Charlie Munger had mental models for everything

The best investors think like philosophers and read books that have nothing to do with the stock market.

Earlier this year I traveled to Omaha, Nebraska to attend what turned out to be the final Berkshire Hathaway shareholder meeting led by Warren Buffett.

I was sitting in the stadium audience that Saturday morning, stunned like everyone else, when the 94-year-old announced he would step down as CEO at the end of the year.

In the months since Omaha, I’ve read everything I can about Buffett and his late partner Charlie Munger, who died in November 2023.

Plenty has been said about the two’s voracious reading habits, though Munger in particular embraced the idea of “worldly wisdom” which gave him such a wide yet incisive aperture on business and life.

He believed the best decisions stemmed from a combination of mental models and lessons drawn from many — rather than few — disciplines.

Thinking clearly about investments did not come from a narrow understanding of finance, in his view, but from a “latticework” of ideas that married concepts from physics, philosophy, literature, biology and so forth.

Munger believed that people who work to understand at least the most important ideas of every discipline at even an elementary level are superior decision-makers.

This multiple-model approach acts as a sort of hedge against any single faulty model.

Thinking about a problem purely mathematically, for instance, has pitfalls if the equations rely on bad assumptions. Drawing on physics, law and poetry, meanwhile, broadens the surface area with which you can tackle an issue.

I see the upside in my own work as a financial journalist. I unknowingly gave myself an edge by studying biology and philosophy in college, and obsessively reading classic literature and science fiction.

To me, my lack of a formal finance education has actually been helpful in my career so far. Munger I think would agree.

To borrow the language of Wharton professor Philip Tetlock, Munger would be a “fox” — someone who knows a little about a lot — rather than a “hedgehog” — knowing a lot about a little.

Munger made these labels moot.

He simply knew a lot about a lot, and he also knew a little about everything else, as described by Tren Griffin in Charlie Munger: The Complete Investor.

“You have to believe the truth of biologist Julian Huxley’s idea that ‘life is just one damn relatedness after another,’” Munger said, according to Poor Charlie’s Almanack. “So you must have the models, and you must see the relatedness and the effects from the relatedness.”

While I do study the stock market and economy to write my financial newsletter, I nonetheless try to read as broadly as possible. I consume a good deal of old fiction and new biographies, and maintain a steady diet of books that have nothing to do with investing.

Like Munger, I read books not in an attempt to be smart but to avoid being dumb. The “worldly wisdom” framework tells us that good decisions come from asking the right questions from all disciplines.

Success to Munger didn’t come from mastering one domain, but from refusing to silo the mind.

Phil Rosen
Co-founder & Editor-in-Chief, Opening Bell Daily

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