Charlie Munger had little patience for foolishness, and he spent much of his 99 years cataloging it. He thought raw intelligence was overrated as a predictor of good outcomes.
What interested him more was why bright people keep doing dumb things. “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent,” Charlie Munger said.
The ten odd behaviors below are the kinds of self-inflicted damage he warned about for decades, and any one of them can make even a smart person act like someone with an extremely low IQ.
1. Refusing to Use the “Too Hard” Pile
Plenty of people believe they owe an answer to every hard question that lands in front of them. Admitting ignorance feels like losing face, so they guess and act as if they’re sure of themselves.
Munger and Warren Buffett handled this differently. Charlie Munger explained, “We have three baskets for investing: yes, no, and too tough to understand.”
Most ideas went straight into that third basket without any guilt. A person who can’t find the edge of their own competence will keep making confident bets in areas that they don’t understand.
2. Holding Opinions You Haven’t Earned
Some people treat their opinions like sports allegiances. They defend them loudly and have never seriously studied the case against them.
Munger held himself to a strict rule here. “I never allow myself to have an opinion on anything that I don’t know the other side’s argument better than they do.”
Try that test on your own views, and most of them won’t last a minute. If you can’t argue the opposing case well, you probably borrowed your position from someone else.
3. Man-With-a-Hammer Syndrome
This habit shows up when someone squeezes every problem into the one framework they learned first. An accountant sees a spreadsheet problem everywhere. A marketer sees a branding problem.
Munger liked the old saying about a man with a hammer treating everything as a nail. His fix was to learn the big ideas from many fields and use them together.
“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,“ Charlie Munger told students at USC’s business school in 1994. Psychology, biology, physics, and history all made his list.
4. Frantic Busyness
Some investors check their accounts constantly and trade on every headline. Sitting still makes them anxious, so they keep pulling levers.
Munger saw this as a discipline problem dressed up as productivity. Charlie Munger said, “The big money is not in the buying and selling, but in the waiting.”
He was known for long stretches of reading with an empty calendar. Berkshire Hathaway held some of its positions for decades, long after most traders would have sold.
5. Protecting Beloved Ideas
Admitting a mistake stings, especially when it’s a belief you’ve repeated to friends for years. So people dig in and explain away every piece of contrary evidence.
Munger treated changing his mind as a skill worth practicing. He admired people who kept learning long after school ended.
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines,” Charlie Munger said in his 2007 commencement speech at USC’s law school. A learning machine has to throw out old ideas to make room for better ones.
6. Calculating Too Much and Thinking Too Little
Numbers feel safe. A forecast carried out to two decimal places looks far more authoritative than a plain judgment call, even when every input is a guess.
“People calculate too much and think too little,” Charlie Munger said. He was a capable numbers man himself, and his complaint was with people who hide behind math when the real question is about incentives or the quality of the business.
A model built on shaky assumptions can leave you precisely wrong. Munger would take a rough judgment about the things that matter over a polished spreadsheet any day.
7. Blindly Following the Herd
Following the crowd feels comfortable because you’re never wrong alone. Plenty of market bubbles were fueled by people buying simply because their neighbors were buying.
Charlie Munger wrote, “Mimicking the herd invites regression to the mean.” Copy everyone else, and you get average results at best, and much worse ones when the crowd panics.
He included social proof in his famous talk on the psychology of human misjudgment. It pulls on smart people as hard as it does on anyone.
8. Envy and Resentment
Envious people keep score by watching the people around them. A friend’s new boat or a coworker’s promotion can ruin their week even though nothing was taken from them.
“The world is not driven by greed. It’s driven by envy,” Charlie Munger said. He also called envy a really stupid sin because nobody ever has any fun with it.
The damage goes past hurt feelings. Envy pushes people into risky bets and spending they can’t afford to keep pace with their neighbors and coworkers.
9. Choosing Instant Gratification Over Compounding
Impatient people grab the small reward today and pass on the bigger one that shows up later. With money, that usually means cashing out early or spending what could have grown.
Munger’s fortune came from letting good investments sit for decades. Charlie Munger put it bluntly: “The first rule of compounding: Never interrupt it unnecessarily.”
He admitted that some people seem born with more patience than others. Those who aren’t have to work at it, because impatience drains savings and careers a little at a time.
10. Ignoring Inversion
Most plans describe how things will go right. Very few people spend any real time thinking about how the plan could go very wrong.
Munger borrowed the advice “invert, always invert” from the 19th-century mathematician Carl Jacobi. Charlie Munger joked, “All I want to know is where I’m going to d*e, so I’ll never go there.”
Applied to a career or a portfolio, the method starts with a list of things that would guarantee failure. Then you stay away from them, which is often easier than finding a brilliant move.
Conclusion
None of these habits need a low test score to take hold. Munger’s whole point was that very intelligent people fall into them all the time.
The fixes are mostly unglamorous. Admit what you don’t know, learn from more than one field, and leave your best investments alone.
Plan for failure before you plan for success. Munger built one of the greatest investing records in history largely by avoiding the mistakes on this list.