The single mode of thinking is the source of many investment disasters

How to make a good decision? How to become a good investor? It is a good start to form our own thoughts and choices in our thinking model. The construction of these thinking patterns is the key to making the right decisions.

The hands can not only have a “hammer”

The mental model is a predictor of the development of things, and it is clear that how you want things to develop is not a mental model, but how do you think things will develop, that is, your mental model.

If a person has a complete and healthy mental model, he can make an accurate prediction of the development of things, so they have the ability to make better judgments than others. We describe people, sometimes with vision, visionary is used to praise those mind models than ordinary people accurate people.

Wikipedia believes that the core of the mental model must have a variety of models. If you compare it to a tool, the tool is the better. There may not be a lot of “tools” in reality, but you have to allow as many “tools” as possible in your own “toolbox”.

Can imagine what kind of results would be if you were to repair something but not the right tool. From my experience, if you have the right tools, it will solve the problem better, things better.

The same applies to the mental model, and the more mental models you have, the more you tend to make the right decision.

This is very natural on the surface, but in fact people in the process of thinking is not so natural. If people’s brains do not go through proper training, then the brain is more inclined to use their own and like the way to think about the problem.

Munger ‘s argument is to compare it to a man who has only one hammer: “If a man with a hammer in his hand is a weapon, then the way he solves all the problems is that he will only use the hammer.

When you are just accustomed to using a mental model to think about it, you will tend to put all things hard into that mental model, regardless of the situation. This can lead to dangerous thinking or erroneous decisions.

How can we avoid it? Then it is necessary in their own existing mental model as much as possible to join a different model, but also to allow these models compete and compare between each other.

At the beginning, the brain will feel uncomfortable, but you have to know that this is a different mental model at work.

Do you remember the first time to learn to ride a bike? At first, you may not think or believe that you can control your bike, but in the end you do the control of the bike, and you can not imagine how to do it. Once you know how to do it, you will never forget this skill.

In your brain kit there are a variety of different tools, do not do a “hammer” people.

Charlie Mung said: “You have to learn the essence of those major disciplines, and the regular use of all you learn, not just a little bit.” In reality, most people just learn a single subject and Content, for example, many investors only learn economics, and in the face of all the problems is only a way to solve.

Munger felt that it was a reflection of a person’s degree of education. He thinks that people’s brains are like muscle and need to exercise.

Munger specifically mentions the main disciplines that can help expand the mental model and says that there is no need to know all the content in these disciplines, but to know the main content of them. These disciplines are:
 Physics, psychology, biology, mathematics, philosophy, history, sociology and many other disciplines, here are not listed one by one.

Formulate a list of investments

For investors, there is a checklist of their own must be.

The list model can help investors make better decisions in investing, but there is no law. Investors need to learn from mistakes and continue to add new factors to their lists.

This list can help us and help investors stay rational in the face of uncertainty and chaos.

The well-known successful investor, Seth Klarman, founder of the world’s fourth-ranked hedge fund Baupost, and Mohnish Pabrai (Buffett disciples, a new generation of value investors) are inventory methods Of the active users, they say that the use of inventory in the investment method is to make the decision in the process of the basic steps.

Munger himself never said how he used the list, but he reminded us of the importance of the list by speaking, writing and talking on a variety of occasions, and he wanted each of us to think about ourselves and list ourselves For your own list.




Reverse Thinking

Munger said: “To learn to reverse the matter to consider, reverse thinking will help you find a lot of problems.Many problems is in the reverse thinking, the other way to consider the process of finding and solving.

In the investment, you want to profit through the pursuit of good results, or would like to continue to practice their own risk aversion to make themselves more successful? To think of a happy life is to try to avoid those who make you in a bad situation risk situation.

Most people think that big risk means big returns, but Buffett is to avoid the risk to earn wealth.

Munger once said that he and Buffett’s success was not because of how smart they were, but because they tried to “avoid stupidity”.

Here is an example of the stock market. If you find a stock and want to buy it, and after doing all the analysis can be inferred to buy, you also need to do a reverse counter to find out some of the reasons you can not buy this stock.

Through this approach, you can try to ensure that your research is comprehensive, and is a thorough consideration of every aspect of this investment.

Be good at learning from mistakes

This may not be done too much explanation. Be sure to learn from others and your own mistakes. The only way to make investors smarter is to learn from mistakes. This is not only an attitude problem, but also to improve their height of the problem.

After Edison invented the light bulb, someone told him that he had failed to find the most suitable material after the invention of the light bulb, Edison’s answer is that he did not fail 3000 times, he just learned to 3000 can not make the lamp method The This is a great look at the height of the problem.

Buffett has repeatedly said that he is also learned from the failure of many lessons. Buffett has invested millions of dollars to buy Dexter shoe factory, a few years later the factory closed, Buffett later in the process of investigating the company, he found his previous misunderstanding decision, and summed up the “investment moat” theory The Buffett’s billionaire learns from mistakes and failures.

Recently, Bill Ackman, the founder of the billionaire hedge fund hedge fund founder, suffered setbacks. He invested in Valeant Pharmaceuticals, the largest investor in the pharmaceutical company, and the company’s investment made Aikman lose $ 1.09 billion.

He recently appeared on television frequently to explain their investment failure process and the impact of the Panxing Fund, we want to see is his humble attitude of the wrong, Aikeman than many other investors in the world should be smart, And more richer, he also publicly admitted in the television program their mistakes, every investor should have such an attitude.

There are some investors in our lives who do not do a lot of practical research, and simply follow the newspaper and other media propaganda to invest, this investment has the possibility of reward, but it is just lucky.

Ultimately, blindly follow will inevitably bring themselves into a loss situation. We have to learn from, if you do not do a real investigation and research, we must always remind ourselves may make mistakes.

Find a very good person to follow

Charlie Mung said: “I am looking for a particularly good person in my life to observe their investment. I am very interested in what happened to them.

What you observe and learn will increase the success of your investment factors, to these very good people to learn and follow the example must not stay on the surface, to follow their non-linear thinking and style. This kind of emulation and learning will have a positive effect. ”

Munger specially recommended investors to take out the free “big short” this film, the film is not only very entertaining, and it is real life investment in the world took place a true portrayal.

Reading makes rational

In the investment has become more rational, these rationality is not coming overnight, there must be patient to practice their own different mental models to consider the problem of the way, every day will progress a little bit.

Reading is one of the tricks of learning, and reason is a way of learning that can be learned. We all have a natural preference for certain behaviors and ideas, but investors can become more rational by learning the church itself.

To read the works of those famous investors, you can find yourself in the thinking of those “dysfunctional”, through reading can also help you find to overcome these “functional disorders” thinking, but also find the right The direction of development.

Training falsification ability

Learn to think about your own ideas. It is easy to choose their own favorite stocks in the subconscious, and before making a decision to buy out to avoid those who choose to prevent their own stock of the opposite idea.

But always remember the stock market does not care how much you like the stock, the market is the most ruthless.

Mr. Munger highly praised Charlie Darwin’s falsification spirit, which he commented on at the opening ceremony of the 2007 Ivy League School in the United States. Darwin was a model of rational and objective thinking, especially as he could be able to correct his initial conclusions.

“We have to learn Darwin’s remarkable spirit of analysis, and Darwin, when he had his own original idea, quickly put down the books to find evidence that could contradict his thoughts, and if you could not be like Darwin, Stop doing this, you will become a great perfect thinker, rather than just stay in their original ideas of the study.

How can I apply this investment? Munger explained: “investment should also take the same way, when you find a company you like or a thought you think great, you first have to first break down the idea and try to prove that they are wrong, If you can not prove that your investment idea is wrong, then you will have a good investment.