusiastic endorsement of listening to to Founders podcast because they say study effective individuals Buffett says look at effective individuals and try to figure out why they're effective Monger says I think history is very helpful it enables you to keep things in
perspective so the history of civilization and the history of finance and investing it is very useful Buffett says I like history I like Financial history it is useful to realize how extraordinary things can happen occasionally this is a great great line everything that needs to be said has already been said and but since no one
was listening everything must be said again now we got a couple different ideas all centered around this one main idea focus on the essence the most important thing the core always try to simplify things to their Essence the fundamental or most important aspect of something the core is the way to think about it Charlie's Got the best
30-second mind in the world Buffett said if I call him and describe a problem to him any kind of situation he gets to the essence of it immediately when we make decisions we focus on the most important thing something that preach Over N again is get into a good business and allow the miracle of compound interest to do M
most of the work for you I talk about this over n again to with you that time is carries most of the weight Buffy says compound interest is a little like rolling a snowball down a hill you start with a small snowball and if it rolls long enough uh you'll have a real snowball at the end uh it's better if you're not in too much of a hurry and
keep doing sound things the reason I read wanted to read you that paragraph is really for this next two sentences birkshire was a small business at one time it just takes time it is the nature of compound interest you cannot build it in one day or one week going back to this idea that once you're in a good
business stay in a good business let time do the work uh Charlie Monger talks about this as staying on the wave so he says when new businesses come in there are huge advantages for the early birds and when you're an early bird there's a model that I call surfing when a surfer gets up and catches the wave and just
stays there he can go for a long long time but if he gets off the wave he becomes mired in the the shallows people get long runs when they're right on the edge of the wave and so he uses example like Microsoft or Intel stay on the way and then they give some ideas on both that are effective for sales and
effective for managing other people within your organization Mary Kay once said it's so simple you you make such a difference pretend that every single person you meet has a sign around his or her neck that says make me feel important all human beings work better if they get reinforced if there are constant rewards for doing
well you will be driven to do more of the same and then they have a theme that they repeat over and over again with different little stories and a lot of it actually is related to B like Buffett loves baseball stories but it's just this idea that there's just most of the world is by definition has to be
mediocre in that if you can actually do the work necessary to turn yourself in a formidable individual and then work with just the best first of all work with the best possible people and work in the best possible Industries and businesses that will do most of the work for you and to be able to do that is you have to
be kind of Ruthless with cutting people that aren't up to your standards out of like you don't want to do work you don't you can't work with you know C players or even B players so buff it says the real issue is mediocrity there are too many 240 hitters so he he loves his baseball analogy if you were a fantastic hitter you'd be a 400 hitter that's
something he's going to repeat over and over again but in this case you have somebody that may even think they're a 400 hitter but are actually a 240 hitter so what he's talking about the real issue here is mediocrity there are too many 240 hitters in business businesses often settle for a notch or two above
mediocrity there are strong human instincts at work and then they also give advice where it's like listen you think you might be able to turn around a business or turn around a person you're just better off getting into a better opportunity this is something where I always say it's like actions Express priority it's one of my favorite maxims
people do what they actually want to do and you can tell what people want to do is just like how do you spend your time what are your act it doesn't matter what you tell me hey this is important to me it's like just I can look at what you do and this is great advice from Buffett people just do what they want to do and
you're just better off just not trying to change their behavior because only they can do that so he says in almost 60 years of investing we found it practically useless to give advice to anyone and this is even in situations where you figure hey they have they should have a lot of influence and
control here and he says listen Charlie and I have been on Boards of companies in which we were among the largest shareholders and even then we had very little luck changing their behavior so we think that if you buy a stock in a company you better not count on being able to change the course of action and
then they go back into the importance of understanding human behavior and then they touch a little bit on why so many Founders and investors have it like they love history they like studying history they find it very useful for their careers Buffett says you really should understand human behavior if you're going to run a business Munger says once
you have the ideas of course you must continuously practice amen something you and I talk about over and over again once you have the ideas of course you must continuously practice their use if you don't practice you can't perform well a wise man engaged in learning some important skill will will not stop until
he is really fluent in it so more on this idea of it's really important if you're going to run a business to understand human nature again this is all these ideas these are not on the same page so this is how you know it's important to them because what what's important to people they will repeat and so this is really it's a it's a story
about imitation is the note that I left myself when I read this but no what Charlie's about to tell us he's telling us a story about human nature that's very fascinating and if you think about like their Bird's eyee view that they've had uh in the like the finance industry which um you know it's been full of
panics and Bubbles and Booms and busts right this is just absolutely fantastic so Charlie Monger says one of my favorite stories is about the little boy in Texas the teacher asked the class if there are nine sheep in the pen and one jumps out how many are left and everybody got the answer right except this little boy who said none of them
are left and the teacher said you don't understand arithmetic and he said no teacher you don't understand sheep and Buffett adds on to the story by saying it always amazes me how high IQ people mindlessly imitate and then Buffett describes this phenomenon by this idea he calls the three eyes and so he says
you get what I call the natural progression the three eyes the innovators the imitators and the idiots so skipping ahead let's go back to this idea that they repeat over and over again spend a lot of time thinking reading formulating your own thoughts and mute the world and so Buffett says we do not read other people's opinions
we want to think we want to get the fact and then think this was such a like a mindblowing uh realization because you never know like when you're reading something when it just is going to sudden click or like kind of um interact with a maybe an idea that was previous in your mind or you didn't weren't necessarily like completely understood
how important it was when I was reading Buffett shareholder letters and then obviously uh this is like years ago so this is probably like in 2019 maybe and listening to Charlie Munger speak they kept bringing up this guy named Henry Singleton and I was like what the heck is going on here you know in my opinion
and among her have studied the people living and maybe people have ever lived they probably studied more different businesses and more company Founders and managers and CEOs than almost anybody else right um they've been at it since in Buffet gate since he was a little kid and he's been doing almost for 100 years
right and yet they kept bringing up Henry Singleton Henry Singleton they're like hey this guy was uh Charlie M says Henry Singleton was the smartest person you ever met Monger said that uh his returns in business were utterly ridiculous buff say is literally a crime that Business Schools don't study this
guy and the reason it's hard to study him is is you actually have to like there's not a lot written about him um I've done two episodes on them but episode 110 there's this book called disent Force which is written by Singleton's like right-hand guy and it's really the history of the company tadine that they built together but what was so
remarkable and just made I don't know why it just clicked when I started reading about Singleton is like how he spend his time but the point of all this is like there's a description in that book that really resonated with me that you have to do the work necessary to be able to trust your own judgment or none
of this is going to work and so I'm going to read a quote from dist Force this episode 110 I'm about to reread this and collect all the other information in fact a bunch of listeners actually sent me uh really valuable information about Singleton like old press articles and stuff they found in like public libraries and stuff but I
want to read this because I really think this is exactly what Buffett is saying here let me reread Buffett before I get there right he's like listen we don't read other people's opinions we want to think we want to get the facts and then think in many ways Singleton was Buffett before buff it right so it says quite
often Henry simply talked about his philosophy of running a a corporation and the various Financial strategies that came that he came up with as he sat in his office each day often working in his Apple 2 computer he was a brilliant strategist and he came up with many creative ideas ideas that were sometimes
contrary to the currently accepted methods of managing a large corporation that prevailed in those days one of the things that blew my mind was the fact that Henry Singleton was friends with Claude Shannon the inventor of information Theory a universal genius one of the rare universal Geniuses that the world has seen right in Claud
Shannon and Claude Shannon was actually on the board of tadine and an advisor so when when Henry would go out when he was building his Kate trying to buy through Acquisitions he would actually have to be able to tap imagine be able to like call up Claud Shannon like hey what do you think about this new technology it's
just crazy to me anyways this is what Shannon said check this out he all Shannon is talking about Singleton observing Singleton how he works he says he always tries to work out the best moves and maybe he doesn't like to talk too much because when you're playing a game you don't tell anyone else what your strategy is and where did the
strategy come from the same place that Buffett now in this book that I'm holding in my hand is saying came from him sitting there in a room thinking Singleton was obviously extremely well read just like Buffett as well let me go back to Buffett I'm going to repeat this for the third time we do not read other
people's opinions we want to think we want to get the facts and then think now we're many pages deep in the book and they go back to this theme default to know keep an open calendar so you can actually think the difference between successful people and very successful people is that very successful people say no to almost everything Monger that
was buff it Monger says both Warren and I have amazingly open calendar and we're very reluctant to put new commitments in there I like flexibility and it has worked for me and so Buffett takes this so seriously that you know at this at the point they're talking about this I think he owned like 80 different
businesses and so he would actually every few like years he would write uh the managers of his business a a letter and it's all about the fact that Buffett ruthlessly guards his time this is what the letter says please turn down this is Buffett writing right this is to all of the the CEOs and the managers of all the
subsidiaries in birkshire please turn down all the proposals for me to speak make contributions uh Etc sometimes these requests for you for you to act as an intermediary will be accompanied by oh it can't hurt to ask it will be easier for both of us if you just say no and he means no right away as an added
favor don't suggest that they inste said WR or call me multiply 80 or so businesses by the periodic oh I think he'll be interested in this one and you can understand why it's better to just say no firmly and immediately and then they touch on a main theme in the history of Entrepreneurship the importance of frugality guarding the
resources that you have not spending foolishly no matter how much money you have uh Charlie and I have always been big fans of living within your income and if you do that you'll you'll have a whole lot more income later on if you Monger says if you want to get rich you've got topend your underspend your
income you've got to intelligently invest the money that you haven't spend uh spent the money will work for you for a longer period of time you have to save and so I actually found U I'm going to reread his biography and I I got another book on him too uh I actually found uh this guy because Buffet it's another uh
entrepreneur that buff Ander talk about from history it's this guy named James J Hill and I covered him all the way back on episode number 96 and he's one of the maybe the greatest railroad builder in history and there's something that he he talks about and he would repeat in his work you know this is 1800s probably
let's see mid to late 1800s when he says this and he said if you want to know whether you are destined to be a success or failure in life you can easily find out the test is simple and it's invaluable are you able to save money if not drop out you will lose you may you may think not but you will lose as sure
as you live the seed of success is not in you so then they spend some time talking about the dangers of debt that debt is a is an easy way a common way for really rich people to go broke Monger says smart men go broke in three ways liquor ladies and leverage Buffett says whenever a bright and rich person goes broke it's usually because of
Leverage any series of positive numbers however impressive the numbers may be evaporate evaporates when multiplied by a single zero history tells us that leverage all too often produces zeros even when it's employed by very smart people one of the things you will find this is still Buffett talking one of the
things you will find which is interesting and people don't think of it enough uh with most businesses and with most individuals life tends to snap you at your weakest link you can have somebody whose aggregate performance is terrific but if they have a weakness maybe it's with alcohol maybe it's susceptibility to taking a little easy
money it's the weak link that snaps you and frequently in the financial markets the weak link is borrowed money and so the other side of the coin of this idea is like hey they they tell you over and over again you got to be real careful debt be real careful with leverage they will preach the fact that you should try
your business should have mountains and mountains of cash cash is a Lot Like Oxygen you don't notice it 99% of the time but when it's absent it's the only thing that you notice we uh have maximum Financial flexibility to face both hazards and opportunities Buffett says we keep our our cash largely in US treasury bills and avoid other
short-term Securities yielding a few more basis points somebody sent me and this is not my world so I don't know but somebody said that they right now they have have 100 billion in cash earning 4% risk-free we agree with investment writer Ray Devo's observation more money has been lost reaching for yield than at
the point of a gun and why do they say that because cash ensures your survival something you and I talk about over and over again you have to stay in the game long enough to get lucky Buffett says it pays to conduct your Affairs so that no matter how foolish other people get you're still around to play the game the
next day Monger says I am not a victim I am a survivor and then they start giving advice on just interpersonal relationships you're going to like people you're going to deal with bad people throughout your life that's inevitable but how you can't control what they do other than you can avoid them obviously but you can control your
reactions and so then Buffett in the middle of this he talks about hey this is some of the best advice I ever got in my life and so he says 40 years ago Tom Murphy who was the former um CEO of cap cities and ABC gave me one of the best pieces of advice I've ever received he said Warren you can always tell someone
to go to hell tomorrow you haven't missed the opportunity just forget about it for a day if you feel the same way tomorrow then you could tell them but don't spout off in a moment of anger and then this is one of the most important fundamental insights into human nature that I've learned personally from Charlie monger and he's like listen
everybody thinks that the world is driven by greed but it's the world is not driven by greed it's driven by Envy and your life will be a lot better if you could just eliminate Envy from your life and so Charlie says I've heard Warren say half a I guess he learned this from Warren I've learned I've heard
Warren say half a dozen times it's not great that drives the world but Envy buff it says our experience is that Envy is what really drives people you can give someone a $2 million bonus and they're happy until they see the next guy got 2.1 million and then they're miserable and Munger illustrates why this is so ridiculous if you're
comfortably rich and someone else is getting richer faster than you so what someone will always be getting richer faster than you this is not a tragedy someone else is always going to be doing better at any human activity you can name then we go back to this idea something that I believe with my whole heart that time is the best filter
Buffett says Giani and janelli maybe is the former chairman of the car company Fiat uh so it says Giani once told me uh one time told me when you get older you'll have the reputation that you deserve you can fool some people some of the time but not forever I believe the same is true for companies and now when
I read that that's probably like what the third or fourth time I think the fourth time I've read that particular highlight something El just jumped at me says hey you know with time you can't fool people you can fool people some of the time but not forever over time you're going to have the personal reputation that you deserve and your
company will have the reputation you deserve Buffett says something in this book that's that's fantastic where he describes what an actual brand is and he says a brand is a promise so I'm not sure why but when I reread that section just now that's the uh the idea that jumped that popped in my mind and so
then Charlie adds to this the best way to get a reputation for yourself and your business is to actually work backwards he is going to quote so Soul price so Soul price Buffett and Monger are both fans of Soul price I did an episode on him it's episode 107 my I would make the argument that Soul price is the most
influential retailer to ever live Sam Walton Trader Joe Jim Sagal Bernie Marcus from Home Depot Jeff Bezos they all used ideas in their business variations of soulle prices ideas in their business and so we have Monger talking about like okay well you should decide what kind of business that you do not want right so he says Soul price
used to say success in business came from deciding which business you could intelligently do without he had a list of businesses uh that he did not want he didn't want business from people who wrote bad checks uh he didn't want business of people who clogged up his parking lot without buying very much he
carefully invented a system uh he's the one that came up with the the idea like what everybody knows Costco that Costco idea is soul Price's idea it was just actually brought to life by Jim Sagle which is soul Price's uh me mentee Jim when he was real young actually worked for soul Price He greatly admired him in
fact the autobiography excuse me the biography of Soul price that I read for 10 episode 107 Jim synal wrote the the forward or the introduction of that book and he says like when people would interview him like oh you knew soul for 50 years before he died you must have learned a lot from him he's like no no I
didn't learn a lot I learned everything everything from him so that's what Charlie's talking about he's like well he just designed a business you know how many businesses do you have to pay a membership fee to shop at like was that's extremely rare but why is he or unusual why is he doing that because he's designing a he's he's getting to
the business he he wants by avoiding the things he does not want and that membership fee that barrier to entry eliminates a lot of things that Charlie's talking about here he didn't want business uh business of people who clogged up his parking lot without buying very much he carefully invented a system where he kept those people out
and succeeded by deciding what he would be better off without and avoiding it this is a very good way to think and it is not common and so then Buffett goes into something that he repeats over and over again in fact one of the best gifts I've ever gotten is uh for Father's Day my wife got me this mug and it says like
the wisdom of Warren Buffett and all it is is Warren's face with a bunch of quotes that he said and all I do is like fill up this cup multiple times a day with with espresso and then read right and one of my favorite things is because it's like these ideas are in the book and they're in the podcast and yet this
like physical item brings that out it's like serves as like a reminder every day and on one of the things that he says on this this coffee mug is the best thing I did was to choose the right Heroes this is something that him and Monger repeat over and over again I'm going to read this section real quick and then tell
you something Munger also says I think it's very important to have the right Heroes Choose Your Heroes carefully and then figure out what it is about them that you admire then you figure out how to do the same thing it is not impossible and then I've actually seen clips from Warren saying this at the shareholder meeting and then Charlie
adds you also should not relegate your selection of Heroes to the living that the eminent dead obviously a main theme of this podcast right the eminent dead provides some of the best models around and then they have some more advice for our career for our work that you really should try to maneuver yourself get
yourself in a position where you can do lot uh work that you have an intense interest in if you listen to my three-part series of about Paul Grahams essays 275 episode 27576 and 277 this is a main theme of his writing as well the big thing you want to do is you want to enjoy every day so you want to have a
job that you love and you want to work with people that you like admire and Trust Monger says in my whole life I have never been good at something I wasn't very interested in it just doesn't work there is no substitute for strong interest they also talk about a very common mistake that smart people make that successful people make is
because they were successful in one domain that they can that knowledge actually transfers to other domains the best example of this is like uh I always say you know Henry Ford's one of the the hisen Henry Ford is one of the entrepreneurs I most admire professionally not personally and um I I really like his philosophy of company
building but you see this illustration if you read about Henry Ford like he was a master at building the Ford Motor Company but then he he thought like he could control like the morals of his uh like his employees he thought he could like he he could figure out a way to stop World War I from happening he had
all these things where he failed spectacularly at where he thought okay well I I have some kind of knowledge I derive from my business and it's applicable to this domain and it definitely wasn't buff it says for us to think that because we made a lot of money we're going to be better at giving advice on every subject well that just
doesn't make sense that's crazy I'm very suspect suspect of the person who is very good at one business who starts thinking they should tell the world how to behave on everything they start repeating this idea you really should try to be seeking out and working with and associating only with First Class
People Monger says our basic rule has has always been that we do not deal with I have turned down business deals that were otherwise decent deals because I didn't like the people that I'd have to work with you have to you want to avoid other people who are total rat poison and there are a lot of them you want to associate with first class
people then they go back into the more most important asset one of the most important Assets in running a business is Passion that is very interesting uh let's say that you want to they're asked a hypothetical question by a fictitious character in this book so that question says let's say I want to hire somebody
what is important to think about Buffett says you look for The Logical things passion an interest in running the business honestly are honesty excuse me uh do they love the business or do they love the money this is the first filter do they love the business or do they love the money this is the first filter
I mean real passion if temperament is the most important personal asset in managing money in business it's passion this also why Jeff bezo says that uh missionaries make the best products missionaries not mercenaries he says mercenaries are in it just for the money missionaries actually care about what the business is doing what service is
that business giving to the world you want to try to hire hire people that are complete in alignment with you and look at it like you do like it's a mission they also spend a lot of time talking about company culture the fact that you have to be very intentional how you build the culture uh at your business that once the culture is in place it is
nearly impossible you're better off just starting a different company than trying to change the culture so it says we try to provide an environment for them meaning the managers and the CEOs of their businesses which is exactly like we'd want if we were running a business we would like to run our own business in
our own way so they're like hey we try not to mess with them right we're only working with a players a players don't like to be micromanaged and if I had to micromanage them why did I buy the business to begin with that doesn't make any sense we will never allow birkshire to become some monolith that is overrun
with committees budget presentations and multiple layers of management instead we plan to operate as a collection of separately managed medium-sized and large businesses most of whose decision- making occurs at the O at the operating level all of the businesses that we own are run autonomously to an extraordinary
degree in most cases the managers of important businesses we have owned for many years have not been to om Omaha or even met each other we adapt to their methods rather than vice versa so then Buffett talks about like his own strategy like what is Buffett's think like what is his competitive Advantage right he is trying to be a like not
trying to be he does this he's a buyer of businesses I would argue that Buffett sharehold letters is the greatest single example of content marketing that the world has ever seen I talk about this more on episode 227 which is the essays of Warren Buffett where it talks about like he he publishes a letter that he
shows like he was interested in buying this person's business he he actually publishes the letter that he sent uh the buy the person he uh the owner of the business I feel it's like a master class in product differentiation and so he touches on how he thinks about this and how he positions himself and so he says
our long avowed goal is to be the buyer of choice for businesses particularly those built and owned by families the way to achieve this goal is to deserve deserve it that means we must keep our promises avoid leveraging up acquired businesses Grant unusual autonomy to our managers and hold the purchase companies
through thick and thin our record matches are rhetoric most buyers competing against us follow a different path for them Acquisitions are merchandise we have a decided Advantage when we encounter sellers who truly care about the future of their businesses so if you truly care about your business and the future of it it's not
merchandise to it's not just a big uh you know a big exit it's like you actually care like if you are going to sell your business like you care what happens what happens after you leave the business and so Buffett's like well if you're one of those people of course but birkshire would be if you look at our
track record birkshire would be your first choice so it says the reverse is apt to be true also when an owner auctions off his business exhibiting a total lack of interest in what follows you will frequently find that it has been dressed up for sale and therefore what Buffett saying it's not a high high quality like if somebody truly cares
most likely they truly they built a like a wonderful business somebody's just in it to start scale and sell they probably don't give a and so therefore the long-term prospects of a business like that are very suspect and Buffett's not interested in buying those kind of businesses there is a great line in the
Anthony Bourdain biography that I read for episode 219 that jumps out at this next when I read this next uh sentence it says life isn't a green room for something else go for it buff it says we're here on the earth only one time so you ought to be doing something that you enjoy as you go along and you can be
enthusiastic about then we have two great quotes the first one is from Buffett when a problem exists whether it's in Personnel or in business operations the time to act is now Monger says wise people step on big and growing troubles early there's several times in the book that Monger talks about his ability to make decisions very rapidly
we heard Buffett say earlier that Monger has the best 30second mind that he's ever encountered and so until this point he like they have an idea of the businesses that they're interested in they're in their mind uh the characteristics of the stuff they're interested in so even like he'll get a phone call and within like 15 seconds
like nope and he'll just like hang up the phone he's like there's no point I know I don't want this business there's no point us like we have limited time on this earth like I'm not going to waste sit here and just be polite for 15 minutes just to give you a no that I can give you a no in 30 seconds and so
Monger says spend no time arguing with people whose idea you know to be stupid I think a main theme that comes up again and again these life stories that you and I go over is the fact that future opportunities are unpredictable to you like like you just have to trust in something um obviously do as good job as
you can with whatever is in front of you but like there's going to if you keep going along and you keep getting better that's going to unlock opportunities you can't possibly predict and there's a the I feel like there's a current yeah running through the thinking of buffet and merer that that talks about this it's like listen we're not really big
into Master plans uh we know we want to own wonderful businesses we know we want to you know own pieces of wonderful business in public markets but essentially like instead of going deep in this inflexible master plan like we're just going to keep reacting to the game that's on the field and so it says Monger says I have a deep distrust in
master planning there has never been a master plan anyone who wanted to do a master plan we fired because it takes on a life of its own and doesn't cover the new reality Buffett says we do have a few advantages perhaps the greatest being that we don't have a strategic plan thus we feel no need to proceed in
an ordained Direction but can instead simply decide what makes sense for our owners Charlie and I don't sit around and talk about the future of Industries we have no reports or staff we just review what comes in and look for companies with a durable competitive Advantage at an attractive price and so
think about that that is a rather Simple Plan we're just going to review what comes in we constantly get people offering to sell our like we have inbound requests to to buy their businesses we just review it does it is this a company with a durable competitive advantage and attractive price if it is okay we'll buy it and if
it isn't we'll just sit on our ass and we'll read and we'll think and we'll pile up money it's really hard to lose that's the two different modes that you have in your business right this goes back into the futility that people just the futility of trying to change other people's minds better just select
different people to work with that you know people just do what they want to do and Buffett says I'd say that the history that uh that that Charlie and I have of persuading decent intelligent intelligent people who we thought were doing unintelligent things to change their course of action has been poor when people want to do something they
want to do something we don't try to change people it doesn't work well we accept people the way they are and then Charlie passes on a bit of wisdom that he thought was very valuable in running a business it's from this guy named Carl brwn who was an engineer and an entrepreneur and it says few practices
are wiser than not only thinking through reasons before giving orders so orders to people in your company but also communicating these reasons to the recipient of that order no one knew this better than Carl Brun who designed oil refineries with spectacular skill and integrity he had a very simple rule you had to tell who was to do what where
when and why if you wrote a communication leaving off your explanation of why the addresse was to do what you what was ordered braon was likely to fire you because Braun knew well Braun well knew that ideas got through best when reasons for the ideas were meticulously laid out people have to know why is what Charlie's telling us
or even simpler way to think about that is always tell the other person why Charlie just told us that there's no that you should spend no time arguing with people whose idea you know to be stupid there's another great line in in this regard you do not have to attend every argument that you're invited to so
then they talk about Charlie's orangutang Theory which I absolutely love the first time I was introduced to the theories actually um I read the autobiography of Katherine Graham it was actually episode 152 and she talked about that um in her case her the way like Warren Buffet was helping her learn
how to run her business and that um she she thought that Warren was her version of the orangutang and so monger's orangutang theory is this if a smart person goes goes into a room with an orangutang and explains whatever his or her idea is the orangutang just sits there eating his his banana and at the end of the conversation the person
explaining comes out smarter there's something about smart people explaining ideas to an orangutang that makes their decision making better and it's this idea that you're just speaking this is actually forces you to organize your thought it clarifies your thinking it's very helpful remember at the beginning
of the book they said uh repetition is the mother of learning Charlie Munger goes back to this idea that it's so hard to get rich and yet most likely when you get rich you're going to mess it up just don't mess it up the problem is not getting rich Munger says it is staying sane for whatever reason extreme success
war is tends to warp people's minds they cannot handle it and then I absolutely love this section because it talks about like you know we talk about this like history doesn't repeat human nature does that there's ideas in history books that are worth you know billions of dollars I'm about to read you something right
that sounds like Warren Buffett said it today we just went from this zero interest rate environment rates are going up valuations are you know being in flux and yet what I'm about to read you he said in 1994 I just had a weird experience where you know I share a lot of like highlights and stuff from books
I read on Twitter and on LinkedIn I tweeted this out and Elon Musk responded back to it basically agreeing with what Buffett said again in 1994 from this book but is just as accurate as today Buffett says the value of every business the value of a farm an apartment or any other economic asset is 100% sensitive
to interest rates that's because all you're doing when you're investing is transferring money to someone now in exchange for a stream of money which you expect to come back in the future and the higher the interest rates are the less that present value will be interest rates are to asset prices sort of like gravity is to an Apple when interest
rates are low there is little gravitational pull on asset prices in this is a crazy sentence right and I wish I didn't understand this you know maybe I wasn't like something that was relatively important to like my business right but it's just amazing where I just wish I understood I wish I understood this before now because if you
understood this in 1994 and you knew that this entire time you could have profited heavily off of this transition back and forth between High interest rates to low interest rates and now from low interest rates to highest higher interest rates so that's like there like ideas really will put money in your
wallet if is a way to think about it so I'm going to re repeat this second paragraph cuz I interrupted it but this is very fascinating and I'll tell you the punch line at the very end interest rates are to asset prices sort of like gravity is to Apple when interest rates are low there is little gravitational pull on asset prices this is the
punchline interest rates power everything in the economic Universe another thing they repeat is the importance always go for Quality wonderful businesses are so rare so if you get into a wonderful business do not leave it it is just a rare thing to happen uh if you are in a wonderful business for a long time even if you pay
a little bit too much going in getting into the business you will get a wonderful result if you stay in that business for a long time but it talks about early in his career he did not really understood the power of Brands it's like this weird abstraction right and it came from his purchase of seas
candy many many years ago he's oh brands are extremely valuable they're they're value they're they're extremely powerful and valuable and so this leads to other Investments uh profitable investments in the future and so he says additionally through watching C candy in action I gained a business education about the value of powerful
brands that open my eyes to many other profitable Investments and this is example of why I think buff is one of the world's greatest communicators that has ever lived because he can communicate things that are you know relatively complex make them simple uses humor talk tells talks to us in stories but this was really interesting I don't
think I've heard this before anywhere in any other book too and he talks about like there is sometimes uh there there like you can be inexact and there there's just times when further analysis is actually a waste of time and it sounds crazy because of the giant numbers that he is throwing out here in
this investment but he'll tell the story and I think it'll make sense to you at the end uh with something like petrochina my reaction is similar to seeing somebody who weighs somewhere between 300 and 350 lbs I might not know how much they weigh but I know that they're fat and that's all I'm looking for knowing if an opportunity is
financially fat and whether Petrina weighed $95 billion or $105 billion he's talking about the true valuation of it if it's 95 or 105 right it did not make much difference Why didn't it make much difference because at the time it was selling for $35 billion any further refining of analysis would have been a
waste of time in that case he's saying just jump on it you know it's a good opportunity doesn't matter you're paying 35 billion whether it's worth 95 or 105 it doesn't matter it is a financially fat opportunity we are so we were very inexact you'd be amazed at how inexact we are using precise numbers is in in
fact foolish working with a range of possibilities is the better approach now this this is one of my favorite this is where it just clicked for me right um we're in the middle well I you can't see this because you can't see the book I'm holding we're in the middle of the book where at this part they're all talking about like the uh
like the irrational behavior that occurs in Bull markets and that just happens over and over again right and I I'll pull out a couple quotes cuz I think that's very interesting I think you and I can learn from that and yet what sticks out to most to me clicked is I'm going to read this first and I have no idea why I finally like had a deeper
understanding of this so buff says Charlie and I do not expect to win you over to our way of thinking we've observed enough human behavior to know the futility of that but we do want you to be aware of our personal calculus and I was like oh my God sometimes I read uh and you probably do this too we're like
you know that's two sentences you know three three lines in a book and yet you just sit there and you stare at it and like you read it again and you like really think about what the hell he's talking about and I was like okay that is actually really interesting Charlie and I don't expect to win you over to
our way of thinking we've observed enough human behavior to know the futility of that but we do want you to be aware of our personal calculus what I wrote to myself in this click to me learning is not memorizing information learning is changing your behavior there is no point for you and I to spend all this time reading listening
to educational podcasts if it doesn't change what we do and if it doesn't change what we do we didn't actually learn it he's telling you we've seen enough human behavior you're not going to actually do anything with this information that we're giving very few people obviously some some people were and so that's what they talk about like
most people they don't say all people but they're saying most people cannot learn from the experiences of other people they're exing the exact same thing here that we've seen enough human behavior we could tell you not to do this a lot of people are going to do it the Smart Ones the ones that are able to
learn from other people's behavior are going to have a massive Advantage because they know that learning is not memorizing information learning is changing your behavior that's like I love that whatever clicked right there is super important for me and hopefully for you as well it's not memorizing information did the book that I read the
podcast I listen to did it change my behavior did it actually have an effect in the real world okay so then they go into like this irrational behavior that you see in Bull markets the Sheep story that he told earlier is like a good indication of that and he's got funny ways Buffett's got a funny way of of
reminding you about this like when you should feel that you're in danger because it says like the the the problem is it looks so easy so that's what attracts you to it and so he says but remember the late Barton Briggs observation a bull market is like sex it feels best just before it ends and so Monger says how do you take advantage of
that if you stay rational yourself the stupidity of the world helps you Wall Street Street never changes the pockets change the suckers change the stock change but Wall Street never changes because human nature never changes then it goes back to this idea of they don't have a master plan they are opportunity
driven that's a great way that's like a great uh use of language by them really gets this idea into our brains we don't have a master theory of capital allocation or excuse me of asset allocation we simply we're simply opportunity driven individual opportunity driven our acquisition technique at birkshire is simpli itself
we answer the phone something I love about uh doing the podcast is getting to read these stories this idea where multiple people that we cover have figured out the the the idea of having the value of having a personal motto right so Stanley the founder of um of Marvel had like I can't even pronounce
it but it means like ever upward uh Shackleton says by endurance we conquer one of my favorites is actually Teddy Roosevelt and he says get action it was actually a personal motto of his father that he adopted for his own life very Sim similar to whater saying here do not be too timid go at life with a little
courage so in the past few episodes and really I mean this is a main theme throughout Founders but it has been especially pronounced in actually uh it's episode two uh 283 of Andrew Carnegie and 284 of Andrew carneg and Henry Kay frck and now I'm looking at all the episodes actually 282 of Jeff basos talks about this quite a bit um in
his sh letters too and there's two twin themes that run throughout the history of Entrepreneurship that I think are most pronounced in the books and I see observe less frequently in like modern day uh meaning they're obviously very valuable because they're very hard for people to do and that's this idea of
extreme focus and extreme frugality I love what Buffett does here and so he's talking about the fact that if you really think about it like two different Founders two different business managers one is unbelievably gifted at costc conscious Frugal culture uh they're watching their cost over and over again and one is not like they're not even if
they're in the same industry they're completely different businesses this is really interesting use of language here so she says one of the best modes in many respects is to be a lowcost producer being a lowcost producer of something that's essential to people is going to be a very good business it is
like comparing a copper producer whose costs are $2.50 a pound with a copper producer whose costs are a dollar a pound this next sentence is crazy to would be crazy to most people I don't think it's going to be crazy to you and I those are two different kinds of businesses but you're like no wait they're both producing
copper and he's like and Buffett point is like no this advantage means it's just completely other business why one is going to go broke at $150 a pound and the other one is going to still be doing fine this idea that they're they're completely different businesses regardless same product same same industry doesn't matter they're
completely different just the way they're managed so let's go back to something that's above this why does the business have an edge against its competitors you're asking yourself questions right ask why can't company a do what company B does what stops some competitor from entering the market and so Buffett's answer to the this
hypothetical question is the best way to understand this meaning why does that company have an edge whether it's a company you're running yourself or a company you want invest this why do they have an edge the best way to understand this is to study businesses that have achieved it the question then is how
does a company get its Edge and the way company talks about building up the Moe and it's this idea of focus and frugality leads into his copper Story the mo is not the pro in this case the Moe is not the product the Moe is not the industry the mo is the management of the business in regards to its costs this is a very old idea this is
something Buffett is saying in 2009 and yet it's something that Andrew Carnegie knew in 1865 and then this is what I mentioned earlier my favorite definition of a brand I think I've ever read a brand is a promise that is a quote from Warren Buffett then he goes into the important part Buffett's going to talk a lot about
here is just like you know business can be fundamentally simple it's you should be really obsessing over your customers this is uh you know one one of my favorite maximums in the history of Entrepreneurship comes from Jeff Bezos he says obsess over customers I don't have any tattoos but if I did I almost
feel like it'd be beneficial if I like tattooed this on my forearm just obsess over customers there's just so much hard-earned knowledge in those three words Buffett is going to agree with Bezos here and he says in the end nobody that's ever taken good care of the customer has ever lost like Sam Walton
once said there's only one boss the customer and he or she can fire everybody in the company from the chairman down on down simply by spending his or her money elsewhere and a few pages later look how this actually ties together right this what these two quotes I'm reading the ones I just read and this one are you know separated by
maybe 20 Pages or something this is crazy Warren Buffett said this about Amazon in 2012 he says Amazon could affect a lot of businesses who don't think they will be affected for Amazon it is very hard to find unhappy customers a business that has millions and millions of Happy customers can introduce them to new
items it will be a Powerhouse and could affect a lot of businesses and this is where you really get excited right when you think about this okay Warren identified that sees this is very unusual says that in 2012 that is after because Jeff is writing you know in in the late 90s I think 97 is his first um is his first shareholder
letter it's 15 years separating from the first shareholder letter uh you know he'd been practicing that in the the few years that he'd been running Amazon before that but this is like that is the end result of what what Bezos set out from day one he's like no we're going to obsess our customers we're going to
build the the world's most customer Centric company 15 20 years later and you're seeing buff it's like oh this is this dude's going to be a problem and he's going to be a problem for other businesses because he's got millions of happy and satisfied customers and how do you get millions of happy and satisfied customers you build the world's most
customer Centric company and you obsess over customers this is how could that not excite you I love when I I see these ideas they just stick together and what makes me or they fit together rather and what makes me even more excited is like you have a another genius you got two Geniuses there you got another genius
realizing oh what this other genius is doing is genius all we have to do I'm not a genius all I have to do all you have to do is just copy them like hey that's a good idea thank you very much I'm going to apply it to my business this is not rocket science and it gets even better because on the next page Monger gives us a tactic it's like oh
you like that idea here's how you actually implement it uh one of the director The Daily Journal said very simply we should make a list of everything that irritates our customers and then we should eliminate those defects one by one then I love this idea by Buffett like this is how you find the best operator in your industry when I
interview managers I ask what their business nightmare is if you had a silver bullet and you could put it through the head of one competitor which competitor and why you will find out who the BET asking this question you will find out who the best guy in the industry is he continues ask the management of each company which
competitor they would would be willing to this is the other side of that right it's like okay if you could knock out of the game uh only one of your competitors who that is the other side is what if you had to bet all of your net worth and you could like you invested all your net worth in one of your competitors who who
is that ask the management of each company which competitor they would be willing to put their net worth in for the next 10 years then ask which of their competitors they would short this will provide important insights into the industry into your industry that even those who work their whole life in the
industry would not realize two pieces of advice one from Munger one from Buffett this is something you and I talk about all the time if you go to sleep on a win you wake up with a loss Charlie merer says successful places tend to get blo he's talking about successful companies successful companies tend to get bloed
fat complacent it's the nature of human life most companies when they get rich get sloppy Warren Buffet this is one way to avoid that widen your moat build an enduring competitive Advantage Delight your customers and relentlessly fight costs and Munger and Buffett both know this because they have this this crazy
uh like historical base of knowledge in the history of business Monger says it is the nature of things that most big businesses eventually fall into mediocrity or Worse look at the history of big companies in the world and the record is not good almost all great records eventually dwindle I think that's the natural consequence of
competitive life and then Monger talks about one of the fiercest competitors that the business landscape has ever seen something somebody you and I have talked about over and over again the latest episode I did on him which will not be the last is episode 234 Sam Walton I've never heard this before for and it's absolutely fantastic it is
Charlie munger's northern pike model and his point is if you're running up against somebody like this you should just get out of the business he says one of the models in my head is the northern pike model you have a lake full of trout but if you throw in a few northern pike pretty soon there aren't many trout left
but there a lot of northern pike Walmart in its early days was the northern pike it figured out how the customer could be better served and just Gallop through the world like gang of con so then there's a few ideas here this is on passion intense interest and working only with winners this is another this
is one of my favorite of his this is probably my favorite of Buffett's business uh baseball stories when it regards to P business first Monger says I cannot put passion into someone either they either have it or they don't there's nothing you can do about it and Buffett goes in the importance of working with winners my managerial model
is Eddie Bennett so he's talking about this is I'm just going to copy Eddie Bennett who was a bat boy his idea for how I run Burk this metaphor is fantastic my managerial model is Eddie Bennett who was a bat boy in 1919 Eddie began his work with the Chicago White Soxs who that year went to the World
Series the next year he switched to the Brooklyn Dodgers and they won their league title however our heroes meaning Eddie CH smelled trouble he changed Burrows and joined the New York Yankees in 1921 and they promptly won their first title in history now Eddie settled in shrewdly seeing what was coming in
the next 7 years the Yankees won five American League titles what does this have to do with management it is simple to be a winner work with winners in 1927 Eddie received $700 for his share of the World Series uh winnings this sum which Eddie earned by working only four days because New York swept the series was roughly equal to
the full year pay then earned by bat boys who worked with ordinary Associates so just what he made from working four days in the world series is what the per a person with his same job would make all year because they were working with ordinary players right Eddie understood that how he lugged bats was unimportant
what counted instead was hooking up with the cream of those on the playing field I've learned this from Eddie at birkshire I regularly hand bats to many of the heaviest hitters in American Business and then just one more thing from Buffett on passion he says passion adds to your productivity Monger says the secret to being successful in any
field is getting very interested in it I could never excel in anything which which I didn't have an intense interest now these next two pages are so good it's essentially saying unusual records are a result of high levels of talent in low competition environments Buffett says I don't want to play a game where the other guy has an advantage
somebody asked how do you beat Bobby fiser the answer was you play him in any game except chess he continues one of the bo best Moes in many respects is sometimes just having more talent and then once you have the talent he says you want to work where there is little competition one of the secrets of life
is weak competition the unusual records have been achieved by those who have worked relatively neglected fields in which the competition was light Monger now jumps in competence is a relative concept I realized what I needed to get ahead was to compete against idiots and luckily for me there was a large supply
of idiots and then I love how much Charlie Monger talks about the importance of practice in uh in this book this is something obviously that really stuck in my mind from reading the biography of Michael Jordan on episode 2112 so Monger says obviously if you want to get good at something which is competitive you
have to think about it and you have to practice a lot you have to keep learning because the world keeps changing and your competitors keep learning you have to go to bed wiser than when you got up as you tried to Master what you're trying to do people who do that almost never fail utterly very few have ever
failed with that approach meaning just trying to be a little wiser every day right very few have ever failed with that approach you may rise slowly but you're sure to rise and so then they go back to this and they go on this for quite a while the idea is like we're not listening to the opinions and the predictions of other people that is just
absolutely useless forming macro opinions are listening to the macro or Market predictions of others is a waste of time it is dangerous because it may blur your vision to the facts that are truly important I pay no attention to economic forecasting I worry about being in a good business with good people that
is all I focus on this is Buffett that speaking about this entire time in the 54 years that we have worked together we have never forgone an attractive purchase because of the macro or political environment or the views of other people then Monger says people have all he's talking about like the futility of trying to predict the future
and forecasting uh people have always had this craving to have someone tell them the future long ago Kings would hire people to read sheep guts there's always been market for people who pretend to know the future listening to today's forecasters is just as crazy as when the king hired the guy to look at
the Sheep guts it just happens over and over and over again and this an absolutely fantastic line uh still about forecasters and it says this is Buffett Market forecasters will fill your ear but they will never fill your wallet and then Munger goes into the important role that continuous education seeking of knowledge that him and
Buffett have dedicated their lives to why that was so influential with the record that birkshire was able to achieve what people mean when they say a man has common sense is Uncommon Sense we don't have any new tricks we just know the old tricks better birkshire loves education and it loves people who like to learn I think the one thing that
we did that worked best of all we were always dissatisfied with what we already knew we wanted to know more if Warren and I had stayed frozen in time B sh would have been a terrible place it's only that we kept learning that made it work and I don't think that'll ever stop had Warren not been learning all this
time our record would be a mere shadow of what it is and he's actually improved since he passed the age at which most other people retire most people don't even try this it takes practice and that is where I'll leave it for the full story highly highly recommend buying the book the great thing about this book is
it's you don't have to read it all at once you don't even really have to read it in order that's the way I did but I think it's just a great thing to keep out you pick up maybe read five 10 minutes maybe read you know a few pages to me it's really a tool a way to download the thinking of Buffett and
Monger into your brain consistently so if you buy this book using the link that's in the show notes on your podcast player you'll be supporting the podcast at the same time another great way to support the podcast is to sign up to the founders premium feed the founders premium feed contains AMA ask me anything episodes subscribers to that
feed get to ask me questions directly which I then answer those questions on AMA episodes on the founders premium feed if that sounds interesting to you that link is down below in the show notes and of course available at Founders podcast.com that is 286 books down 1,000 to go and I'll talk to you again soon