“The better decision maker has at his/her disposal repertoires of possible actions; checklists of things to think about before he acts; and he has mechanisms in his mind to evoke these, and bring these to his conscious attention when the situations for decision arise.”
- Herbert Simon, Nobel Laureate
Charlie Munger has ‘the best 30-second mind in the world. He goes from A to Z in one move. He sees the essence of everything before you even finish the sentence’
- Warren Buffett, Forbes Magazine, January 22, 1996.
Are you a genius? Nope, me either. Don’t worry..
It turns out that Charlie Munger essentially thinks by using the BIG IDEAS from disciplines as diverse as physics, economics and psychology. He has a list of these ideas (mental models) in his mind and quickly picks the ones applicable to the given situation, much as a pilot automatically goes through a checklist prior to take-off.
After some more investigation I found a list of some of the models Charlie uses:
- Game theory
- Newton’s laws
- Supply and demand
- Network effects
- Social proof
- Anchor effect
- Business models
- Porter’s five forces
The list goes on and on and many of the ‘big ideas’ are very diverse and at first glance totally unconnected. However the variety and randomness of the theories creates thought patterns and links that other people cannot see. It gives him the power to create connections in disconnected theories.
However there are other ways to build in variety to keep your brain’s neurons firing on all cylinders; try talking a different route to work, reading a book on a subject you know nothing about, going to an art fair, learning a new language. Try anything to keep you brain off balance and force it to create new neural pathways.
If anyone wants to see Charlie in action there is a great video of his 2007 USC Gould Law School Commencement Address on YouTube: http://www.youtube.com/watch?v=L6Cy7UwsRPQ
Did you hear what he said? “You’ve got to have models in your head. And you’ve got to array your experience—both vicarious and direct—on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life.”