Poor Charlies's Almanack - Charlie Munger  ## Metadata - Author: **Charlie Munger** - Full Title: Poor Charlies's Almanack - Category: #articles - URL: https://readwise.io/reader/document_raw_content/40185908 ## Highlights - Charlie has a desire to understand exactly what makes things happen. He wants to get to the bottom of everything, whether it's something of serious interest to him or not. Anything that comes to his attention, he wants to know more about it and understand it and figure out what makes it tick." ([View Highlight](https://read.readwise.io/read/01hsqa8m5ffgezp66pamnaesp2)) - He knows how to take all of his brains and all of his energy and all of his thought and focus exactly on a single problem, to the exclusion of anything else. People will come into the room and pat him on the back or offer him another cup of coffee or something, and he won't even acknowledge their presence because he is using one hundred percent of his huge intellect." ([View Highlight](https://read.readwise.io/read/01hsqa9k9p9nny5bzxeb03v452)) - Take a simple idea and take it seriously." ([View Highlight](https://read.readwise.io/read/01hsqaamv3as2119renybj1yye)) - The number one idea is to view a stock as an ownership of[ the business and to judge the staying quality of the business in terms of its competitive advantage. Look for more value in terms of discounted future cash-flow than you are paying for ([View Highlight](https://read.readwise.io/read/01hsqac91x8nmr5vtycvk3e293)) - Charlie Looks for an easy to understand dominant business franchise that can sustain itself and thrive in all market environment understandably few company survive this first cut many investor favourites such as pharmaceuticals and Technology for example go straight to the too tough to understand basket heavily promoted Deals And IPOs earn an immediate no ([View Highlight](https://read.readwise.io/read/01hsqaemhr609k3wx3qcfmgjn0)) - Those that do survive this first winnowing are subjected to the screens and filters of Charlie mental model approach the process is intense and darwinian but also efficient Charlie detest placer mining the process of sifting through piles of sand for specs of gold instead he applies his big ideas from the big disciplines to find the large and reorganize nuggets of gold that sometimes lie in plain sight on the ground ([View Highlight](https://read.readwise.io/read/01hsqafdpja821q98ebghx1yv5)) - Buffett: "So we think in terms of that moat and the ability to keep its width and its impossibility of being crossed as the primary criterion of a great business ([View Highlight](https://read.readwise.io/read/01hsqah0m1mf3hq2vk02csshgy)) - Charlie treats financial reports and their underlying accounting with a Midwestern dose of skepticism. At best, they are merely the beginning of a proper calculation of intrinsic valuation, not the end ([View Highlight](https://read.readwise.io/read/01hsr9nbg39xyet7x9420etbtb)) - The list of additional factors he examines is seemingly endless and includes such things as the current and prospective regulatory climate; state of labor, supplier, and customer relations; potential impact of changes in technology; competitive strengths and vulnerabilities; pricing power; scalability; environmental issues; and, notably, the presence of hidden exposures (Charlie knows that there is no such thing as a riskless investment candidate; he's searching for those with few risks that are easily understandable ([View Highlight](https://read.readwise.io/read/01hsr9qf3rmz5swcwakkh5j0eg)) - He especially assesses a company's management well beyond conventional number crunching-in particular, the degree to which they are "able, trustworthy, and owner-oriented." For example, how do they deploy cash? Do they allocate it intelligently on behalf of the owners, or do they overcompensate themselves, or pursue ego- oriented growth for growth's sake ([View Highlight](https://read.readwise.io/read/01hsr9tfx81b12tsx49v6z1zbd)) - Munger and and perfect are laser focused on this issue over their long business careers they have learnt sometimes painfully that few business survive over multiple generations ([View Highlight](https://read.readwise.io/read/01hsr9wwtsp6e9jjfg5w19fkjd)) - Charlie understood this early I was a slow learner child Li inside help Buffett move from pure Benjamin Graham style investing to focusing on great business such as the Washington Post Coca-Cola gellert and others. ([View Highlight](https://read.readwise.io/read/01hsr9z647w58qptrrnf8gay49)) - This habit of committing far more time to learning and thinking than to doing is no accident. It is the blend of discipline and patience exhibited by true masters of a craft: an uncompromising commitment to "properly playing the hand ([View Highlight](https://read.readwise.io/read/01hsra6ah78ke9v7432kfte185)) - Most players gain pleasure from feeling accepted or belonging to the group. The good player however, gains pleasure from his ability to cope with the realities of the game ([View Highlight](https://read.readwise.io/read/01hsra817ghnzqfw9vrmdxr482)) - People always want a formula-but it doesn't work that way. You have to estimate total cash generated from now to eternity, and discount it back to today. Yardsticks such as P/Es are not enough by themselves." -Buffett ([View Highlight](https://read.readwise.io/read/01hse784c2m39azm86g3dfszn1)) - You need a different checklist and different mental models for different companies. I can never make it easy by saying, 'Here are three things.' You have to derive it yourself to ingrain it in your head for the rest of your life."- Munger ([View Highlight](https://read.readwise.io/read/01hse79hv6s8mwe533hfnxz0e8)) - Risk-All investment evaluations should begin by measuring risk, especially reputational ([View Highlight](https://read.readwise.io/read/01hse7caf50jf4gbsf17qhknxz)) - Independence-"Only in fairy tales are emperors told they are naked"  Objectivity and rationality require independence of thought ([View Highlight](https://read.readwise.io/read/01hse7d0rkgzyr120vgcw36a4g)) - Preparation-'the only way to win is to work, work, work, work, and hope to have a few insights" ([View Highlight](https://read.readwise.io/read/01hse7e4xyj2ha7rvt5cjhqcqq)) - Intellectual humility-Acknowledging what you don't know is the dawning of wisdom ([View Highlight](https://read.readwise.io/read/01hse7f1tp1bjqvpjmrrxvf00e)) - Analytic rigor-Use of the scientific method and effective checklists minimizes errors and omissions . ([View Highlight](https://read.readwise.io/read/01hse7fx7w90dx63x9hxw3y0zp)) - Be a business analyst, not a market, macroeconomic, or security analyst ([View Highlight](https://read.readwise.io/read/01hse7gwv3m3h4fvr9dypw7e3p)) - Think forwards and backwards-Invert, always invert ([View Highlight](https://read.readwise.io/read/01hse7jw8ypgegda42cq5exsdn)) - Allocation-Proper allocation of capital is an investor's number one job ([View Highlight](https://read.readwise.io/read/01hse7k43kqdardzk3wwyn3pdm)) - Patience-Resist the natural human bias to act ([View Highlight](https://read.readwise.io/read/01hse7r4hr0zg8ksmp75avfev2)) - Compound interest is the eighth wonder of the world" (Einstein ([View Highlight](https://read.readwise.io/read/01hse7rp9j167wr23ssw2npxby)) - Decisiveness-When proper circumstances present themselves, act with decisiveness and conviction  Be fearful when others are greedy, and greedy when others are fearful ([View Highlight](https://read.readwise.io/read/01hse7tczqgs0mk5gpmgdp6evc)) - Opportunity meeting the prepared mind: that's the game ([View Highlight](https://read.readwise.io/read/01hse7v453zqx5zee6jjey9rx4)) - Change-Live with change and accept unremovable complexity Recognize and adapt to the true nature of the world around you; don't expect it to adapt to you ([View Highlight](https://read.readwise.io/read/01hse7vnak7bzn4q4az0p3pkag)) - 1. Focus-Keep things simple and remember what you set out to do o Remember that reputation and integrity are your most   valuable assets ([View Highlight](https://read.readwise.io/read/01hse7w1j797tdqbc6qh7gy9za)) - Warren Buffett has become one hell of a lot better investor since the day I met him, and so have I ([View Highlight](https://read.readwise.io/read/01hseba6s23xqb2dbea4x7r6qv)) - Mimicking the herd invites regression to the mean (merely average performance) ([View Highlight](https://read.readwise.io/read/01hse7dexv8df3tnjnp7vbp6f6)) - I think track records are very important, If you start early trying to have a perfect one in some simple thing like honesty, you're well on your way to success in this world." -Charles T Munger ([View Highlight](https://read.readwise.io/read/01hsebp1scwmf7j0ec68q2jkwg)) - If you tell the truth, you don't have to remember your lies ([View Highlight](https://read.readwise.io/read/01hsebs067r98rx45d73b6cs06)) - You ought to have an internal compass. So there should be all kinds of things you won't do even though they're perfectly legal. That the way we try to operate. ([View Highlight](https://read.readwise.io/read/01hsec00q6q9hnpj6d62rn3sb5)) - l don't think we deserve a lot of credit for that because we early understood that we'd make more money that way. And since we understood it so well, I'm not sure that we're entitled to credit for such morality as we have. ([View Highlight](https://read.readwise.io/read/01hsec0scvyrwchjvg6x5ad9xy)) - you can read the last thirty of them for free at www.berkshirehathaway.com ([View Highlight](https://read.readwise.io/read/01hseegp59xm3c9d22ft75ghvc)) - 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. ([View Highlight](https://read.readwise.io/read/01hsj9mpp8kesb6cb8nfvf6mbf)) - We don't claim to have perfect morals, but at least we have a huge area of things that, while legal, are beneath us. We won't do them. Currently, there's a culture in America that says that anything that won't send you to prison is okay. We believe there should be a huge area between everything you should do and everything you can do without getting into legal trouble. I don't think you should come anywhere near that line. We don't deserve much credit for this. It helps us make more money. I'd like to believe that we'd behave well even if it didn't work. But more often, we've made extra money from doing the right thing. ([View Highlight](https://read.readwise.io/read/01hsj9prkkw0a4zx9amnds181d)) - Tell the truth, and you won't have to remember your lies ([View Highlight](https://read.readwise.io/read/01hsj9q6314spwkecbzpc3xz34)) - The future returns of Berkshire and Wesco won't be as good in the future as they have been in the past. [This is true of all large, successful companies.] The only difference is that we'll tell you. ([View Highlight](https://read.readwise.io/read/01hsja4n87dn02ff9mf9bdx2x2)) - Two-thirds of acquisitions don't work. Ours work because we don't try to do acquisitions-we wait for no-brainers. ([View Highlight](https://read.readwise.io/read/01hsjaeq0erppg3c2cfk4j0464)) - I would argue passion is more important than brain power ([View Highlight](https://read.readwise.io/read/01hsjamh4d9dk57vfy4nsrngjy)) - You need to have a passionate interest in why things are happening. That cast of mind, kept over long periods, gradually improves your ability to focus on reality. If you don't have that case of mind, you're destined for failure even if you have a high I.Q. ([View Highlight](https://read.readwise.io/read/01hsmthjna0y6whz2h451h7fmk)) - Our game is to recognize a business idea when it comes along when one doesn't come along very often, Opportunity comes to the prepared mind.. ([View Highlight](https://read.readwise.io/read/01hsmtkzrrnws4ka4sbt5f79w8)) - Very few people have adopted our approach. Focus investing is growing somewhat, but what's really growing is the unlimited use of consultants to advise on asset allocation, to analyze other consultants, and so forth. Maybe two percent of people will come into our corner of the tent, and the rest of the ninety-eight percent will believe what they've been told [e.g., that markets are totally efficient. ([View Highlight](https://read.readwise.io/read/01hsmtq5qhn4vqt5nc1rtngfx3)) - If you buy something because it's undervalued then you have to think about selling it when it approaches your calculation of its intrinsic value that's hard but if you buy a few great companies then you can sit on your ass that's a good thing we are partial to putting out large amounts of money when we don't have to make another decision. ([View Highlight](https://read.readwise.io/read/01hsmttkvf30qexazfxnczfb0n)) - The most extreme mistakes in Berkshire's history have been mistakes of omission. We saw it, but didn't act on it. They're huge mistake-we've lost billions. And we keep doing it. We're getting better at it. We never get over it. ([View Highlight](https://read.readwise.io/read/01hsmtzfzrq7gk2p7dqsf1ksny)) - There Are two types of mistakes: 1. doing nothing that Warren calls "sucking my thumb" and 2. buying with an eyedropper things we should be buying a lot of. ([View Highlight](https://read.readwise.io/read/01hsmv2nt0fm3p67t6zqp5ntdf)) - Over many decades, our usual practice is that if [the stock of something we like goes down, we buy more and more. Sometimes something happens, you realize you're wrong, and you get out. But if you develop correct confidence in your judgment, buy more and take advantage of stock prices. Attractive investment opportunities tend to be ephemeral. Really good investment opportunities aren't going to come along too often and won't last too long, so you've got to be ready to act. Have a prepared mind. ([View Highlight](https://read.readwise.io/read/01hsmv4txphydj5y4gp8qejwwv)) - I'd work with very small stocks, searching for unusual mispriced opportunities, but it's such a small world. ([View Highlight](https://read.readwise.io/read/01hsmv6f5ty0rgkyt67v30zzfc)) - Short Selling Being short and seeing a promoter take the stock up is very irritating. It's not worth it to have that much irritation in your life. ([View Highlight](https://read.readwise.io/read/01hsmv75t3xd5m6w8p320sakkt)) - There are a lot of things we pass on. We have three baskets: in, our, and too tough. We have to have a special insight, or we'll put it in the "too tough" basket. All you have to look for is a special area of competency and focus on that. ([View Highlight](https://read.readwise.io/read/01hsmvd783sj8w3vf8hfvfzc6m)) - intelligent people make decisions based on opportunity costs-in other words, it's your alternatives that matter ([View Highlight](https://read.readwise.io/read/01hsmvgahnxwvzq7p30gab7rwz)) - Value of Forecasts People have always had this craving to have someone tell them the future. Long ago, kings would hire people to read sheep guts. There's always been a market for people who pretend to know the future. Listening to today's forecasters is just as crazy as when the king hired the guy to look at the sheep guts. It happens over and over and over. ([View Highlight](https://read.readwise.io/read/01hsmvn7rydgtv67z6h3cnkpct)) - IPOs are too small for us, or too high tech-we won't understand them ([View Highlight](https://read.readwise.io/read/01hsmvpnfnpr8jz6889w88z74s)) - Stocks are valued partly like bonds, based on roughly rational projections of producing future cash' But they are also valued partly like Rembrandt paintings, purchased mostly because their prices have gone up so far. This situation, combined with big "wealth effects," at first up and later down, can conceivably produce much mischief. ([View Highlight](https://read.readwise.io/read/01hsmvr9vfdmqre49v8ck6zxay)) - Question: "What macro statistics do you regularly monitor or find useful in your attempt to understand the broader economic landscape?" Answer: "None. I find by staying abreast of our Berkshire subsidiaries and by regularly reading business newspapers and magazines, I am exposed to an enormous amount of material at the micro level. I find that what I see going on there pretty much informs me about what's happening at the macro level." ([View Highlight](https://read.readwise.io/read/01hsmwmpwnz2gkzmsctb1hwejc)) - Indexing can't work well forever if almost everybody turns to it. But it will work all right for a long time. ([View Highlight](https://read.readwise.io/read/01hsn924t3h2v124qztdqdsd14)) - You need a different checklist and different mental models for different companies. I can never make it easy by saying, "Here are three things." You have to derive it yourself to ingrain it in your head for the rest of your life ([View Highlight](https://read.readwise.io/read/01hsnbqy8n0c1yfc3jwmz4432x)) - The happier mental realm I recommend is one from which no one willingly returns. A return would be like cutting off one's hands. ([View Highlight](https://read.readwise.io/read/01hsnbt5hgs3vdsrrrf2v83v9v)) - There are huge dangers with computers. People calculate too much and think too little ([View Highlight](https://read.readwise.io/read/01hsnbyfdqadjzvwazqe4eag29)) - I don't know anyone who's wise who doesn’t read a lot ([View Highlight](https://read.readwise.io/read/01hsnbxg7t4dhn7fvtkxn5scbm)) - Henry Singleton has the best operating and capital deployment record in American business...if one took the 100 top business school graduates and made a composite of their triumphs, their record would not be as good as Singleton ([View Highlight](https://read.readwise.io/read/01hsnc36swvm7syqjf2y4ybk11)) - If all you succeed in doing in life is getting rich by buying little pieces of paper, it's a failed life. Life is more than being shrewd in wealth accumulation. A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc. Just avoid things like AIDS situations, racing trains to the crossing, and doing cocaine. Develop good mental habits ([View Highlight](https://read.readwise.io/read/01hsnc60w0rvn3js25ts3z3e0f)) - Avoid evil, particularly if they're attractive members of the opposite sex. ([View Highlight](https://read.readwise.io/read/01hsnc5wt7rxxga2z6f660m3x2)) - If your new behavior earns a little temporary unpopularity with your peer group then the hell with them ([View Highlight](https://read.readwise.io/read/01hsnc6kjsdvbyff5nmrgwrh4z)) - The idea of caring that someone is making money faster [than you are] is one of the deadly sins. Envy is a really stupid sin because it's the only one you could never possibly have any fun at. There's a lot of pain and no fun. Why would you want to get on that trolley ([View Highlight](https://read.readwise.io/read/01hsnc93rtahgcexr2b33kjsp9)) - Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in fast spurts. But you build discipline by preparing for fast spurts. Slug it out one inch at a time, day by day. At the end of the day-if you live long enough-most people get what they deserve. ([View Highlight](https://read.readwise.io/read/01hsncatvevcmejne5nrxhny6k)) - In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time-none, zero. ([View Highlight](https://read.readwise.io/read/01hsncd3jjh85z796vwse7fwtw)) - If you wish to retain the contribution of envy to misery, I recommend that you never read any of the biographies of that good Christian, Samuel Johnson, because his life demonstrates in an enticing way the possibility and advantage of transcending envy. ([View Highlight](https://read.readwise.io/read/01hsnd2vf99avrd6tm3fegfc4p)) - First, be unreliable. Do not faithfully do what you have engaged to do. If you will only master this one habit, you will more than counterbalance the combined effect of all your virtues, how so ever great ([View Highlight](https://read.readwise.io/read/01hsnd5mnfr0zp098cyjkjb7xt)) - My second Prescription for miseries to learn everything you possibly can from your own experiences minimizing what you learn vicariously from the good and bad experience of others, living and dead. This prescription is a sure shot producer cf misery and second-rate achievement ([View Highlight](https://read.readwise.io/read/01hsnd7mx4rkdtjdxwcjjgtqzr)) - If I have seen a little farther than other men. it is because I stood on the shoulders of giants ([View Highlight](https://read.readwise.io/read/01hsndapc1pd20gcbfvcxkn6sz)) - My third prescription to you for misery is to go down and stay down when you get your first, second, or third severe reverse in the battle of life. ([View Highlight](https://read.readwise.io/read/01hsnkf8zrd7912tvaqg6sh3x3)) - Invert always invert," Jacobi said. He knew that it is in the nature of things that many hard problems are best solved when they are addressed backward ([View Highlight](https://read.readwise.io/read/01hsnkhfj3kk7ezt20hqtzcbzt)) - My final prescription to you for a life of fuzzy thinking and infelicity is to ignore a story they told me when I was very young about a rustic who said, "I wish I knew where I was going to die, and then I'd never go there." Most people smile (as you did) at the rustic's ignorance and ignore his basic wisdom. If my experience is any guide, the rustic's approach is to be avoided at all cost by someone bent on misery. To help fail, you should discount as mere quirk, with no useful message, the method of the rustic, which is the same one used in Carson's speech ([View Highlight](https://read.readwise.io/read/01hsnkkkg784zv7b5zc7bp8d5s)) - Invert, always invert." It is in the nature of things, as Jacobi knew, that many hard problems are best solved only when they are addressed backward. For instance, when almost everyone else was trying to revise the electromagnetic laws of Maxwell to be consistent with the motion laws of Newton, Einstein discovered special relativity as he made a 180 degree turn and revised Newton's laws to fit Maxwell's ([View Highlight](https://read.readwise.io/read/01hsnkscd95wj94qg4cgb2tw8e)) - If you minimize objectivity, you ignore not only a lesson from Darwin but also one from Einstein. Einstein said that his successful theories came from "Curiosity, concentration, perseverance, and self-criticism ([View Highlight](https://read.readwise.io/read/01hsnm0me7vvacjztxe0a9g61d)) - 1) reliability is essential for progress in life and (2) while quantum mechanics is unlearnable for a vast majority, reliability can be learned to great advantage by almost Anyone ([View Highlight](https://read.readwise.io/read/01hsnsjk4zzy4q69sexbfne5v1)) - You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and fail in life. You've got to hang experience on a latticework of models in your head. ([View Highlight](https://read.readwise.io/read/01hsnvgv3yn98ce2m1ezbc2eaj)) - One of the advantages of a fellow like Buffett, whom I've worked with all these years, is that he automatically thinks in terms of decision trees and the elementary math of permutations and combinations. ([View Highlight](https://read.readwise.io/read/01hsnw0e942ce21tvw3cwx67r4)) - Pascal said, "The mind of man at one and the same time is both the glory and the shame of the universe." ([View Highlight](https://read.readwise.io/read/01hspzat1vpt1yy38nrqmxmc3j)) - The very nature of things is that if you get a whole lot of volume through your operation, you get better at processing that volume. 'That's an enormous advantage. And it has a lot to do with which businesses succeed and fail ([View Highlight](https://read.readwise.io/read/01hspzt0gjer5gma9gcvvmzjn8)) - And the way they beat us was by going to a narrower specialization. We'd have a travel magazine for business travel. So somebody would create one which was addressed solely at corporate travel departments. Like an ecosystem, you're getting a narrower and narrower specialization ([View Highlight](https://read.readwise.io/read/01hst0q0nxbrzgk3wzqz1ya33k)) - circle of competence- which results partly from what they were born with and partly from what they slowly develop through work ([View Highlight](https://read.readwise.io/read/01hstd7yyfsgfny1je87w4ganb)) - You have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don't, you're going to lose. ([View Highlight](https://read.readwise.io/read/01hstday9bk99jzzt1y33q2e80)) - The way to win is to work, work, work, work, and hope to have a few insights. ([View Highlight](https://read.readwise.io/read/01hste3wedteh8jpa0mw7c156b)) - That is a very simple concept. And to me it's obviously right-based on experience not only from the pari-mutuel system, but everywhere else. And yet, in investment management, practically nobody operates that way. We operate that way-I'm talking about Buffett and Munger. And we're not alone in the world. But a huge majority of people have some other crazy construct in their heads. ([View Highlight](https://read.readwise.io/read/01hste4vyc0c8hv5mrx9w0bkvg)) - If you look at Berkshire Hathaway and all of its accumulated billions, the top ten insights account for most of it. ([View Highlight](https://read.readwise.io/read/01hste6w38p2mx90b8dntj12sj)) - When Warren lectures at business schools, he says, "I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches-representing all the investments that you got to make in a lifetime. And once you'd punched through the card, you couldn't make any more investments at all." He says, "Under those rules, you'd really think carefully about what you did, and you'd be forced to load up on what you'd really thought about. So you'd do so much better." ([View Highlight](https://read.readwise.io/read/01hstensw9nrr3grrdgtj3bwvh)) - What style should the investor use as a picker of common stocks in order to try to beat the market-in other words, to get an above average long-term result? A standard technique that appeals to a lot of people is called "sector rotation." You simply figure out when oils are going to outperform retailers, etc., etc., etc. You just kind of flit around being in the hot sector of the market making better choices than other people. And presumably, over a long period of time, you get ahead. However, I know of no really rich sector rotator. Maybe some people can do it I'm not saying they can't. All I know is that all the people I know who got rich-and I know a lot of them-did not do it that way ([View Highlight](https://read.readwise.io/read/01hstf4w72at6te36epnb8bc37)) - The second basic approach is the one that Ben Graham used, admired by Warren and me. As one factor, Graham had this concept of value to a private owner-what the whole enterprise would sell for if it were available. And that was calculable in many cases. Then, if you could take the stock price and multiply it by the number of shares and get something that was one-third or less of sellout value, he would say that you've got a lot of edge going for you. Even with an elderly alcoholic running a stodgy business, this significant excess of real value per share working for you means that all kinds of good things can happen to you. You had a huge margin of safety-as he put it-by having this big excess value going for you. But he was, by and large, operating when the world was in shell-shock from the 1930s-which was the worst contraction in the English-speaking world in about 600 years ([View Highlight](https://read.readwise.io/read/01hstf5tmx35hjmdn3z4y2571v)) - And in terms of blowing it, IBM is some example. Those were brilliant, disciplined people. But there was enough turmoil in technological change that IBM got bounced off the wave after "surfing" successfully for sixty years. And that was some collapse-an object lesson in the difficulties of technology and one of the reasons why Buffett and Munger don't like technology very much. We don't think we're any good at it, and strange things can happen. ([View Highlight](https://read.readwise.io/read/01hstfs5xepe6xkjqgtkga6es1)) - Of course, the best part of it all was his concept of "Mr. Market." Instead of thinking the market was efficient, Graham treated it as a manic-depressive who comes by every day. And some days "Mr. Market" says, "I'll sell you some of my interest for way less than you think it's worth." And other days, he comes by and says, "I'll buy your interest at a price that's way higher than you think it's worth." And you get the option of deciding whether you want to buy more, sell part of what you already have, or do nothing at all. ([View Highlight](https://read.readwise.io/read/01hstfxzy3bjfysvfjpcwnajr2)) - We've really made the money out of high-quality businesses. In some cases, we bought the whole business. And in some cases, we just bought a big block of stock. ([View Highlight](https://read.readwise.io/read/01hstgr8yz1tezwpc6gvvkc84c)) - How do you get into these great companies? One method is what I'd call the method of finding them small-get em when they're little. For example, buy WalMart when Sam Walton first goes public and so forth. And a lot of people try to do just that. And it's a very beguiling idea. If I were a young man, I might actually go into it. ([View Highlight](https://read.readwise.io/read/01hstgv8gj6emkwyag7y4xaahx)) - However, averaged out, betting on the quality of a business is better than betting on the quality of management. In other words, if you have to choose one, bet on the business momentum, not the brilliance of the manager. ([View Highlight](https://read.readwise.io/read/01hsth0ds8wk85wk5gz98r84tq)) - But, very rarely, you find a manager who's so good that you're wise to follow him into what looks like a mediocre business ([View Highlight](https://read.readwise.io/read/01hsth0z6xymh4c5gwvx67ze4a)) - Another very simple effect I very seldom see discussed either by investment managers or anybody else is the effect of taxes. If you're going to buy something that compounds for thirty years at fifteen percent per annum and you pay one thirty-five percent tax at the very end, the way that works out is that after taxes, you keep 13.3 percent per annum. ([View Highlight](https://read.readwise.io/read/01hsth3nye6ahth1nqpd0dh0m6)) - Warren and I personally don't drill oil wells. We pay our taxes. And we've done pretty well, so far. Anytime somebody offers you a tax shelter from here on in life, my advice would be don't buy it. ([View Highlight](https://read.readwise.io/read/01hsth7h9sv9d8n2g1s5t13p7s)) - There are huge advantages for an individual to get into a position where you make a few great investments and just sit on your ass: You're paying less to brokers. You're listening to less nonsense. And if it works, the governmental tax system gives you an extra one, two, or three percentage points per annum compounded. ([View Highlight](https://read.readwise.io/read/01hsth9nfjkes69sdb8bq6y3ak)) - And just as IBM fell off the wave, other companies did, too. Thus, a large investment disaster resulted from too high prices. And you've got to be aware of that danger ([View Highlight](https://read.readwise.io/read/01hsthcwz989zfr3zjn1sh7727)) - Thales of Miletus. This scientist of antiquity made a large profit by leasing most of the olive presses in his area just before the occurrence of a particularly bountiful harvest. ([View Highlight](https://read.readwise.io/read/01hstj9r0yefhfjg245ganz6pd)) - I have three basic rules. Meeting all three is nearly impossible, but you should try anyway: Don't sell anything you wouldn't buy yourself.. Don't work for anyone you don't respect and admire. Work only with people you enjoy ([View Highlight](https://read.readwise.io/read/01hstjfjrcr5wgm5pek71aga3s)) - Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step-by-step you get ahead, but not necessarily in fast spurts. But you build discipline by preparing for fast spurts. Slug it out one inch at a time, day-by-day, and at the end of the day-if you live long enough-like most people, you will get out of life what you deserve ([View Highlight](https://read.readwise.io/read/01hstjjqq5msw4c8433q4r4stz)) - Life and its various passages can be hard, brutally hard. The three things I have found helpful in coping with its challenges are: Have low expectations. Have a sense of humor. Surround yourself with the love of friends and family. Above all, live with change and adapt to it. ([View Highlight](https://read.readwise.io/read/01hstjmf8gh5bk0ejvxhkb896m)) - You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time ([View Highlight](https://read.readwise.io/read/01hstjmw26wm80p0s6tan3y5jv)) - How do you get worldly wisdom? What system do you use to rise into the tiny top percentage of the world in terms of having sort of an elementary practical wisdom? I've long believed that a certain system-which almost any intelligent person can learn works way better than the systems that most people use. As I said at the U.S.C. Business School, what your need is a latticework of mental models in your head. And you hang your actual experience and your vicarious experience (that you get from reading and so forth) on this latticework of powerful models. And, with that system, things gradually get to fit together in a way that enhances cognition. ([View Highlight](https://read.readwise.io/read/01hstjr15x8g0xsq16c5h3vshc)) - And some of the worst dysfunctions in businesses come from the fact that they balkanize reality into little individual departments with territoriality and turf protection and so forth. So if you want to be a good thinker, you must develop a mind that can jump the jurisdictional boundaries. ([View Highlight](https://read.readwise.io/read/01hstjvj815cjwebx42k12f77x)) - Heavy ideology is one of the most extreme distorters of human cognition. Look at these Islamic fundamentalists who just gunned down a bunch of Greek tourists shouting, "God's work!" Ideology does some strange things and distorts cognition terribly. ([View Highlight](https://read.readwise.io/read/01hstvve8w87gb90vxdxzkcqvv)) - Warren observed this as a kid. And he decided that ideology was dangerous and that he was going to stay a long way away from it. And he has throughout his whole life ([View Highlight](https://read.readwise.io/read/01hstvwqqtn9gbae887crq7eab)) - What a man wishes, that also will he believe." Well, Demosthenes was right ([View Highlight](https://read.readwise.io/read/01hsvvx6beyasd37z15s1p8k1s)) - The five essential entrepreneurial skills for success are concentration, discrimination,, organization, innovation, and communication ([View Highlight](https://read.readwise.io/read/01hsvw1sk0masbhx6jpc9qadxv)) - his checklist: A, B, C, D. And no bridge player who needs two extra tricks plays a hand without going down his checklist and figuring out how to do it ([View Highlight](https://read.readwise.io/read/01hsvwcqec9ht1nnadc4z8w0ak)) - We just look for no-brainer decisions. As Buffett and I say over and over again, we don't leap seven-foot fences. Instead, we look for one-foot fences with big rewards on the other side. So we've succeeded by making the world easy for ourselves, not by solving hard problems ([View Highlight](https://read.readwise.io/read/01hsw1xnksfpcgkrcjmn7sy2r5)) - By and large, we've chosen people we admire enormously to have the power beneath us. It's easy for us to get along with them on average because we love and admire them. And they create the culture for whatever invention and reality recognition is going on in their businesses ([View Highlight](https://read.readwise.io/read/01hsw253mjtwwmgds44c10n7fy)) - In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke. You've made an enormous commitment to something. You've poured effort and money in. And the more you put in, the more that the whole consistency principle makes you think, "Now it has to work. If I put in just a little more, then it'll work. ([View Highlight](https://read.readwise.io/read/01hsw2exbhe8bgnzv566ff62xg)) - At age 26, Walt Disney was already the head of a successful cartoon studio in Hollywood, California. But business was less than rosy for the young cartoonist, because his principal property, Oswald the Rabbit, had just been wrested from his control by his financial backers. "Mrs. Disney and I were coming back from New York on the train and I had to have something I could tell them," he recalled. "I have lost Oswald, but I had this mouse in the back of my head..." Walt’s new creation was a little mouse in red velvet pants named "Mortimer." 'Walt's wife, Lillian, felt that was too pompous a name for such a cute character and suggested "Mickey''instead. The rest is Disney history. ([View Highlight](https://read.readwise.io/read/01hsw2k893cjtvy74rvk6rja97)) - Disney is an amazing example of autocatalysis ([View Highlight](https://read.readwise.io/read/01hsw2kqkwyh8ke93807ntmfzy)) - We've basically invested our own money for a long, long time. ([View Highlight](https://read.readwise.io/read/01hsw6d6hrcaazqq9fbzwe34vp)) - The Intelligent Investor still the best book on investing. It has the only three ideas you really need: l) The Mr. Market analogy 1. A stock is a piece of a business 2. Margin of safety." -Buffett ([View Highlight](https://read.readwise.io/read/01hsw6dj10g22n3srh1ybs1e2j)) - On the other hand, we have said that common stocks generally have generated returns of ten to eleven percent after inflation for many years and that those reTurns can't continue for a very long period. And they can't. It's simply impossible. The wealth of the world will compound at no such rate. Whatever experience Stanford has had in its portfolio for the last fifteen years, its future experience is virtually certain to be worse. It may still be okay. But it's been a hog heaven period for investors over the last fifteen years. Bonanza effects of such scale can't last forever. ([View Highlight](https://read.readwise.io/read/01hswpz7g40b3111pj0kjb83ba)) - I try to get rid of people who always confidently answer questions about which they don't have any real knowledge. To me, they're like the bee dancing its incoherent dance. They're just screwing up the hive ([View Highlight](https://read.readwise.io/read/01hsyr8nj01th41ejv654r5f62)) - I believe in the discipline of mastering the best that other people have ever figured out. I don't believe in just sitting down and trying to dream it all up yourself ([View Highlight](https://read.readwise.io/read/01ht0438fym6eaqpa80923kmkz)) - The first helpful notion is that it is usually best to simplify problems by deciding big "no-brainer" questions first ([View Highlight](https://read.readwise.io/read/01ht0aykeqxpct4khqbd2gy93b)) - The second helpful notion mimics Galileo's conclusion that scientific reality is often revealed only by math as if math was the language of God. Galileo's attitude also works well in messy, practical life. Without numerical Fluency, in the part of life most of us inhabit, you are like a one-legged man in an ass-kicking contest. ([View Highlight](https://read.readwise.io/read/01ht0azqp93t9d41aj3t5mygz8)) - The third helpful notion is that it is not enough to think problems through forward. You must also think in reverse, much like the rustic who wanted to know where he was going to die so that he'd never go there. Indeed, many problems can't be solved forward. And that is why the great algebraist Carl Jacobi so often said, "Invert, always invert." And why the Pythagoreans thought in reverse to prove that the square root of two was an irrational number ([View Highlight](https://read.readwise.io/read/01ht0b1a9w8tjb2a5w93cpz19q)) - The fourth helpful notion is that the best and most practical wisdom is elementary academic wisdom. But there is one extremely important qualification: You must think in a multidisciplinary manner ([View Highlight](https://read.readwise.io/read/01ht0b3ktbynb25xdhzb7c986d)) - Ben Franklin's prescription in Poor Richard: "If you want it done, go. If not, send." ([View Highlight](https://read.readwise.io/read/01ht0b45yh0xr5s4hg2t50bmyp)) - The fifth helpful notion is that really big effects, lollapalooza effects, will often come only from large combinations of factors ([View Highlight](https://read.readwise.io/read/01ht0b6sz2s58pne4yqn6wkwah)) - Pavlov's most famous experiment showed that dogs tend to salivate before food is actually delivered to their mouths. This result led him to a long series of experiments in which he manipulated the stimuli occurring before the presentation of food. He thereby established the basic laws for the establishment and section of what he called "conditional reflexes," later mistranslated from the original Russian as "conditioned reflexes." He was awarded the Nobel Prize in l904 for his work on digestive secretions. ([View Highlight](https://read.readwise.io/read/01ht197tzxcfc6ahe1qjn35d1f)) - As we expand fast in our new- beverage market, our competitors will face gross disadvantages of scale in buying advertising to create the Pavlovian conditioning they need. And this outcome, along with other volume creates-power effects, should help us gain and hold at least fifty percent of the new market everywhere ([View Highlight](https://read.readwise.io/read/01ht19vnyhmw1jjnavpy9mm8x3)) - We can now see, Glotz, that by combining (1) much Pavlovian conditioning, (2) powerful social-proof effects, and (3) a wonderful-tasting, energy-giving, stimulating, and desirably cold beverage that causes much operant conditioning, we are going to get sales that speed up for a long time by reason of the huge mixture of factors we have chosen. Therefore, we are going to start something like an autocatalytic reaction in chemistry, precisely the sort of multifactor-triggered lollapalooza effect we need ([View Highlight](https://read.readwise.io/read/01ht1jfnqpv9y239wafn05g5d4)) - The logistics and the distribution strategy of our business will be simple. There are only two practical ways to sell our beverage: (1) as syrup to fountains and restaurants and (2) as a complete carbonated-water product in containers. Wanting lollapalooza results, we will naturally do it both ways. And, wanting huge Pavlovian and social-proof effects, we will always spend on advertising and sales promotion, per serving, over forty percent of the fountain price for syrup needed to make the serving. ([View Highlight](https://read.readwise.io/read/01ht1nfqfkd3bw49ds4hrzckcm)) - The best way to arrange this desirable profit-maximizing control is to make any independent bottler we need a subcontractor, not a vendee of syrup, and certainly not a vendee of syrup under a perpetual franchise specifying a syrup price frozen forever at its starting level ([View Highlight](https://read.readwise.io/read/01ht1pds72z0s3q9hayv90saay)) - Being unable to get a patent or copyright on our super important flavor, we will work obsessively to keep our formula secret ([View Highlight](https://read.readwise.io/read/01ht1ph9gagmh1ykz6newmgcrb)) - Eventually, food-chemical engineering will advance so that our flavor can be copied with near exactitude. But, by that time, we will be so far ahead, with such strong trademarks and complete, "always available" worldwide distribution, that good flavor copying won't bar us from our objective ([View Highlight](https://read.readwise.io/read/01ht1pkywdzdk14q91q2ba3jgj)) - No less a figure than Einstein said that one of the four causes of his achievement was self-criticism, ranking right up there alongside curiosity, concentration, and perseverance. ([View Highlight](https://read.readwise.io/read/01ht1qyfkrt69nwtwqeg5xa4vr)) - The company that needs a new machine tool, and hasn't bought it, is already paying for it. ([View Highlight](https://read.readwise.io/read/01ht1t93m08fwhhe17e49v0844)) - Question: "Do you use a computer?" Answer: "I don't. I do have one in my office, but I've never turned it on. In fact, I wouldn't even know how to plug it in. In my life there are not many questions I can't properly deal with using my $40 adding machine and dog-eared compound interest table." ([View Highlight](https://read.readwise.io/read/01ht1te5074k6e9n0wpdh0grzn)) - Teachers open the door, but you must enter by yourself ([View Highlight](https://read.readwise.io/read/01ht1ts76sdxavjhdjes4kv9ny)) - A magician demonstrates this sort of contrast based error in your nervous system when he removes your wristwatch without your feeling it. As he does this, he applies pressure of touch on your wrist that you would sense if it was the only pressure of touch you were experiencing. But he has concurrently applied other intense pressure of touch on your body, but not on your wrist, "swamping" the wrist pressure by creating a high-contrast touch pressure elsewhere. This high contrast takes the wrist pressure below perception. ([View Highlight](https://read.readwise.io/read/01ht30f806qgkmd7xd84bbx42p)) - One: Reward and Punishment Super Response Tendency Two: Liking/Loving Tendency Three: Disliking/Hating Tendency Four: Doubt-Avoidance Tendency Five: Inconsistency-Avoidance Tendency Six: Curiosity Tendency Seven: Kantian Fairness Tendency Eight: Envy/Jealousy Tendency Nine: Reciprocation Tendency Ten: Influence-from-Mere- consequences from Association Tendency confluences of psychological Eleven: Simple, Pain-Avoiding Tendencies Acting in Favor of psychological Denial a Particular outcome Twelve: Excessive Self-Regard Tendency Thirteen: Overoptimism Tendency Fourteen: Deprival-Super Reaction Tendency Fifteen: Social-Proof Tendency Sixteen: Contrast-Misreaction Tendency Seventeen: Stress-Influence Tendency Eighteen: Availability-Mis Weighing Tendency Nineteen: Use-It-or-Lose-It Tendency Twenty: Drug-Misinfluence Tendency Twenty-One: Senescence-Misinfluence Tendency Twenty-Two: Authority-Misinfluence Tendency Twenty-Three: Twaddle Tendency Twenty-Four: Reason-Respecting Tendency Twenty-Five: Lollapalooza Tendency-The Tendency to Get Extreme 464 ([View Highlight](https://read.readwise.io/read/01ht30qjevhpmkh23m2tgvn35t)) - Kant was famous for his "categorical imperative," a sort of a "golden rule" that required humans to follow those behavior patterns that, if followed by all others, would make the surrounding human system work best for everybody. And it is not too much to say that modern acculturated man displays, and expects from others, a lot of fairness as thus defined by Kant ([View Highlight](https://read.readwise.io/read/01ht3w1pgccq6y6t1gpw7r3t7f)) - An idea or a fact is not worth more merely because it is easily available to you. ([View Highlight](https://read.readwise.io/read/01ht3x511p76xjnk0131xrkrwg)) - "The next thing most like living one's life over again seems to be a recollection of that life, and to make that recollection as durable as possible by putting it down in writing." ([View Highlight](https://read.readwise.io/read/01hs1yxcd702xrsqee4t3562z8)) - He has often stated that anyone who wants to be successful should study physics because its concepts and formulas so beautifully demonstrate the powers of sound theory ([View Highlight](https://read.readwise.io/read/01hs36bcwtarefwnf3zb80kd4w)) - However, he never forgot the sound principles caught by his grandfather: to concentrate on the task immediately in front of him and to control spending. ([View Highlight](https://read.readwise.io/read/01hs36ttrca0ws5hha215mkk8p)) - "Charlie's Smart, Curious, Focused...and a Little Absentminded. ([View Highlight](https://read.readwise.io/read/01hsdb4ns18fcz0nzppt6jwjgy)) - Charlie has a desire to understand exactly what makes things happen. He wants to get to the bottom of everything, whether it's something of serious interest to him or not. Anything that comes to his attention, he wants to know more about it and understand it and figure out what makes it tick. ([View Highlight](https://read.readwise.io/read/01hsdb4w9f73d3sq5c2pcrpchk)) - He knows how to take all of his brains and all of his energy and all of his thought and focus exactly on a single problem, to the exclusion of anything else ([View Highlight](https://read.readwise.io/read/01hsdb5qcsz55e9c46arzacw6c)) - 'Find out what you're best at and keep pounding away at it. ([View Highlight](https://read.readwise.io/read/01hsdcmdg86z00sq3tg6px9fsv)) - Take a simple idea and take it seriously ([View Highlight](https://read.readwise.io/read/01hsdcwbwbnty75y86aw1stzv9)) - "The most important thing to keep in mind is the idea that especially big forces often come out of these one hundred models. when several models combine, you get lollapalooza effects; this is when two, three, or four forces are all operating in the same direction. ([View Highlight](https://read.readwise.io/read/01hsdd9bs1cv13yp51p32x2thx)) - There is no better teacher than history in determining the future.... There are answers worth billions of dollars in a $30 history book. ([View Highlight](https://read.readwise.io/read/01hsdde9fy1y3s22yvt98s50xz)) - Munger, like Buffett, believes a successful investment career boils down to only a handful of decisions. So when Charlie likes a business, he makes a very large bet and typically holds the position for a long period ([View Highlight](https://read.readwise.io/read/01hsddt0nzc5nk645bhrh9f7ny)) - three companies is plenty of diversification. ([View Highlight](https://read.readwise.io/read/01hsddv0mddktpmq46cx9sw6vm)) - few investors share Charlie's willingness to appear foolish by not following "the herd." ([View Highlight](https://read.readwise.io/read/01hsddxt0vr4zttgpr2hdp6q5r)) - Charlie is simply content to trust his own judgment even when it runs counter to the wisdom of the herd ([View Highlight](https://read.readwise.io/read/01hsddymqxzagx4w1k7k4sf3vq)) - At the 2004 Berkshire Hathaway annual meeting, a young shareholder asked Buffett how to succeed in life. After Buffett shared his thoughts, Charlie chimed in: : "Don't do cocaine. Don't race trains. And avoid AIDS situations." Many would dismiss his seemingly flippant answer as merely humorous (which it certainly was), but in fact it faithfully reflects both his general views on avoiding trouble in life and his particular method for avoiding missteps in investing. ([View Highlight](https://read.readwise.io/read/01hsdf93v68g332hyatvfyw8e3)) - 'When Warren lectures at business school, be says, 'I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches representing all the investments that you get to make in a lifetime and once you had punched through the card you could not make any more investments at all under those rules you would really think carefully about what you did and you would be forced to load up on what you would really thought about. So you'd do so much better ([View Highlight](https://read.readwise.io/read/01hsdf9y6kdxstn8q6s8xw6dkm)) - Often, as in this case, Charlie generally focuses first on what to avoid-that is, on what NOT to do-before he considers the affirmative steps he will take in a given situation. "All I want to know is where I'm going to die, so I'll never go there" is one of his favorite quips. ([View Highlight](https://read.readwise.io/read/01hsdfb4m8kxycer9gymxrg63q)) - A scientific theory should be as simple as possible, but no simpler ([View Highlight](https://read.readwise.io/read/01hsdfc9wd7m76hm3k44vfdkff)) - What I'm against is being very confident and feeling that you know, for sure, that your particular action will do more good than harm. You're dealing with highly complex systems wherein everything is interacting with everything else. ([View Highlight](https://read.readwise.io/read/01hsdfd5hw33mr69e4zpnh9937)) - Graham cautioned the investor to carefully use his own, unemotional judgment of value instead of relying on the often manic- depressive behavior of the financial markets. Similarly, Charlie recognizes that even among the most competent and motivated of people, decisions are not always made on a purely rational basis. For this reason, he considers the psychological factors of human misjudgment some of the most important mental models that can be applied to an investment opportunity ([View Highlight](https://read.readwise.io/read/01hsdfewgcp4etnhrcj887kz0t)) - personally I had gotten so that I now use a kind of to track analysis first what are the factors that really govern the interest involved rationally considers? And second, what are the subconscious influences where the brain at subconscious level is automatically forming conclusions in various ways which, by and large comma are useful but which open malfunction? ([View Highlight](https://read.readwise.io/read/01hsdffb0f1bskgraee6aej4hf)) - The number one idea is to view a stock as an ownership of[ the business and to judge the staying quality of the business in terms of its competitive advantage. Look for more value in terms of discounted future cash-flow than you are paying for. Move only when you have an advantage. its very basic. You have to understand the odds and have the discipline to bet only when the odds are in your favor. 'We just keep our heads down and handle the headwinds and tailwinds as best we can, and take the result after a period of years ([View Highlight](https://read.readwise.io/read/01hsdfhze013tkbsrh0nc13zm1)) - In the red world, it is critical to distinguish when you are "Max Planck," and when you are the "chauffeur." If You cannot respond legitimately to the next question, you lack true mastery and are likely outside your "Circle of Competence." ([View Highlight](https://read.readwise.io/read/01hsdx9mmwekgs1ag8c4dvgkgh)) - The list of additional factors he examines is seemingly endless and includes such things as the current and prospective regulatory climate; state of labor, supplier, and customer relations; potential impact of changes in technology; competitive strengths and vulnerabilities; pricing power; scalability; environmental issues; and, notably, the presence of hidden exposures (Charlie knows that there is no such thing as a riskless investment candidate; he's searching for those with few risks that are easily understandable). He record all financial statement figures to fit his own view of reality, including the actual free or "owners" cash being produced, inventory and other working capital assets, fixed assets, and such frequently overstated intangible assets as goodwill. He also completes an assessment of the true impact, current and future, of the cost of stock options, pension plans, and retiree medical benefits. He applies equal scrutiny to the liability side of the balance sheet. For example, under the right circumstances, he might view an obligation such as insurance float-premium income that may not be paid out in claims for many years-more properly as an asset ([View Highlight](https://read.readwise.io/read/01hsdxerza2rdefgjrf1x84p2n)) - He especially assesses a company's management well beyond conventional number crunching-in particular, the degree to which they are "able, trustworthy, and owner-oriented." For example, how do they deploy cash? Do they allocate it intelligently on behalf of the owners, or do they overcompensate themselves, or pursue ego- oriented growth for growth's sake? ([View Highlight](https://read.readwise.io/read/01hsdxff32bgpa5vndpj566etm)) - Above all, he attempts to assess and understand competitive advantage in every respect-products, markets, trademarks, employees, distribution channels, societal trends, and so on-and the durability of that advantage. Charlie refers to a company's competitive advantage as its "moat": the virtual physical barrier it presents against incursions. ([View Highlight](https://read.readwise.io/read/01hsdxkhpr8npkwf7myt6a7tq4)) - Warren Buffett opening credits Charlie with convincing him of the wisdom of this approach Charlie understood this early I was a slow learner child Li inside help Buffett move from pure Benjamin Graham style investing to focusing on great business such as the Washington Post Coca-Cola gellert and others. ([View Highlight](https://read.readwise.io/read/01hsdxpz8r9bp2dy6xb5jpv9zd)) - In investing, just as in baseball, to put runs on the scoreboard, one must watch the playing field, not the scoreboard ([View Highlight](https://read.readwise.io/read/01hsdy4bs7nkr0e6rsdnq0asc1)) - Such behavior implies uncertainty, and Charlie's moves, few as they are, are anything but uncertain. As he says, he practices "extreme patience combined with extreme decisiveness." Charlie's self-confidence is based not on who, or how many, agree or disagree with him ([View Highlight](https://read.readwise.io/read/01hsdy6j6wc6rg351zd598aw85))