Munger's mental models #1: Invert...always invert!

Mental models

In this short series of blogs and videos, in honour of the late, great, Charles Munger, I take a look at some of his most powerful mental models.

Survivorship: first, do no harm

One of Munger's most famous quotes was:

"All I want to know is where I'll die, so I'll never go there".

This sums about a good deal about the near-unbreakable strategies that allowed Warren Buffett and Charlie Munger to compound their wealth, wisdom, and success for so many decades.

It echoes the old adage: 

Rule #1: Don't lose money

Rule #2: See rule 1!

Inversion is a way of contemplating what you might do with a problem if you wanted to accomplish the opposite result.

How could a goal or endeavour fail?

And how can you avoid the pitfalls?

Inversion in your toolkit

Mathematical geniuses have found that some maths and algebraic problems can only be solved by humans by inverting them. 

If you can't solve a problem, try looking at it differently by solving it backwards.

Try this conundrum on compounding:

Q: If lily pads covering a pond double the surface area they cover every day, and it takes them 30 days to cover the entire pond, how long does it take them to cover half of the pond?

A: It seems extremely difficult to work this puzzle out, until you look at it in reverse to discover that the answer becomes simple...29 days!

The whole pond is covered in 30 days, so half the pond must have been covered one day earlier.

Making a situation worse

If you want to be happy and satisfied with your life, Munger suggested looking at the things that are most likely to make you utterly morose, and avoid them like the plague.

In particular these 3 things:

(i) using chemicals to alter your mood;

(ii) envy; and

(iii) resentment

And if you don't want to become a failure in life, avoid these 3 things:

(i) doing everything yourself, and and not learning from experts and the experiences of others;

(ii) being unreliable; and

(iii) showing no resilience in life

You can apply this approach to anything from solving business problems, considering your personal safety, cementing a robust marriage or partnership, building a bulletproof investment strategy, and much more besides.

For example:

How could I make my business results worse?

What are the most dangerous things I do in life? (If I die in an accident, there's no coming back from that!)

How could I wreck my marriage? (It could be hard to recover from an affair!)

How could I experience a dramatic financial loss? (A bad investment could go to zero!)

Avoiding stupidity

Using inversion as a toolkit in your armoury can help you with the power of avoiding stupidity.

And, by the way, the good news is that avoiding stupidity is much easier than achieving brilliance!

Focus, therefore, at least as much on avoiding failure as on gaining success.

When I quit my career in financial services to start my own business, one of the tools I used was to consider what I might regret if I never gave it a go to work for myself. 

I believe that the path of least regret could be said to be a subset of inversion as a mental model.

I discussed this in the following short video below:

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