Book Summary — Poor Charlie’s Almanack
Charles Munger was Warren Buffett’s partner at Berkshire Hathaway and life long friend. The book, “Poor Charlie’s Almanack” put together a collection of his writing and speeches over his lifetime. In these speeches he offers advice for learning, decision making, living a good life and being a successful investor. While the book was often repetitive, and really only presented a few core ideas — the ideas are gold and presented in a really wonderful way. Here are my main takeaways from the book, grouped by category.
Decision Making
Invert… always invert
Many problems are solved better in reverse. Rather than trying to figure out how to get X, Charlie suggests thinking through how to not get X. For example if you want to make a million dollars before age 30, he suggests thinking through how to guarantee you don’t make a million dollars before age 30.
Personal Application: When I am designing systems at work, there is always some goal of the system I am designing. For example if I am building a rate limiter the goal is to protect the system from being overwhelmed. I can try out applying the principle of inversion by flipping this goal around and thinking through what would be true if I wanted the system to be vulnerable to being overwhelmed.
Say No to Almost Everything
Say no to nearly everything you could do or invest in. There are very few things that are actually really important or truly great opportunities. In order to even start to get at the great stuff you need to quickly discard a ton of crap.
Personal Application: There is this idea that I have heard before that if something is not a “Hell Yes,” then its a “NO!” I like this piece of advice because there are lots of things that I would like to do and are good things, but really should not make it past the cut line for the things that truly matter.
Use Mental Checklists
Pilots use mental checklists every time they take off or land a plane. This ensures they have a safe, repeatable process for doing this operation. Charlie also uses mental checklists before investing in a company.
Personal Application: I don’t really have an application for this yet. The idea of thinking in terms of checklists just did not really resonate with me.
Investing
Duration of Increase is the Most Valuable Investment Attribute
A theme that seems to punctuate many of his talks is that the most valuable attribute of an investment is durable increases over a long period of time. Charlie wants to invest in companies that are going to increase over decades and not just do well for the next couple of years.
Personal Application: I liked this idea a lot when applied to personal life. Rather than thinking about this piece of advice as investing advice I took it as personal self improvement advice. Basically, the thing I should care about is getting better bit by bit over the course of a lifetime. This is more important than my current state and more important than my instantaneous velocity of growth. So across my relationships, health and career I will aim for durable growth over a very long time horizon.
Bet Less Often
Warren Buffett had a great quote in the book about how he could improve a whole graduating class’ investment success if he gave them punch cards with 20 holes and each of those holes represented an investment they could make over their lifetime. Once all the holes were punched, they were out of investments and could not invest anymore. Both Buffett and Munger suggest that such a system would produce better investment outcomes compared to making significantly more bets over the course of a lifetime because it would force people to really think about their bets, to bet big when they do bet and only bet when they are really confident.
Personal Application: I think this bit of investment advice can also be applied to a career. If you think about a career is a lot like an investment — its long lasting and has the potential to compound with time. So in my career I want to limit the number of changes that I make, and when I make a change I want to really double down on it.
Buy Great Companies at a Fair Price, Not Fair Companies at a Great Price
When you buy a great company at a fair price you can sit on your ass as you get rich along with the company, but when you buy a fair company at a great price then you need to monitor the market carefully, think about when to sell and sell when you think the company is up to market value. Pick your bets carefully, don’t make very many bets and bet big when you think you have a winner.
Personal Application: In my real estate investing its tempting to buy a lower tier property at a great price. While there can be merit to this method, I have found that by paying more for top tier properties everything gets way easier. The tenants are better, the maintenance is easier and the building tends to appreciate more. To rephrase what Charlie said, I would prefer to buy a great property at a fair price then a fair property at a great price.
Compounding Factors Lead to Extraordinary Results
Multiple bad inputs added together produce a really bad output and multiple good inputs added together produce a really good output. Basically the idea here is the combination of factors, for good or bad, does not compound linearly — instead there is some super-linear relationship between number of input factors, for good or bad, and the outcome.
Personal Application: I am a pretty obsessive person and I can easily slip into the trap of being overweighted in one area of my life. While this obsessive focus is generally directed at something positive, it does not lead to balance. I think in order to really get the extraordinary results from compounding positive inputs together I need to focus on balance across my relationships, health and career.
Learning
Multi-Disciplinary Mental Models
Perhaps the top idea of the book is that people should have 80–100 mental models to think about how the world works. They should hang their understanding of the world, their learnings and their decisions on these mental models. Most importantly, these mental models should come from a diversity of disciplines. Charlie suggests taking the top ideas from each discipline and really learning about them. He gives examples of the most important mental models to adopt from economics, psychology, finances, math, engineering and more.
Personal Application: I set a goal this year to read 12 books. These books run the gamut in terms of disciplines. In order to re-enforce my learnings from each of these books I also intend to write a blog post about each one.
Use Your Mental Models
If you do not regularly use your mental models they will get soft over time and less useful. This idea really relates to my learnings from the book Peak and my learnings about how to effectively learn. Basically if you do not practice something regularly it atrophies.
Personal Application: I don’t think its enough to just intend to learn mental models and use them more often — that is too mushy of a goal to be useful. So instead my goal is to read consistently and blog. By doing this I am going to keep ideas fresh, I will connect ideas across books, I will re-enforce the learning with blog posts…. and through all of this the hope is my mental models improve and I naturally just start using them more regularly.
Study Psychology
Of all the disciplines to take mental models from, Charlie’s personal favorite is psychology. He is a big fan of the idea that humans are irrational in predictable ways, and by learning about these irrationalities one can improve their decision making.
Personal Application: I included a few books on psychology in my 2024 reading list.
Be a Life Long Learner
Both Charlie and Warren have spent their whole lives learning. Even into their 80s they kept learning. Something I noticed from the book is it really was obvious that Charlie had kept learning. His writings and talks that he gave in his 80s are still extremely well put together, clear and insightful. I think this level of mental sharpness into his old age must be at least partially attributed to his focus on learning.
Personal Application: I am going to read 12 books this year focusing on learning from them. Additionally, I am going to double down on my intentional learning time at work. I have always tried to allocate intentional time to just learn at work, but I am going to be even more intentional about protecting that time.
The Good Life
Avoid Envy, Self Pity and Slop
This one is pretty simple — don’t envy others, don’t pity yourself and don’t let even little bits of slop creep into your life.
Personal Application: The one of these that I am most prone to is envy. Its very easy for me to see someone at work that just seems smarter then me and feel envy. But this is super non-constructive! First off this view really robs me of having a growth mentality, and second I should be comparing myself to the yesterday version of myself rather than others.
Be Reliable, Truth and Hard Working
Show up when you say you are going to show up. Do what you say you are going to do. Execute your duties faithfully and well. Work hard and don’t be lazy.
Personal Application: I often struggle with over committing to things. This year I am going to focus on under committing a little bit, then still working hard so that I can over deliver. It is better to sign up for less and deliver slight more then it is to sign up for everything and limb along through getting it done.
Each Day Go to Bed a Bit Wiser Then When you Woke Up
You don’t get ahead in life by making huge gains over the course of just a few months. You get ahead in life inch-by-inch day-by-day over the course of a lifetime. If you do this over a lifetime, you live a long/healthy life and you don’t encounter any unrecoverable setbacks — then this will sum up to a pretty amazing life.
Personal Application: With the move to return to working from offices with the tech world, I now need to take the bus twice every day. I am using this time to think and recall my learnings from the day. One of my goals for the near year is to have a technology free commute. The purpose of this is to give myself headspace to intentionally reflect on my learnings for the day so that I can harden these learnings into longer term memories. An idea I took from by study of learning is that we remember the things we think about. So if I can dedicate space to think about my learnings each day and things I can do better, then these learnings will become more engrained. Summing these up day-by-day and inch-by-inch should aggreate to significant gains.
Winning
Play to Your Strengths
Charlie does not investment in technology companies, because he does not think he has an advantage at understanding those companies. He instead invests in companies where he thinks he has an advantage in understanding. This does not imply you shouldn’t work on improving your weakness, but it does suggest that you want to really win on the grounds of your strengths.
Personal Application: I am really good at building large scale new software projects, but I am less good at doing system operations of existing systems. So while I am focused on improving my ability to operate systems well, I am not going to try to really win on these grounds. Instead I will get to a passable level of system operations such that it does not hold me back, and I will win by building awesome, large, new software projects.
Capitalism is Brutal
Charlie compares capitalism to an ecosystem — the strong win and the weak don’t make it.
Personal Application: Its easy to wish that capitalism was nice and that everyone could just end up doing well in a capitalist market. But that is simply not the case. Capitalism is hard and its important to continuously develop a skill set that is valuable in the market.
Sharpen The Saw on the Sidelines
Most of the time not acting on an opportunity is the best option. You should say no to the vast majority of things. As you say no to doing things, you free up more time to focus on learning. Do less, learn more!
Personal Application: I have carved out dedicated practice time for myself each morning. The first thing I do when I start my work day is to practice something for my job, or do some very focused reading or explore a new piece of code. In other words I have dedicated time each day where I am not “doing” anything I am just focused on getting better at my job and learning. I re-enforce these learnings by recalling the learnings on my bus ride and blogging about them.
