The Idea of Multiple Mental Models in Poor Charlie’s AlmanackPosted: March 17, 2010
Warren Buffet’s business partner, Charlie Munger writes Poor Charlie’s Almanack in the style of Benjamin Franklin’s Poor Richard’s Almanack. While the book has a fair amount of fluff I think it is worth working your way through it in order to find the insights on life and investing that Munger shares with great wit. The reviews on amazon can do better justice to the book than I.
Munger focuses on the importance of multiple mental models that can be gathered across academic subjects. These mental models form a latticework that provides the holder with new ways to analyze problems and look at the world. Learn more here. One of my goals of my broad liberal arts education is to develop a deep understanding of these important mental models. The sum of which Munger calls “elementary worldly wisdom.” Munger argues, “80 or 90 important models will carry about 90% of the freight in making you a worldly-wise person.” Focusing on one narrow model too much can cause what Munger calls the Man with a Hammer Syndrome: to the man with a hammer, everything looks like a nail. Adding more mental models increase the number of tools one has so the world can be viewed more accurately.
After hearing that I was eager to learn what these models were. Munger does briefly review some of them. The first ideas he shares are from math: things like compound interest and decision trees. From physics there are the ideas of breakpoints and critical mass. Psychology has many models ranging from classical and operant conditioning to the principles of influence. As I go through my education, I will place an emphasis on the mental models that I can learn and apply.
Mental models may appear rather academic in nature but they have importance beyond the academic world and can be useful when analyzing the world and investing decisions. Munger with his signature humor captures the importance of learning a multitude of mental models by saying otherwise “you go through a long life like a onelegged man in an asskicking contest.”