OtherWhat is most interesting about Munger is not his success as an investor, but the way he thinks and keeps his emotions under control.Munger's ability to cut to the heart of an issue with a few well-chosen words is legendary, as is his desire to think independently.A fundamentally important truth is that people rarely make decisions independently.This means that people who can think independently, gain control of their emotions, and avoid psychological errors have an advantage.
WarrenWarren Buffett once illustrated Munger's desire to do his own thinking with this story.In 1985, a major investment banking house undertook to sell Scott Fetzer, offering it widely but with no success.Upon reading of this strikeout, I wrote Ralph Shea, then and now Scott Fetzer's CEO, expressing an interest in buying the business.I had never met Ralph, but within a week we had a deal.Unfortunately, Scott Fetzer's letter of engagement with the banking firm provided it with a $2.5 million fee upon sale, even if it had nothing to do with finding the buyer.I guess the lead banker felt he should do something for his payment, so he graciously offered us a copy of the book on Scott Fetzer that the firm had prepared.With his customary tack, Charlie responded,I'll give you $2.5 million not to read it.
QuestionerSo that is from the introduction of the book that I read this week and the one I'm going to talk to you about today, which is Charlie Munger, the Complete Investor by Tren Griffin.What I was just reading from was actually a direct quote from Warren Buffett from his chairman's letter all the way back in 1999.So last week we did an introduction to Charlie Munger with the book, the wonderful book, The Tao of Charlie Munger, which I'd recommend everybody go out and buy.It's a fantastically easy to read book and a good introduction into the beautiful mind of Charlie Munger.It contains like 130 or so individual essays where the author would take like a quote or a statement by Charlie and then use that to like expound on his own thoughts.Like I said, it's a really easy read and a really good introduction to getting to know Charlie Munger, which I think everybody obviously should get to know.So in that book and in last week's podcast, I covered a little bit about like Charlie's early life and how he got into investing and everything.So I'm not going to cover that this week.Definitely go back and read that.What I'm going to do is just jump right into the highlights and notes that I took while I was reading the book and the things that really stuck out to me.
[2:53]
OtherThis book is formatted in a similar but at the same time different way.There's a lot of quotes from Charlie and Warren in this book, but Trenn breaks it down into like more like regular chapters.So it reads more like a book than last week's book where I consider that more like a reference book where you could just pick it up, read one or two or three essays, put it down and so on and so forth.You can read Trenn's book straight through and it kind of follows in like a – you can understand why Trenn organized the way he did.And if you're not familiar with Trenn Griffin, I'd recommend – first of all, he's a good follower on Twitter.But I would also recommend checking out his blog, which I've learned a lot from, 25iq.com.Okay, so let's just jump right into the book.And I love how – I talk about this all the time in the podcast.So this is Charlie just telling us that we should read biographies.But I love the point that Trenn is making here, which is his interpretation of how Charlie Munger thinks because I say this all the time.Like listen, we're here to learn from these people.We're not here to idolize them because all humans are imperfect.So Trenn picks that point up right here.He says, the point is not to treat anyone like a hero, but rather to consider whether Munger, like his idol Benjamin Franklin,may have qualities, attributes, systems, or approaches to life that we might want to emulate even in part.This same process explains why Munger has read hundreds of biographies.Learning from the success and failures of others is the fastest way to get smarter and wiser without a lot of pain.And undoubtedly, a lot of other smart people, current smart people and people from the past have picked up on this idea.I always say like the genesis, the little kernel of idea that stayed in my mind for a year or two before I started this podcast and kind of influenced me to start it was when I was listening to Elon Musk on another podcast.And he was asked, you started a business really young.How did you even think to learn about these things?Like did you read a bunch of business books?He's like, no, I didn't read business books.I read biographies.And he thought they were really helpful.I talked last week in the first like five or six minutes of last week's podcast, how every single one of the entrepreneurs I've studied for this podcast are nearly every single one.They did the exact same thing, whether Jeff Bezos studying Sam Walton or the founder of Costco, which he, Jeff talked about like the breakfast with him or something like that.
[5:19]
OtherThe meeting he had with, his name's Jim Sinegal, I think, was life changing.So this is definitely a good idea for us to use.And what he's saying here, like I love what he says is like, listen, we just want to consider whether they have qualities, attributes, systems or approaches to life that we want that we might want to emulate even in part.OK, so we skip ahead a little bit.And I love this this idea, which I think applies to a lot in life, which is simple but not easy.It's as much of what is interesting about Munger is explained by this simple sentence.I observe what works and what doesn't and why.That's a direct quote from him.Life happens to Munger as it does to everyone.But unlike many people, he thinks deeply about why things happen and works hard to learn from that experience.So, again, thinking, just sitting down and thinking and analyzing, it's really simple.But for some reason for our species, this is actually not easy for us to do.And if you're able to do that, you have an advantage over a long period of time.And I think I'll touch on this later.But just in case I don't, Charlie brings up a lot about the importance of leaving your like, do not pack your schedule.He's like, you wouldn't believe how much time Warren and I leave to just thinking and reading that.He's even said, like, if someone was to follow around Warren Buffett or himself, like, it looks very academic.They're just sitting and reading. They're sitting in there.He calls it sitting on their ass, sitting on their ass and reading or talking one on one with people that have information that is valuable to them,but not like one of the most famous quirks about Warren is that he won't.He schedules very rarely like he won't fill up his calendar and he won't make a commitment that far in the future.He does that very rarely. So, for example, if you want to meet, let's say you want to meet him next Thursday or let's say you want to meet him three months from now.Right. He's like, well, call me the day before. And if I can do it, I'll do it.But he he he is rather strict about keeping like controlling his time, which I think is smart for everybody to do.All right. So Munger is going to tell us we need to use checklists here.He says Munger is a strong proponent of a checklist approach to life challenges.Direct quote from Charlie. It says I'm a great believer in solving hard problems by using a checklist.
[7:30]
OtherYou need to get all the likely and unlikely answers before you.Otherwise, it's easy to miss something important.Part of the benefit of creating a checklist is the process of writing down your ideas.I've always loved the point Buffett made about the importance of making the effort to actually put your ideas in writing.In Buffett's view, if you cannot write it down, you have not thought it through.So I actually just heard the founder of WordPress, Matt Mullenweg, talk about that.How when he's looking for people to hire, he always sees how they write.And he's like, listen, writing is important, but it's not the most important thing.Thinking is the most important thing, but it's really hard to think if you don't write it down.This is something I'm definitely trying to work on in my own life as well.OK, so this is another another trend that you're going to see over and over again.And this Munger is telling us, like if you want to have a good life, if you want to succeed at what you're doing, you need to become what he calls a learning machine.So this is trend writing.He says the learning and teaching opportunities related to investing are essentially unlimited.And so this book is about investing.Our purpose is we're just going to every time you hear the word investing, just think about entrepreneurship, running a company.It's really very similar activities.Obviously, entrepreneurship is is where our focus is.Munger likes to say that a successful investor, a successful entrepreneur, never stops being a learning machine.This need to learn and relearn means that an entrepreneur must read and think constantly.Munger has said he does not know a single successful entrepreneur.Remember, I'm just changing every time he says investor entrepreneur who does not read voraciously.Learning about Munger's ideas and methods will forever change the way you think about investing and your and about life.You will make better decisions, be happier and live a more fulfilling life.OK, so that's the end of the introduction.Let's go ahead right into.So they're both proponents.He's going to start off with like who influenced them.Ben Graham, obviously, like the godfather of value investing, heavily influenced Warren and Ben and Charlie.And then Charlie did some tweaking to his system where it's just not just about buying fair businesses at great prices.It's a buy about buying great businesses at fair prices.
[9:46]
QuestionerAnd just a few quotes here.I'm going to pull out that I don't think need expounding on.And it's it's Charlie Munger's distaste for complexity.And the note I left myself as complexity is not your friend.So here's Charlie says we have a passion for keeping things simple.Another quote, if something is too hard, we move on to something else.What could be simpler than that?And another quote, I love this.He says we have three baskets in, out and too tough.We have to have a special insight or we'll put it into the too tough basket and just move on.And then here's Charlie quoting one of somebody from history that's heavily influenced him.That's Confucius.He says Confucius said that the real knowledge, that real knowledge is knowing the extent of one's ignorance.Aristotle and Socrates said the same thing.And so now I want to get into this concept, which I really like.So this is Munger's concept of worldly wisdom.And there's an entire chapter in this book dedicated to this.And I think it's a really useful idea.So he says Munger's adopted an approach to business and life that he refers to as worldly wisdom.Munger believes that by using a range of different models from many different disciplines, psychology, history, mathematics, physics, philosophy, biology and so on.A person can use the combined output of this of the synthesis of the synthesis to produce something that has more value than the sum of its parts.In developing his worldly wisdom approach, Munger uses what he calls.I'm hoping I pronounce this word correctly, but you know, I can't pronounce any words.A lattice of mental models.So the lattice metaphor was also carefully chosen by Munger to convey the idea that multiple models needed to acquire worldly wisdom must be interconnected.And so this is Munger expounding on that.He says you've got to have models in your head.And you've got to array your experience, both vicarious through reading and direct on this lattice work of models.And now this is Trent expounding on that.He says understanding the worldly wisdom methodology is made easier if you see it applied in an example.To illustrate the method, Munger gave the example of a business that raises the prices of its product and yet sells more of the product.This would appear to violate the rule of supply and demand as taught in economics.So if you only, his point here is if you only study economics, you might never attempt something like this because you're like what Munger was saying.
[12:16]
OtherLike you've got to connect all these models in your mind.Well if you only have one model, you're going to think it's right and it's a good approximation of reality.And it's not.However, if one thinks about the discipline of psychology, one might conclude that the product is a geffen good.I've also never heard this term before.And what that means is people desire more of it at higher prices.Or another explanation, one could conclude that low prices signal poor quality to buyers and that raising prices will result in more sales.So again, he's studying human behavior from different angles.So it could be economics, it could be philosophy, it could be psychology.And he's applying why it makes sense.And this is actually a rather important tenet to help Berkshire think about their businesses.They don't want to buy businesses where they're not able to raise prices.And we'll get into more of that later.Simply put, Munger believes that people who think very broadly and understand many different models from many different disciplines make better decisions.This view should not be a surprise because he believes the world is composed of many complex systems that are constantly interacting.Before I read his quote, there's many ways to think about this.Munger's going to call them complex systems.Marc Andreessen calls the act of starting a company and living in the world in general as a complex adaptive system.Bill Gurley would call it a multivariable nonlinear system.They're all describing the same thing.And so here's Munger talking about that.He says, you've got a complex system and it spews out a lot of wonderful numbers that enable you to measure some factors.But there are other factors that are terribly important, yet there's no precise numbering you can put to these factors.This is a really important point.You know they're important, but you don't have the numbers.Well, practically, one, everybody overweighs the stuff that could be numbered because it yields to the statistical techniques that are taught in academia.And two, it doesn't mix in the hard-to-measure stuff that may be important.That is a mistake I've tried all my life to avoid, and I have no regrets for having done that.I also say on point number two, you've heard me reference that as a human score in the abstract.Like if there's not a number, if it's not right in front of us, we kind of ignore it, even though it's really important.
[14:25]
OtherOkay, so again, the best way to survive in a complex system is to, one, what he was just saying about Confucius and Socrates and Aristotle,so you have to know the limits of your knowledge.I think he calls this like knowing the circle of your competence.And also, just being well-read is a way to spot BS.Okay, so here's Munger on why he feels reading is so important.This is something like through, I don't know, decades he talks about.Munger's speeches and essays are filled with thoughts of great people from the past and present from many different domains.So it's kind of an extension of what we were just talking about, right?Munger's also careful to set aside a lot of time in his schedule for reading.This is Charlie Munger speaking in 1998.
CharlieI believe in the discipline of mastering the best that other people have already figured out.I don't believe in just sitting down and trying to dream it all up yourself.Nobody's that smart.
OtherConnects again to what he was saying about the complexity of the world.It's impossible for one person to understand everything.He also applies this to businesses, and I think Warren Buffett said this as well.He's like, listen, there's only a certain amount of businesses that one human being can know intimately,enough that they can put a large percentage of their assets into.So he talked about why they're not fans of diversification.He's like, I can't understand six, like one individual can't understand 30 or 40 different great businesses,and you don't need to.They always say, like, if you have a handful, I think the number's like two or three great businesses in your lifetime,you can get fabulously rich.So again, these are all, when you start studying and understanding how their minds work,you see how their philosophy is connected in, like, it's the same philosophy applied to different parts of life,whether it's learning, investing, managing, whatever the case is.And then here's more importance on reading.He's going to continue on this.He says, I constantly see people rise in life who are not the smartest, sometimes not even the most diligent.This is one of my favorite quotes of Munger.I've talked about it in many different places.I may have even mentioned it last week on last week's podcast, but also on my e-mail list.So he said, I constantly see people in life who are not the smartest, sometimes not even the most diligent,but they are learning machines.
[16:39]
CharlieThey go to bed every night a little wiser than they were when they'd grown up.And boy, does that help, particularly when you have a long run ahead of you.So if civilization can progress only with an advanced method of invention,you can progress only when you learn the method of learning.Nothing has served me better in my long life than continuous learning.I went through life constantly practicing, because if you don't practice it, you lose it,the multidisciplinary approach.And I can't tell you what that's done for me.It's made life more fun.It's made me more constructive.It's made me more helpful to others.And it's made me enormously rich.You name it, that attitude really helps.
QuestionerAnd so Munger applies that to reading.I think it like obviously like I love reading as well, and that's the single best way for me to learn.But I think it applies to so many other things.It applies to podcasts, audio books, lectures, videos.Like I don't – like however – you've got to figure out however you learn.I know some people that they just absolutely cannot sit down and read a book,but they will consume audio books voraciously.To me, it's all the same.It doesn't matter.Okay, just whatever works for you.What is – okay, so now he's got this famous speech on YouTube,and it's called The Psychology of Human Misjudgment,and it's like an hour and a half lecture.I'd recommend reading it.But this chapter I'm in has the same title,and I'm just going to pick out some things where he feels like he's identified through studying humans,like where we're most likely to make mistakes,and then being aware of that mistake and then trying to avoid it in our own life.So I'm just going to pull out some of the parts that I found most interesting.The first one is this thing called Reward and Punishment Super Response Tendency.So let me just read this quote from Munger.He was talking at Harvard University in 1985, and this is what he said.
CharlieAlmost everyone thinks he fully recognizes how important incentivesand disincentives are in changing cognition and behavior.But this is not often so.For instance, I think I've been in the top 5% of my age cohortalmost all of my adult life in understanding the power of incentives,and yet I've always underestimated that power.Never a year passes, but I get some surprises that pushes a little furthermy appreciation of incentive superpower.And another way to say this, he said a few years later, was
[19:19]
Otherthe iron rule of nature is that you get what you reward for. If you want ants to come, put sugar on the floor.
QuestionerOkay, so he's just saying, listen, we are heavily influenced by incentives. So whether you're thinking about that from product design or dealing with other people or just analyzing, like, why would somebody do that? There's usually an incentive hiding behind that. So he says, and this applies to, they talk a lot about the importance of incentives when you're figuring out compensation in your company, right? So he says, Munger believes that structuring compensation incentives is critical. If the right structure exists, then a seamless web of deserved trust, this is also a term that's repeated over and over again, can be created which lessens problems related to this tendency. For example, it is surprising how many people fail to recognize how performance suffers if you pay someone in advance rather than after the work has been completed. It's precisely because of the dangers of misaligned incentives that Munger and Buffett choose to make compensation decisions themselves, whereas they delegate almost all management responsibilities. So what they're talking about there is this weird, maybe weird is not the word, this unique way that the conglomerate that is Berkshire Hathaway is structured, where it's almost completely decentralized. They're famous for buying businesses and then leaving the people alone to run them. But when it comes to, they do control, some decisions are centralized. One, where to invest obviously the profits from that business, and two, the compensation of the people in the business. So again, I think that's a signal to us, like that's obviously important to them if they're saying, no, no, no, we're going to do this ourselves. Okay, another one of the psychologies of human misjudgment is something they call doubt-avoidance tendency. And I think this paragraph describes, like gives you a good summary of it. It says, the confidence of entrepreneurs bolstered by doubt-avoidance tendency creates positive benefits for society in the aggregate by generating productivity and genuine growth in the economy, even if legions of entrepreneurs may fail. Nassim Taleb put it this way, quote, most of you will fail, disrespected, impoverished, but we are grateful for the risk you're taking and the sacrifices you're making for the sake of the economic growth of the planet and pulling others out of poverty.
[21:56]
OtherYou're the source of our anti-fragility. Our nation thanks you.
QuestionerResearchers believe that doubt-avoidance tendency exists because a brain's processing load can be substantially reduced if a person rejects doubt. That's very dangerous, though. Another one, curiosity tendency. And I'm not reading all of them. These are just the ones that I find personally most interesting. There's a bunch of them in here. All right, so curiosity tendency. This is Charlie Munger on that. Experience tends to confirm a long-held notion that being prepared on a few occasions in a lifetime to act promptly in scale in doing some simple and logical thing will often dramatically improve the financial results of that lifetime. So it's kind of a core tenet of the way they invest, right? A few major opportunities clearly recognizable as such will usually come to one who continuously searches and waits with a curious mind that loves diagnosis involving multiple variables. Okay, so there's the whole complexity thing again and the whole reason to be a learning machine, because he's saying it's a curious mind. And usually if you're curious, that means you want to learn. And then, Charlie continues here, and then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past. So prudence, he's meaning frugality, sitting on tons of cash, keeping your operating expenses low, and then he preaches over and over patience. That's actually really good. Now that I've read two books on Munger and I've watched a ton of his talks and things, this is actually really good. I didn't think about this when I highlighted this, but that one paragraph is actually a really good view into the mind of Charlie Munger. Let me read that again. Experience tends to confirm a long-held notion that being prepared on a few occasions in a lifetime to act promptly in scale. Okay, so that means go all in. He's not one to be like, oh, if you really believe in something, they talk about if you look at them, it looks like they're doing nothing, and then they move fast and they make an investment fast, and they usually don't put a tiny bit of money in. They're kind of like a self-confidence in their own skills. So to act promptly in scale in doing some simple and logical thing will often dramatically, there's the whole simplicity thing again, right, will dramatically improve the financial results of that lifetime.
[24:26]
OtherA few major opportunities,remember what I was just saying a few minutes ago,how they say you just need a few wonderful businessesto make yourself really rich,clearly recognizable as such will usually come to onewho continuously searches and waits, learning machine,with a curious mind that loves diagnosis involving multiple variables, complexity.And then all that is required is a willingness to bet heavily.They're not fans of diversification.When odds are extremely favorable, using resources available,saving your money is about prudence and patience in the past.So yeah, that is a really good combinationof a lot of the things I've learned from Munger.Now, this is Tren expounding on that.He said, curiosity can, okay, so this is important.Curiosity can cause an investor to engage in too many activitiesor a business owner to offer too many products and services.Startup founders can end up repeatedly pivoting their business into oblivionif they overload on curiosity.At the same time, curiosity can lead to important breakthroughs for a business.So you see this a lot.Somebody made the point on Twitter, and I wish I saved the tweet, but I didn't.They're like, if you really analyze some of the most successful businessesin the world right now, and I guess in the past even then,they were founded on extremely simple ideas.So let's go through some of the examples.Apple has a bunch of different products,but the vast majority of the profits they will ever makecome from one product, the iPhone.Google, I know they try to do all this other stuff,but all their profits come from one thing,making the world's information online searchable.So these are simple ideas.That doesn't mean they're easy to do.Uber, press a button, get a ride.These are, again, simple ideas.Not easy, but very simple.So I love this idea where it goes back to what I was saying about Andrew Carnegiewhere he was lecturing Henry Frick and other people.He was like, go study how the great fortunes of the world are made.He called it like a scattershot approach.Focus on what you're doing, one thing.His case was like, I'm just going to make money on steel.So I really like what Trent is saying here.Startup founders can end up repeatedly pivoting their business into oblivionif they overload on curiosity.A business owner can offer too many products and services.And then that last sentence I think is also important.It's like, at the same time,
[26:51]
Questionercuriosity can lead to important breakthroughs for a business.
So there's a dichotomy there.
Moving forward, another one is, and this is another reason we should all be nicer.
Reciprocation.
You know the word I'm trying to pronounce.
You know what?
Here, my co-host will pronounce it.
This YouTube channel is a lifesaver for me.
Reciprocation.
Okay, so reciprocation tendency.
So this is Charlie Munger on it.
The automatic tendency of humans to reciprocate favors and disfavorshas long been noticed as extreme.
Interesting choice of words, extreme.
So this is Trent talking about this.
Actually, he's quoting, he's the guy that wrote Influence.
Cialdini, I think is how you pronounce his last name.
People will help if they owe you for something you did in the past to advance their goals.
That's the rule of reciprocity.
That's the end of his quote.
The reverse is also true if you have done something that negatively affects a person.
The urge to reciprocate favors and disfavors is so strongthat even someone smiling at you is hard not to reciprocate.
The indebted feeling that humans have when they receive a gifttends to make that person feel uncomfortableuntil he or she can extinguish the debt.
So this is him, obviously, studying psychology.
And the reason I said there's another reason we should be niceris because, you know, you might be having a bad day and taking it on somebody else,but then what is he saying?
He's like, the automatic tendency of humans to reciprocate favors and disfavorshas long been noticed as an extreme.
And what I always talk about in the podcast,something I've learned from studying other areas of history,is like humans are virtuosos, what I call virtuosos of violence.
And you just don't, we're unpredictable.
And you just don't, there's no reason to go around making enemies.
Just be nicer and that person's,hopefully he's not going to feel the need to reciprocatewhat Trent here is calling a disfavor.
Okay.
Moving ahead.
This is funny.
This one is called excessive self-regard tendency.
So it says, this is Trent talking,companies are not immune from this excessive self-regard tendency,including Berkshire's Portfolio Companies.
And now Charlie's going to talk about this.
He said, Geico got to thinkingthat because they were making a lot of money, they knew everything.
So anybody with the experience in the ecosystem of entrepreneurshiphas seen this behavior before.
Because they were making a lot of money,
[29:27]
Otherthought they knew everything and they suffered huge losses. All they had to do was to cut out all the folly and go back to the perfectly wonderful business that was lying there. And this happens to people that should have a high regard. We're all prone to excessive self-regard. Think about the entire podcast I just did on Steve Jobs' Time and Next. When you create an amazing product and you're in your early 20s, you're worth hundreds of millions of dollars in the 70s, I think the early 70s, 80s. And you do that for a decade, then you come back and the entire book, Randall Strauss' book, The Next Big Thing, in case you haven't listened to the podcast yet, is all about this, excessive self-regard. It's amazing to me the difference between the quality of entrepreneur in Mike Moritz's book, Return to the Little Kingdom, which focused on just the beginning of Steve Jobs, where he's still young and immature, but he's undoubtedly a talented entrepreneur. And then obviously what we see when he comes back to Apple in the late 90s and early 2000s, that's the same person that in the late 80s, early 90s, was doing everything incorrectly. We're all prone to this. I'm definitely prone to it as well. So it's something to be aware of. Another one, social proof tendency. Here's Charlie Munger on that. Big shot businessmen get into these waves of social proof. Do you remember some years ago when an oil company bought a fertilizer company and then every other major oil company practically ran out and bought a fertilizer company? And there was no more damn reason for all these oil companies to buy fertilizer companies, but they didn't know exactly what to do. And if Exxon was doing it, it was good enough for mobile and vice versa. I think they're all gone now, but it was a total disaster. And Trent expounding on that, humans have a natural tendency to follow a herd of other humans. In other words, because humans do not have unlimited time and complete information, they tend to copy the behavior of other humans. I love Munger's use of this word constantly. So this is the twaddle tendency. Charlie Munger speaking, he says, it's obvious that if a company generates high returns on capital and reinvests at high returns, it will do well. So right, another thing that's simple, but not easy. But this wouldn't sell books. So there's a lot of twaddle and fuzzy concepts that have been introduced that don't add much. And so he talks about that constantly
[31:55]
Questionerabout modern finance is all twaddle,which is just really a polite way of saying bullshit.And I just love,I absolutely love this idea about like,what we're doing here is real simple.It's not easy.But again, like no one can sell you it.And another reason I thinkwhy he's read hundreds of biographiesas opposed to hundreds of like the latest business book.And I used to, I felt when I was, let's say,I have to go back and look at Amazon,but let's say the last like 12, 14 years,I bet you when I started college,I read a lot of business books.Like here's this one idea.And then it took me way later in lifeto actually skip over and get over that phenomenon.Because you're young,you don't know anything about the world.I still don't know that much about the world.And you're just looking for answers.And you're trying to see like,oh, this guy must know,or this girl must know what's going onbecause they have a book and it was published.And the idea is obviously good.And you realize that's not an indicationthat the idea is good.So I love this quote and I just want these traits.This is an author, Roger Lowenstein,who's, this is a quote from the biographyhe wrote on Warren Buffett.It says, genius was largely a genius of character, right?Not intellect, which is very important,interesting distinction in my opinion.So what it's saying,largely a genius of character of patience.And now he's gonna list off the traits.Patience, genius,and now he's gonna list off the traits.Patience, discipline, and rationality.That's what I mean by I want those traits.His talent sprang from his unrivaled independence of mind.I'd also like to do that.I'd also like to be capable of that.And ability to focus on his work and shut out the world.So yeah, those are just great.I mean, who doesn't want that?Who doesn't want to be patient?I'm not patient.Disciplined, I'm somewhat disciplined.Rational, I have no idea.And then independent of mindand ability to focus on work and shut out the world.I mean, those are fantastic traits, right?Oh, so I didn't explain.I just transitioned out ofthe psychology of human misjudgment.And now they have this concept,Charlie and I think Warren has the concept,they call it the right stuff.And it's just like,well, I guess that's a good opening of it.It's just traits and ideas that people havewhich they consider like to be successfulat what they're doing,investing and starting companies,
[34:17]
Questionerbuying companies, et cetera, et cetera.
Like this is the stuff you need to do, right?
So it says the chapter identifies a few of the attributes
that make up the right stuff
of a successful entrepreneur investor
as identified over the years by Munger.
Okay, so there's a bunch of traits in here.
I'm not gonna obviously read all of them.
We're just gonna pick out the ones
that I found interesting.
So this one's on patience.
Success means being,
these are quotes from Charlie.
Success means being very patient
but aggressive when it's time.
Another one, it would be nice
if finding great investments happened all the time.
Unfortunately, it doesn't.
Hence the need for patience.
Another one, patience combined with opportunity
is a great thing to have.
My grandfather taught me
that opportunity is infrequent
and one has to be ready when it strikes.
That's what Berkshire is.
And then later on, this is interesting.
He's telling us that,
yeah, he's telling us
that we need to study probability.
Here's a quote.
If you don't get elementary probability
into your repertoire,
you go through a long life
like a one-legged man
in an ass-kicking contest.
And if you wanna learn more about probability,
I would read,
I'd read the entire insert
but if you can only read one of the collection,
I'd read Fooled by Randomness.
I think a little trick that I have
as far as if you wanna be good at conversations,
I always like to ask questions like that.
Like, okay, if you can only recommend one book
for somebody to read, that's it.
They can only read one book.
What would that be?
My answer to that question
would be Fooled by Randomness by Nassim Taleb.
But even last night,
I was texting friends.
I was like, hey,
if you can only visit one country
that you haven't gone to yet,
what would it be?
When you put these artificially,
artificial constraints on it,
you really get to know people better,
to know their thinking.
Sometimes I'll ask the question
like when I'm at dinner.
Okay, you're trapped on a desert island.
You're gonna be trapped on a desert island.
You can only bring one album.
What are you bringing with you?
You're gonna listen to this one album
for the rest of your life.
What is it?
Get you a good idea how to think about music.
And this just works for everything.
Books, podcasts, just anything.
Cities to visit, experiences to have.
So anyways, if you wanna learn probability,
I think one of the best books you can read
is Fooled by Randomness on that.
Okay, so this is Munger's unique definition
[36:41]
Otherof being disciplined.We've got great flexibility in a certain disciplinein terms of not doing some foolish thingsjust to be active.Remember, that goes against human nature.Discipline in avoiding just doing any damn thingjust because you can't stand inactivity.So I think that little idea comes fromhis lifelong study of human nature.Another quote on this.I think it's possible for a great many peopleto live a life,I think it's possible for a great many peopleto live a life like thatwhere there isn't much risk of disasterand where they're virtually sure to get aheada reasonable amount.It takes a lot of judgment, a lot of discipline,and an absence of hyperactivity.Absence of hyperactivity.By this method, I think most intelligent peoplecan take a lot of risk out of their life.So he's telling us you need to have judgment,discipline, and an absence of hyperactivity.Another one of his traits,what he calls the right stuff, is honesty.And here's him talking about that.Generally speaking, when Berkshire has the power,we try to be more than fair to the minoritywho don't have the power and who depend on us.You can say, aren't they wonderful, moral people?I'm not sure we get credit for a lot of moralitybecause we early knew that the minorityhad the power.I'm not sure we get credit for a lot of moralitybecause we early knew how advantageousthat would be to get a reputationfor doing the right thing,and it's worked out well for us.My friend Peter Kaufman said,if the rascals really knew how well honor worked,they would come to it.So this idea that being honest and being honorableis actually a long-term competitive advantage.Most people optimize for the short termis what they're talking about.Munger continues.It really has worked well.People make contracts with Berkshire all the timebecause they trust us to behave wellwhere we have the power and they don't.There's an old expression on this subject,which is really an expression on moral theory.How nice it is to have a tyrant's strengthand how wrong it is to use it like a tyrant.It is such a simple idea, but it's a correct idea.I just love Munger's own love of simplicity.Continuing, there's another quote on honesty.More often, we've made extra money out of morality.Ben Franklin was right for us.He didn't say honesty was the best morals.He said that it was the best policy.Another trait for the right stuff is long-term oriented.Charlie says, almost all good businesses engage in pain today,
[39:21]
Othergain tomorrow activities.And this is Tran expounding on that.
CharlieHe says, Munger has recognized that it is hard to thinkon a long-term basis when you are just getting startedor starting over.For this reason, he said once that accumulatingthe first $100,000 is a bitch.That is reason enough to work hard to assemblea basic financial cushion.Not only is it not fun, it is a handicapto live on the edge of financial ruin.This applies to your personal financesas well as your company finances.It's amazing to see how few people actually,and businesses actually adhere to this very simple idea.In the long-term, the power of compoundingbecomes ever more evident.Unfortunately, understanding the power of compoundingis not a natural state for the human race.I've always wondered why people use the human race.Why isn't it a human species?However, it is a critical task.This is more on Charlie, or Charlie speaking about this again.Understanding both the power of compound interestand difficulty of getting it is the heart and soulof understanding a lot of things.
OtherWhat does he mean by that?He says many things that are not,this is Trent speaking,many things that are not directly financialwill compound.Skills, relationships, and other aspects of lifecan compound and benefit a personwho invests time and money wiselyto cultivate these things.
CharlieAnother trait that he identifies is passion.This is Charlie speaking about that.What matters most, he's asking a question,what matters most, passion or competencethat was born in?Berkshire is full of people who have a peculiar passionfor their own business.I would argue passion is more important than brain power.
OtherThat's a hell of a statement.This is Trent expounding on that.If you do not know about the linkbetween passion and success,you have not been paying attention.People who are passionate tend to work harderand invest more in achieving their goals.Passionate people also read and think more.Passionate people tend to have an informational edgeover others who are not as passionate.This is also an indictment.If this is true, which I tend to believe it is,it's an indictment on our education system.I just read, who knows how they come upwith these calculations, if it's true or not,but 75% of people, I think this was just in the United States,are working in a job that they don't like.They're just literally doing it for money.It's really hard to be really great at something
[41:41]
Questionerthat you don't actually care about.If you don't actually care about it,you're not going to invest the time outside of workto get better at your skill,whether it's reading and understanding the historythat you're in or doing what Danny Meyerand Bill Gurley call professional research.
Often the level of passion you have for a topicwill grow over time.So this is another idea about compoundingthey keep hitting on, right?The more you know about some topics,the more passionate you will get.That's probably true.
Some of the best passions in life grow on youin a non-linear way after a slow start,which is just another word for compounding.
Another trait that they consider is the right stuff,studious.This is Charlie.
Learning from other people's mistakesis much more pleasant.
He's continuing on this idea that you need to be studious.
I think they kind of go hand in hand.
If you're naturally passionate about something,you can't help but studyand want to learn everything about it.
I think finding passion is the key to unlockingyour inner studious person.
Really, what they're talking about is being studious.
It's just about ignorance removal.
So it says,In my whole life, I've known no wise peoplewho didn't read all the time.None.Zero.
You'd be amazed at how much Warren readsand how much I read.
Another quote,Development into a lifelong self-learnerthrough voracious reading,cultivate curiosity and...
I put the enunciation on the wrong part.
Let me read that again.
Develop into a lifelong self-learnerthrough a voracious reading.
Cultivate curiosity and strive to becomea little wiser every day.
So again, he's already hit on that.
He's just saying it a different way.
Another way to think about this isyou've got to work where you're turned on.
Again, I think passion and being studious,they're connected.
Oh, and here's...
He's still talking about being studious here.
He's got a lot of quotes on this.
Apparently it's important to him.
The main contribution of buying See's Candies,they mention See's Candies constantly,was ignorance removal.
If it weren't good at removing ignorance,if it weren't...
What's it?
Maybe Berkshire?
If it weren't good at removing ignorance,we'd be nothing today.
We were pretty damn stupid when we bought See's,just a little less stupid enough to buy it.
The best thing about Berkshire...
Yeah, they were talking about Berkshire.
The best thing about Berkshire is thatwe have removed a lot of ignorance.
[44:09]
WarrenThe nice thing is we still have a lot more ignorance left.
David SenraI love this guy.
WarrenAnother trick is scrambling out your mistakes, which is enormously useful. We have a sure to fail department store, a trading stamp business sure to fold, and a textile mill. Out of that comes Berkshire.
David SenraThat's a really fascinating way to look at things. Think about how we would have done if we had... Think about how we would have done if we had a better start. This guy's hilarious, man. I love... Some people call him an ass or arrogant, but I don't interpret it that way. Again, I always say I'd appreciate... I think what he's... It's kind of the opposite of arrogance, isn't it? He's saying I know such a... There's so much more things that I'm ignorant about and I haven't fixed yet. He's saying these words and he's in his 90s. He's saying... What is it? The nice thing is we still have a lot more ignorance left. I just think it's, again... You want to call it arrogant, whatever, but I prefer real arrogance to false modesty. I like that he has an independent of thought. He gets to say what is actually on his mind, where I feel a lot of public statements is basically performance art.
David SenraOkay. Another trait. We're still on the right stuff. This one is frugal. I had this thought. Okay. I had this idea. I had this thought, rather, that if you were able to transcribe every single word spoken so far in Founders Podcast, that the most common word uttered on this podcast has got to be the word frugal. When I read this quote from Charlie Munger about the importance of frugality, which obviously is going to be very important to them, it made me think of one of my favorite scenes. I've said before I was fairly obsessed with Game of Thrones. When I read this part earlier, I left a note on one of my favorite scenes in Game of Thrones. Two of my favorite characters are talking. It's Tywin Lannister and Olenna Tyrell. They're paying for this huge royal wedding. Tywin walks up to her and he's like, this is a bit much, don't you think? This is ridiculous. She's like, oh no, it's what the people expect. Then he says something that I love. He says, people who spend money on this sort of nonsense tend not to have it for long. Again, I think that applies to your personal finances and also to your company finances. This is an example. Berkshire Hathaway is one of the most successful companies in existence. This is Charlie describing it. He says, we don't have an isolated group of managers
[46:57]
Othersurrounded by servants.Berkshire's headquarters is a tiny little suite.Trent continues to expound on Munger's frugalityand maybe who influenced him to be frugal.He says, like his idol Benjamin Franklin and his partner Buffett,Munger is relatively frugal given his wealth,especially when it comes to operating and investment expenses.In addition to the axiom, a penny saved is two pence dear,Benjamin Franklin wrote,the way to wealth is as plain as the way to market.It depends chiefly on two words, industry and frugality.That is, waste neither time nor money,but make the best use of both.That's the best description of frugalityand that's why it's not a coincidencethat some of the entrepreneurs that we study adhere to this principle.You're not going to be able to build a successful company,especially on the scale that these people do,wasting time or money.Without industry and frugality, nothing will do,and with them, everything.That's the end of Benjamin Franklin's quote.Other grand value investors have a similar focus on frugality.This guy named Walter Schlosswas famous for running his investment firmout of a single room leased from another investment firm.He says, I suspect that some of the frugalitythat can be seen in grand value investorssprings from their understanding of opportunity costand the power of compounding.They naturally compare the value of consumption todaywith the value of greater consumption tomorrow,which causes them to be frugal.That's fantastic.This is the idea of being risk averse.Really what Charlie's telling us here is how to run your businessand again, this is also good for your personal life as well.Here's Charlie.
CharlieYou can easily see how risk averse Berkshire is.In the first place, we try to behave in such a waythat no rational person is going to worry about our credit.After we have done that, we also behave in such a waythat if the world suddenly didn't like our credit,we wouldn't even notice it for monthsbecause we have so much liquidity.That double layering of protection against riskis as natural as breathing around Berkshire.It is just part of our culture.
OtherI'm skipping way ahead in the book now.Towards the end, they have another chapter.It's called The Right Stuff,but this is The Right Stuff in Business.They're talking about how they actually manage Berkshireand what they prioritize.This is on the importance of capital allocationand the management of a business.
[49:35]
OtherOne major fundamental aspect of any business is management.Munger and Buffett are famous for delegatingalmost all authority and responsibilityto Berkshire subsidiaries to run their own business.This is what I was mentioning earlier.With the exception of capital allocationand the creation of compensation systems.In other words, while management of the businesswithin Berkshire is extremely decentralized,the management of capital allocationand compensation systems is extremely centralized.You have a decentralized management of the business,of the subsidiaries, and yet the complete controlof capital allocation and compensation systems.Munger and Buffett believe that capital allocationis a skill that many managers simply do not learnbefore they become chief executive officers of companies.They believe this can create big problems for a businessbecause the CEO will often not know how to makecritical decisions that will maximize shareholder return.You can argue that's one of,in addition to many of his other talents,Jeff Bezos is fantastic at this.The most important task in a capital allocationis to take cash generated by a companyand deploy it to the very best opportunityand avoid what Buffett called the institutional imperative.Now what's the institutional imperative?This is a quote from 1989 from Warren Buffett.Rationality frequently wiltswhen the institutional imperative comes into play.For example, number one,as if governed by Newton's first law of motion,an institution will resist any change in its current direction.Number two, this is such an important point,just as work expands to fill available time,corporate projects or acquisitionswill materialize to soak up available funds.I don't think I've ever heard anybody else say that.Three, any business craving of the leader,however foolish, will be quickly supportedby detailed rate of return and strategic studiesprepared by his troops.So fake work.Four, the behavior of peer companies,whether they're expanding, acquiring,setting executive compensation or whatever,will be mindlessly imitated.So he's telling you to avoid all this.Those four things he calls institutional imperative.This is trend now.The culture at Berkshire has been created by Buffett and Mungerso as to reject the institutional imperative like a foreign body.The heads of many companies are not skilled in capital acquisition.Another thing that they say is a skill that you need to develop in business,
[52:05]
Otherand I'll expand on this because they have an entire chapter just on moats,but they say you need to develop moat widening skills.This is what I mean about the ability to raise prices that they love.Charlie says, I can see instance after instancewhere that isn't what people do in business,meaning widening the moat.One must keep their eye on the ball of widening the moatto be a steward of the competitive advantage that came to you.Munger wants managers of the businesswho have an ownership mentality toward the business,and Munger is now going to quote Carnegie and others.Carnegie was always very proud that he took very little salary.Rockefeller and Vanderbilt were the same.It was a common culture in a different era.All of these people thought of themselves as the founderand their partners as founders.If you think about Carnegie's unique private partnership,they all had a small percentage of the business.So what are they actually talking about?Why would you do that?The importance is they want risk and benefitsto be symmetrically allocated.So skin in the game, in other words.This is an interesting thought I've never heard of.This is Munger on the curse of scale.For example, if you worked for AT&T in my day,it was a great bureaucracy.Who in the hell was really thinking about the shareholder or anything else?And in a bureaucracy, you think the work is donewhen it goes out of your in-basket into somebody else's in-basket.But of course it isn't.It's not done until AT&T delivers what it's supposed to deliver.So you get big, fat, dumb, unmotivated bureaucracies.The constant curse of scale is that it leads to big, dumb bureaucracy.I never articulated it this way,but this is kind of why I would say I favor smaller companiesand I try to support independent entrepreneurs whenever I can.Because as businesses grow, inevitably, as they scale,the end result for the end users is usually worse.Some of the best service you're ever going to getand some of the best products you're ever going to getare small batch independent owners, people that are actually there.In a large company, the owners are separated from the customers in many cases.So I love that.The constant curse of scale is that it leads to a big, dumb bureaucracy.Who's going to get great products or services from a big, dumb bureaucracy?Let's see.This is Charlie telling us how to make decisions.Intelligent people make decisions based on opportunity costs.
[54:46]
QuestionerIn other words, it's your alternatives that matter.
OtherThat's how we make all of our decisions.
OtherThis is the chapter on moats.
OtherJust like anything else, he's got a bunch of numbered listsabout what he feels builds a moat.
OtherSome of them, I don't even know if they made sense to me,so I skipped over a bunch.
OtherBut I'm just going to pull out the ones that are interesting.
OtherOne, supply-side economies of scale and scope.
OtherIf a company's average cost, this is how you widen a moat.
OtherBasically, they're saying, hey, if you don't have a moat, you can't raise prices.
OtherIf you can't raise prices, you might have a commodity business,which means you have heavy competition,and all your profits are going to be competed away eventually.
OtherSupply-side economies of scale and scope.
OtherIf a company's average costs fall when more of a product or service is produced,there are supply-side economies of scale.
OtherIntel is a classic example of a business that benefits from economies of scale.
OtherIt says, regarding the impact of supply-side economies of scale,Munger has pointed out.
OtherNow we're going to go to some quotes that illustrate how he's thinking on this.
OtherIn some businesses, the very nature of things cascadestoward the overwhelming dominance of one firm.
OtherIt tends to cascade to a winner-take-all result,and these advantages of scale are so great, for example,that when Jack Welch came into General Electric,he just said, to hell with it.
OtherWe're either going to be number one or number two in every field we're in,or we're going to be out.
OtherThat was a very tough-minded thing to do,but I think it was a correct decision if you're thinking about maximizing shareholder wealth.
OtherAnother quote.
OtherActually, no, this is Trent speaking now.
OtherIf it is cost-efficient for a company to produce several different products or services,a company can also benefit from supply-side economies of scope.
OtherSo now he said economies of scale and economies of scope.
OtherEconomies of scale, everybody knows what that is.
OtherEconomies of scope is different.
OtherSo you're benefiting because to benefit from economies of scope,a business must share resources across marketswhile keeping the amount of those resources largely fixed.
OtherBusinesses that desire to benefit from economies of scopemust avoid running as isolated units.
OtherSo basically you have one successful product.
OtherThe customer already knows who you are.
OtherIf they already know who you are,they're more likely to buy another product from you.
[56:59]
OtherThat's economies of scope.
OtherThis is the benefits of expanding with demand-side economies of scale,which almost no one uses that term,and everybody uses the other moniker for this, which is network effects.I'm not going to spend too much time on this because it's talked about ad nauseum.It says demand-side economies of scale, also known as network effects,results when a product or service becomes more valuable as more people use it.So Craigslist, eBay, Twitter, Facebook, you all know this already.But American Express is an example of a company in the Berkshire portfoliowith network effect benefits.The more merchants that accept a card, the more valuable the service gets.The more people use their card, the more valuable the services are for the merchants.Thus, over time, that constant expansion expands their moat.Another way to expand a moat is brand, and that's very different.So it says a moat powered by brand is something very differentfrom one created via supply-side or demand-side economies of scale.Now they're going to use, regarding brand power, this is Charlie Munger.This is really interesting.Everybody's like, I'm building a personal brand.We think about branding.I kind of hate when people talk like that.The reason I hate when people talk like that is because they're not really adding anything new to the discussion.They're just kind of mimicking other people.I never thought about, and maybe that's my fault for not listening intently.Maybe people have made this point.But Munger is the first person to talk about what a brand is.A brand is just an informational advantage.It's a way in a small amount, whether it's the name of a company, a logo, an image, whatever,to convey a lot of information about that.Think about that.Think about when you hear the word Disney.That's one word.What is that?Six letters.Think about all the stuff that pops into your mind.That is a brand that has an informational advantage because in six letters it tells you hundreds of different things that may come to mind.So this is the way Charlie thinks about brands, which I think is really smart.The informational advantage of brands is hard to beat, and your advantage of scale can be an informational advantage.If I go to some remote place, I may see Wrigley chewing gum alongside Gloss's chewing gum.Well, I know that Wrigley is a satisfactory product, whereas I don't know anything about Gloss's.
[59:21]
OtherSo he talks about the ability for Wrigley to increase prices just on that informational advantage.So in effect, Wrigley simply being so well-known has an advantage of scale, what you might call an informational advantage.Everyone is influenced by what others do and approve.We already covered this earlier.Another advantage of scale comes from psychology.The psychologists use the term social proof.We are all influenced subconsciously and to some extent consciously by what we see others do and approve of.Therefore, if everybody is buying something, we think it's human.All told, your advantages can add up to one tough moat.A very important test for Buffett and Munger in determining the strength of a brand-based moat is whether a competitor can replicate it.This is another interesting idea.A very important test for Buffett and Munger in determining the strength of a brand-based moat is whether a competitor can replicate or weaken the moat with a massive checkbook.As just one example, here is what Buffett said about Coke at the 2012 Berkshire meeting.If you gave me $10, $20, or $30 billion to knock off Coca-Cola, I couldn't do it.In this chapter on moats, Trent says, let me analyze Berkshire and see what kind of moats they have.Some companies, like Berkshire, have been able to create a moat as a result of a combination of better systems and culture than their competitors.I'm just going to go over some of the ideas that he has.Number one, what adds to the moat of Berkshire?Berkshire is tax efficient.They are well known for buying something and then holding it forever.If you let something compound for 30 years and you only pay taxes on it once, you save a ton of money over that time period.Another one, which is just another way to say they're frugal, is they have low overhead.This is a quote from the New York Times.It says, Berkshire has a corporate headquarters with a mere 25 people on a single floor of an office building.From there, Mr. Buffett and his staff allocate capital and contemplate acquisitions of sales, hire or fire people to run those portfolio companies, and otherwise stay out of the way.Another way they expand their moat is they're the private buyer of first resort.This ties into what Charlie was saying earlier.If people understood the long-term benefits of acting with integrity and honesty and morality, it's going to add to your reputation.That reputation in the future can give you access to opportunities that other people just won't have.
[1:01:49]
OtherSo it says, if you've spent your life building a business and decide to sell the company, Buffett and Munger offer you a unique opportunity.They will let you, and in fact want you to, continue running the business.Your other option is selling the business to a private equity firm that does not give a damn about your business and will probably load it up with debt, creating a serious risk that the company will fail.Another one, Berkshire has what they call permanent capital.They basically say, this is some guy, I don't know who he is, his name is Bruce, that they're quoting that is describing Berkshire.It says, that's why we keep a lot of cash around.Cash is the equivalent of financial volume.It keeps you cool, calm, and collected.And I'm going to skip the other ones.But I want to describe, well, this is them talking about moats again, and I'll leave the idea of moats alone.It says, so you know you have a moat when you can raise prices.This is, is this Munger again?
OtherYep, this is Munger again.Just a quote from Munger.There are actually businesses that you will find a few times in a lifetime where any manager could raise the return enormously just by raising prices, and yet they haven't done it.So they have huge untapped pricing power that they're not using.That is the ultimate no-brainer.Disney found that it could raise those prices a lot.Anybody with little kids knows this, it's ridiculous.And the intended stayed right up.So a lot of the great record of, just naming some old CEOs of Disney, came from just raising prices at Disneyland and Disney World, and through video sales of classic animated movies.At Berkshire Hathaway, Warren and I raised the prices of See's Candy a little faster than others might have.And of course, we invested in Coca-Cola, which has some untapped pricing power.Creating a moat is something that people like Ray Kroc, Founder McDonald's, Sam Walton, Estee Lauder, Mary Kay Ash, and Bill Gates have accomplished.And finally, I'll close on this.And this is trend talking.And this is really my definition.Other people throw around the term mental model a lot, and for a while I didn't even know what the hell it was.And I think this is just the easiest way to think about what it is, at least in terms of what we're trying to accomplish here on the podcast.So it says, with that last bit of wisdom, I send you off into the world.Hoping that you too learn to concentrate and invest successfully.
[1:04:22]
OtherWhenever in doubt about making a decision related to investing or otherwise, ask yourself this, what would Charlie Munger do?And so what I mean is like what I mean by that's my definition of a mental model.The reason that I read – so I didn't just read one book on Steve Jobs.I read like six.And I try to go deeper on these people because you're exposing yourself to a lot of information and more importantly how they think.And to me, that's what the mental model is.Like if you're constantly reading biographies on Henry Ford, Steve Jobs, etc., etc., you're going to eventually be able to, in your own mind, develop a mental model of how they think.And then when you're presented with the decision, like this is kind of the transmission of the ideas that are in these biographies, right?The practical application of these ideas is you can sit there and say, okay, I'm presented with an opportunity.What would Charlie Munger do?What would Henry Ford do?What would whoever you personally identify with their philosophy of business do?Same reason if you're on my email list.Like I take notes on a lot of the same people over and over again because what I'm doing is I've identified people that I admire their mind, and I'm trying to go deeper so I can develop mental models on them.So I was – one example is this Marc Andreessen was giving a talk, and he's one of the people I'm interested in how he thinks.But he's done his own research on Peter Thiel.And I think he thinks Peter Thiel is like one of the smartest people around.And so he says he has a mental model of Peter Thiel, and as he goes about his day, he says he has a little Peter Thiel on his shoulder.And he'll ask himself, well, what would Peter Thiel say or what would Peter Thiel think or do or whatever the case is?And I don't think you need mental models.There's been what?Like I don't even know how many founders we've covered so far.But over time, being exposed to more of these ideas, you're going to identify the people that just – they click with you.You can't even really – I don't even think you can explain why.Maybe you can point to certain ideas that you like of theirs or certain ways they run their business or whatever it is.But it's like deeper than that.It's like more of like an abstraction.So that's the way I think whenever I hear people talk about mental models.I think of them like personal, like personal mental models.
[1:06:37]
David SenraI know other people are like this is my framework on how I make decisions.I wish I could say I have those.I just don't.I think of things in like – like I said, maybe it's because I spend so much time studying people as opposed to just decision frameworks or whatever the case is.So anyways, Charlie Munger, if you want to learn more about him, if you want to – if you thought this podcast was interesting, you'll probably like the book.So if you want to read the book, there's a link in the show notes.You can just click it and it takes you right there to the book and you can buy it.If not, you can go to Amazon.com forward slash shop, forward slash Founders Podcast.You'll see this and every other single book.It's like the visual representation of this podcast presented in reverse chronological order.If you purchase using either the links in the show notes or going to that URL, the Amazon will give me a small percentage of the sale and no additional cost to you.It's a great way for – I always say like you're supporting yourself because you're getting a book that will benefit your life and you can apply those ideas that you learned in that book to your own work and get an unbelievable return on that investment.You're supporting the author who's taken a lot of time writing these books and you're supporting me who's hopefully introduced you to these ideas and expanding it to an audience that may not have known about those ideas.Other than that, if you're listening to this and you have not become a misfit yet, misfits are the people that financially support this podcast.As you see, I don't do any ads on the podcast.I rely on the people that give value out of my work.As a result, half of my podcasts like this one are ad-free and free to everybody.You don't have to do anything but press play and listen and you get the benefit of me reading, taking notes, and doing all this work.But if you want more, every other podcast I do is reserved exclusively for misfits.So if you haven't signed up yet, you're missing out on half the podcast.You can click the link.Oh, so I need to bring this up.Several people have sent me messages and said, David, you are not being clear.You are not communicating clearly.So I've gotten this message enough times that I need to figure out another way to do this.They're like, I wanted to sign up for Misfits.I couldn't figure it out.It wasn't making it easy.
[1:08:49]
David SenraSo I thought it was making it easy because I include every single link in your podcast player.And 90-something percent of the people that listen to me listen to me on Apple Podcasts or Overcast.And they make links clickable.So when you're listening to me, just click on the link if you want to sign up for your Misfit.You click on it.You can use Apple Pay.In like 10 to 20 seconds, you'll have the private RSS feed, which is all what a podcast really is,the private podcast feed installed into your podcast player of choice.And then you can listen to all the unlocked.Basically, you're unlocking all the other Misfit podcasts that you haven't heard yet if you haven't upgraded.So I thought that was really easy.Some people prefer just to go to the URL.So you can open up the browser on your phone.Go to glow, G-L-O-W, .fm.You know every podcast.Like the .fm extension is like every podcast service or podcast loves that extension.But anyways, glow.fm forward slash founders.So you can either go directly to the URL and do that or you can tap the link that's in the show notes.Or if you want to take a roundabout way for some weird reason, you can also go to founderspodcast.com.And I have the link on every single podcast I've done, although people said that I should have it like right in the beginning when you go to the website.So anyways, I appreciate the feedback, and I know that I'm obviously making a mistake if multiple people have run into the same thing.And that's obviously not my desire.My desire is to make it as simple and easy for you to support.So if you sign up for – here's the thing.If you sign up for Misfits, you pay a small monthly fee.If you're willing to pay a small monthly fee and press play, you're going to get four podcasts because I have two free and two Misfit podcasts a month.All you have to do is sign up and then listen, and then you're going to have some of the best ideas from some of the greatest entrepreneurs in history just injected right into your ear every month.And undoubtedly, you will get more back than the small amount of money that you pay every month.And if you don't, say, David, I didn't give value to this.I'll give you a refund.It's impossible that that would happen.So if you haven't done it, I know some people are like, oh, it's kind of a pain in the ass.I promise you, the company I use, Glow, they made it – the only thing better than the way they did it is if Apple did it themselves, and Apple is not going to do it themselves.
[1:11:08]
David SenraSo they did it beautifully.Like they use – it's almost like you're paying for an app on your iPhone, which you've probably done a million times.I've actually talked to the founders at Glow two separate times for over an hour each just because I've tested every single other podcast product, and this one was by far the best.And they just have their shit together over there.They design a beautiful, beautiful, beautiful product.They make it super easy to have a private podcast feed to listen to because some people would sell a private podcast feed, and then you have to listen to it in a browser.That's not ideal.I understand that.I think all audio – literally all audio is better in a podcast feed.So even if they had like people that do YouTube videos that some people only listen to, I think – at least for me, the experience of listening to audio in a podcast player is the single best experience.So that's the experience that you get.I would very much appreciate it if you support the podcast.But if you're going to buy the books – and I know a lot of people have sent me messages that they've bought a lot of books.They haven't used the link, and they're going to use it in the future.Listen, it's really more important to me that you buy the books and read than it is that you use the link.But at the same time, if you're going to buy the book, why not just click the link and benefit the podcast at the same time?What else?What am I doing next week?Oh, and if you go to Amazon.com forward slash shop forward slash founder's podcast, usually I put the book that I'm doing that week up there so you can kind of have like a sneak – so you have like a sneak preview of what I'm working on.I'm not sure which one I'm going to do.I have like 30 to 50 books to choose from.So I can't tell you that.Unfortunately, I don't know why I brought that up.Other thing is – actually, that's it.I've talked enough.Please sign up.Become a Misfit.Tell your friends about the podcast, and I'll talk to you next week.