What I learned from Warren Buffett and Charlie Munger
In a recent interview, I talked about the unexpected things I’ve learned from Warren Buffett and Charlie Munger that have helped me live a better life.
Here’s the question that was asked of me:
Warren Buffett and Charlie Munger, who you just mentioned now, are regular characters on Farnam Street. As you mentioned before, the name of the blog is linked to Berkshire Hathaway’s address, Farnam Street where they’re based. What is it that you admire so much about these two? I imagine there are an awful lot of lessons you’ve learned from them, but what are just maybe one or two core ideas that have really really had a big impact on you?
And here’s my answer:
Well one thing I want to do at the blog is expose their thinking to people outside of investing.
I think Buffett and Munger have done a phenomenal job at thinking at things at a different level than most people. (They reach deep fluency.)
The tagline for the website is “Mastering the best that other people have figured out.” I’m not smart enough, so I look outside and I’m like, “Oh this person seems really bright. What can I learn from them?” Let’s copy models of success. Then also learn how to avoid failure at the same time. That probably leaves me with a pretty good outcome.
Specifically (though) with Buffett and Munger, one thing that I found fascinating that I don’t think anybody has really talked about before and I don’t think I’ve even publicly talked about this before, but here are two guys that have done something that’s fascinating.
You have Daniel Kahneman who’s made a living studying human biases. And in an interview he basically said, “I’m no better at (decisions) than I was before.”
Yet you have these two guys in Omaha who have figured this out, or figured out a way to structure things so that they’re less prevalent and they’re more conscious and they’re more rational about them.
Then the flip side is you have Michael Porter who came up with these five forces of strategy, which is the fundamental way that anybody really analyzes a business to ascertain its longevity (and competitive position). He’s not a billionaire. Buffet’s basically said, “Hey, I just learned from Michael Porter and I implemented it.”
So you have these two guys who have taken these two really big ideas from two vastly different fields, one being business and one being psychology, and they’ve mixed them together.
And they’ve done better than either of those people individually (at least in terms of financial rewards).
…
By mixing them together you get this result that was non-linear to each thing individually.
I thought, “Oh, well that’s a really fascinating way to go about life.” That gets into the whole the world is multidisciplinary.
Understanding things and mixing them together and feeling the weights of what matters and what doesn’t is incredibly important.
However, the biggest thing I’ve taken away from Buffett in particular is his love of life.
I mean here’s a guy who is going on 90 who loves every minute of his life and doesn’t do things he doesn’t want to do.
Every year I go, I take a couple days in December and I go and I, I don’t space out but I start thinking about the past year and what it is that I did that I didn’t like? Do I think that I’ll like that in the future? If I don’t, how do I reduce that? My goal since I’ve been 25 basically has been how do I reduce the things that I don’t want to do and increase the things that I do want to do? I mean we’re not all billionaires. We can’t hire, outsource everything that we don’t want to be doing to other people, but I also don’t want to wake up when I’m 50 and go, “Hey I just did a lot of stuff that I really didn’t like doing for some goal that may or may not come.”
I want to be conscious about how I live life.
I think Buffett is a perfect example. I know so many people who are like, “I hate my job. I don’t want to go to work today.” I don’t want to end up that person. I don’t think the rewards, whether promised or real, are worth it.
I think you end up getting to the end of your life and you start regretting those choices. I don’t want to be in that position. Buffett has taught me to be conscious about happiness, be conscious about being optimistic about the future based on the past, and just constantly having a smile and having fun with life.
What I’ve learned from Munger is completely different.
What I’ve learned from him is that there is a way to think about things that can help you be more rational. I’m not saying rational decision making is the only way or the best way, but I am saying it’s important to know how to make rational decisions.
I think what I’ve learned from Munger is that you can make rational decisions, you can learn about the world, and the world operates incorporating multiple disciplines. If you don’t know those disciplines, as he puts it, you’re going to be a one-legged man in an ass-kicking contest.
I don’t want to be that guy. It’s the blending of those two things that I think is really important. It’s not about being purely rational about every minute of your day and optimizing your time. It’s about living life. We only get one life and we need to be aware of that so that we don’t wake up one day and go, “Man I wish I could have a do over.” Because we don’t get do overs.
Farnam Street, which is a homage to Buffett and Munger, has a clear goal: We want to help you understand how the world really works, in all of its complexity. With that understanding, you can make better decisions, live a better life, and be more helpful to those around you. We think that goal is worth your time and ours.
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