A man who has committed a mistake and doesn’t correct it, is committing another mistake.


The character of the human race never changes, it is permanent.


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. Nobody’s that smart.


Anyone who wishes to be cured of ignorance must first admit to it.


The reading of all good books is like conversation with the finest minds of past centuries.


The advice we give others is the advice that we ourselves need.


The job of genes is to make proteins — the building blocks of life. Proteins are molecules that carry out most of our biological functions and are made up of animo acids. There are 20 kinds of amino acids that can be used to make our skin, hair, muscles, etc. Some proteins called enzymes cause certain chemical reactions. One example is neurotransmitters. Proteins are also hormones that act as messengers between our cells.


Every living thing uses the same genetic code — from cats to humans. This means that we can transfer a single human gene into a cat and the cat “can read it” and follow its instructions. But no individual has the same DNA or the same versions of genes (except for identical twins). Not all things are “spelled” alike.


Our life is what our thoughts make it.


Our state of mind is a function of our life experiences and the specific situation.


Mutations are caused by a copying error in the sequence of A, C, G and T molecules when DNA is copied. This error in the genes “spelling” may cause a change in a protein leading to a modification in the individual that inherits the gene.


Darwin used the word “selection,” but nature doesn’t care who gets selected for survival. Evolution has no goal. Another way to describe natural selection is as a process of elimination. Certain individuals survive because they have structural, physiological, behavioral or other characteristics that prevent them from being eliminated. Those that don’t have these characteristics are eliminated.


If there is a God that made all life forms, a particularly rich blessing was bestowed on the roach, because it got the best design of all.

The cockroach is the oldest insect on our planet as evidenced by fossil records dating back 325 million years. It can eat almost anything, live 45 days without food, and has an effective reproductive system with female sperm storing capability lasting a lifetime and a great defense system. The cockroach is about the same organism it was millions of years ago because it characteristics were adaptive then and now.


The key source of energy for nearly all life is sunlight. This light energy is transformed into chemical energy in plants, algae and certain bacteria by photosynthesis. Sunlight provides the energy needed to runt the biochemical process that yields sugar and the by-product oxygen (that water molecules contain) which is released into the atmosphere. When we eat plants (or animals that eat plants), we take in their stored energy.


Harm avoidance first. Our brain is equipped to register pain more sensitively than any other emotion. We also remember negative arousing stimuli better.


Pain is the signal that tissue is being damaged. It has to be aversive to motivate us to set aside other activities to do whatever is necessary to stop the damage.


Our aversion to pain also encourages a certain human behavior: to take the most rewarding view of events. We interpret choices and events in ways that make us feel better. We often prefer to hear supporting reasons for our beliefs; think of ourselves as more talented than others, and make the best of bad situations.


Some behavior may under certain conditions look like altruism but can often be explained by self-benefit. Social recognition, prestige, fear of social disapproval, shame, relief from distress, avoidance of guilt, a better after-life or social expectations are some reasons behind “altruistic” acts.


It must not be forgotten that although a high standard of morality gives but a slight or no advantage to each individual man and his children over the other men of the same tribe, yet that an advancement in the standard of morality and an increase in the number of well-endowed men will certainly give an immense advantage to one tribe over another.


Af the moment of action, man will no doubt be apt to follow the stronger impulse; and though this may occasionally prompt him to the noblest deeds, it will far more commonly lead him to gratify his own desires at the expense of other men. But after their gratification, when past and weaker impressions are contrasted with the ever-enduring social instincts, retribution will surely come. Man will then feel dissatisfied with himself, and will resolve with more or less force to act differently for the future. This is conscience; for conscience looks backwards and judges past actions, inducing that kind of dissatisfaction, which if we call regret, and if severe remorse.


Fear is our most basic emotion. Fear has evolved to help us anticipate danger and avoid pains. Fear is fundamental because life is fundamental. If we die, everything else becomes irrelevant.


Darwin realized that many anatomical and behavioral characteristics didn’t have any survival value but could play an important role in attracting mates. Strength and beauty were such signals.


Women placed more emphasis on a potential mate’s potential prospects. Women also preferred ambitious and industrious men. Women preferred older men. Men preferred younger women. Men ranked physical attractiveness higher than women did. The study also showed that a man felt most jealous when his woman was having sex with someone else. A woman felt most jealous when her man became emotionally attached to someone else.

Women are less inclined to take risks. They are more influenced by the chance of loss. They are less competitive and status-conscious.


We do not care about our reputation in towns where we are only passing through. But when we have to stay some time we do care. How much time does it take? A time proportionate to our vain and paltry existence.


A reputation for being reliable and trustworthy is important because how we acted in the past is the only guide to how we act in the future. If we fool someone, he tells his friends, destroying our future possibilities for cooperation with others. Isn’t that why we trust our friends but are careful when we meet strangers whom we know nothing about?

We have a strong sense for fairness. We get upset when things are unfair. We sometimes even punish others at a cost to ourselves.


Reputation matters. Do we behave differently when we are watched or when our identities are made public? It pays to be nice when others are watching.


Conscience is the inner voice that tells us someone might be looking.


Fear of disapproval is the major force that keeps a society intact: fear of God, fear of the police, and fear of the judgment of neighbors. Religious authorities want the fear of God to be the dominant controller. Civil authorities want fear of police and court to dominate. But, says Locke John, the opinion of one’s neighbors trumps all others.


Providing resources is another behavior that increases chances of survival and getting a mate. The better our ability to provide, the higher our status would be in the community.

There is competition among men for women. Women compete with each other for access to resources. Women wanted males who could take care of the children. Resources like food, lodging, and status attracted them. Striving for authority, dominance, esteem, position, and respect were advertisements for wealth. Charles Darwin said: “Man admires and often tries to exaggerate whatever characteristics nature may have given him.”


Warren Buffett gives us some introductory remarks on why even smart people get bad results:

It’s ego. It’s greed. It’s envy. It’s fear. It’s mindless imitation of other people. I mean, there are a variety of factors that cause that horsepower of the mind to get diminished dramatically before the output turns out. And I would say if Charlie and I have any advantage it’s not because we’re so smart, it is because we’re rational and we very seldom let extraneous factors interfere with our thoughts. We don’t let other people’s opinion interfere with it… we try to get fearful when others are greedy. We try to get greedy when others are fearful. We try to avoid any kind of imitation of other people’s behavior. And those are the factors that cause smart people to get bad results.


Man is, and always was, a block-head and dullard, much readier to feel and digest than to think and consider.


One is to think like an owner. And the second is to tell us bad news immediately — because good news takes care of itself. We can take bad news, but we don’t like it late.


They could never get it done on time. They tried everything — moral suasion, threats, you name it. And nothing worked. Finally, somebody got the idea to pay all these people not so much an hour, but so much a shift — and when it’s all done, they can all go home. Well, their problems cleared up overnight.


Don’t let money be the only motivation. If we reward people for doing what they like to do anyway, we sometimes turn what they enjoy doing into work. The reward changes their perception. Instead of doing something because they enjoy doing it, they now do it because they are being paid. “We are generally the better persuaded by the reasons we discover ourselves than by those given to us by others.”


Never let it pay someone to behave in a way you don’t want.


The guy who created the arch stood under it as the scaffolding was removed. It’s like packing your own parachute.


I have no use whatsoever for projections or forecasts. They create an illusion of apparent precision. The more meticulous they are, the more concerned you should be. We never look at projections, but we care very much about, and look deeply at, track records. If a company has a lousy track record, but a very bright future, we will miss the opportunity…

I do not understand why any buyer of a business looks at a bunch of projections put together by a seller or his agent. You can almost say it’s naive to think that those projections have any utility whatsoever. We’re just not interested.

If we don’t have some idea ourselves of what the future is, to sit there and listen to some other guy who’s trying to sell us the business or get a commission on it tell us what the future’s going to be — like I say, it’s very naive.


When they make these offerings, investment bankers display their humorous side: They dispense income and balance sheets projections extending five or more years into the future for companies they barely had heard of a few months earlier. If you are shown such schedules, I suggest that you join the fun: Ask the investment banker for the one-year budgets that his own firm prepared as the last few years began then compare those with what actually happened.


If I tell the CEO what he wants to hear, he will pay me well, hire me and recommend me to other CEOs. And if I make it sound complicated it will be easier to send a larger bill.


How can we change people? Benjamin Franklin said: “Would you persuade, speak of interest not of reason.” Since the risk of losing is more motivating than the chance of gaining, we stand a better chance changing people if we appeal to their fear of losing something they value — job, reputation, status, money, control, etc.

It is often better to avoid situations where we need to change people. Changing people is hard as Warren Buffett says, “I’d say that the history that Charlie and I have had of persuading decent, intelligent people who we thought were doing unintelligent things to change their course of action has been poor… When people want to do something, they want to do something.”

Changing people affects their motivations, feelings of responsibility, and tendency to reciprocate. It is better when people act out of their own free will. Warren Buffett illustrates:

We want the manager of each subsidiary to run their business in the way they think is best for their operation. We’ll never tell a subsidiary manager which vendor to patronize or anything of that sort. Once we start making those decisions for our managers, we become responsible for the operation and they’re no longer responsible for the operation. And they’re responsible for the operations. That means that they get to make the call, that it’s up to them to do what’s best for their subsidiary and that it’s up to any other company that wants to do business with their operation to prove to them why it’s best. That’s the Berkshire approach. I think, on balance, our managers like it that way — because they’re not going to get second-guessed and nobody will go over their heads.


Man suffers much because he seeks too much, is foolishly ambitious and grotesquely overestimates his capacities.


Things that happen to others don’t happen to me.


We see ourselves as unique and special and we have optimistic views of ourselves and our family. We overestimate the degree of control we have over events and underestimate chance.


Men’s spirits are lifted when the times are prosperous, rich and happy, so that their pride and arrogance grow.


We tend to over-estimate our abilities and future prospects when we are knowledgable on a subject, feel in control, or after we’ve been successful.

There’s nothing like success to blind one of the possibility of failure.


When we fail, we blame external circumstances or bad luck. When others are successful, we tend to credit their success to luck and blame their failures on foolishness.

This way we draw the wrong conclusions and don’t learn from our mistakes. We also underestimate luck and randomness in outcomes.


Experts love to extrapolate their ideas from one field to all other fields. They define problems in ways that fit their tools rather than ways that agree with the underlying problem.

Why is man-with-a-hammer syndrome always present? Charles Munger answers: “Well if you stop to think about it, it’s incentive-caused bias. His professional reputation is all tied up with what he knows. He likes himself and he likes his own ideas, and he’s expressed them to other people — consistency and commitment tendency.


A good mathematician is not necessarily a nice guy.


When I interview someone I have already formed an impression from reading the job applications. Then I just try to find confirming evidence at the interviews.


Why do some people seem to have an intuition for evaluating people? Maybe their life experiences give them the ability (by asking questions and observing behavior) to look for clues to an individual’s character.

Charles Munger adds, “Actually, I think it’s pretty simple: There’s integrity, intelligence, experience, and dedication. That’s what human enterprises need to run well.”


Recognize your limits. How well do you know what you don’t know? Don’t let your ego determine what you should do. Charles Munger says, “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. There must be some wisdom in the folk saying: ‘It’s the strong swimmers who drown.’”


We don’t do anything that we don’t think we understand ourselves.


Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true.


Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead.


Wishful thinking is rooted in denial, offering us a more pleasant reality.


The first principle is that you must not fool yourself — and you are the easiest person to fool.


Nothing is so difficult as not deceiving oneself.


Once we’ve made a commitment — a promise, a choice, taken a stand, invested time, money or effort — we want to remain consistent. We want to feel that we’ve made the right decision. And the more we have invested in our behavior the harder it is to change.


I can’t behave in a way that is inconsistent with my self-image. I have a reputation to uphold. I don’t want to look weak, dumb, or lose face. I want to be seen as nice, smart and in control.


We want to maintain a positive self-image. When that is violated, we use different defenses in order to justify our behavior. We also behave in ways that are consistent with how others see us. If people label us as talented, we try to appear talented whether or not it is true.


We don’t want to waste our efforts. This way we protect our reputation and avoid the pain of accepting a loss. If people challenge our decisions, we become even more committed we are right. And the more individual responsibility we feel for a commitment, the harder it is to give up.


What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact. We look for evidence that confirms our ideas, beliefs, and actions. Devising reasons why we might be wrong doesn’t come easily.


We are most consistent when we have made a public, effortful or voluntary commitment. The more public a decision, the less likely it is that we will change it. Written commitments are strong since they require more effort than verbal commitments and can also be made public.


We do have a few advantages, perhaps the greatest being that we don’t have a strategic plan. Thus we feel no need to proceed in an ordained direction but can simply decide what makes sense for our owners.

The task of man is not to see what lies dimly in the distance, but to do what lies clearly at hand.

Obviously you look ahead as far as you can. But that’s not very far. But if you respond intelligently and diligently to the challenges before you, we think you’ll tend to end up with a pretty good institution.


A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die and a new generation grows up that is familiar with it.


Most economists are most economical about ideas — they make the ones they learned in graduate school last a lifetime.


Men never do evil so completely and cheerfully as when they do it from religious conviction.


There’s nothing wrong with changing a plan when the situation has changed.


A man should never be ashamed to own that he has been in the wrong, which is but saying, in other words, that he is wiser today than he was yesterday.


When somebody persuades me that I am wrong, I change my mind. What do you do?


We’ve done a lot of that — scrambled out of wrong decisions. I would argue that that’s a big part of having a reasonable record in life. You can’t avoid wrong decisions. But if you recognize them promptly and do something about them, you can frequently turn the lemon into lemonade.


Don’t force people to publicly make commitments that you don’t later want the opportunity to change.


When you are asked to perform a future action but are uncertain, ask yourself: Would I do this if I had to do it tomorrow?


Charlie and I believe that when you find information that contradicts your existing beliefs, you’ve got a special obligation to look at it — and quickly.


You don’t change something people love.


A very important principle in investing is that you don’t have to make it back the way you lost it. In fact, it’s usually a mistake to try to make it back the way you lost it.


One of the important things in stocks is that the stock does not know that you own it. You have all these feelings about it: You remember what you paid. You remember who told you about it — all these little things. And it doesn’t give a damn. It just sits there. If a stock’s at $50, somebody’s paid $100 and fells terrible; somebody else has paid $10 and feels wonderful — all these feelings. And it has no impact whatsoever.


Mary’s daughter didn’t want the toy they gave her, she wanted the toy they didn’t give her.

To forbid us something is to make us want it.

It was not that Adam ate the apple for the apple’s sake, but because it was forbidden.


It took Noah 20 years to build an ark. And of course, the whole time, he looked stupid — until it started raining. You can spend a long time building an ark while everybody else is out there enjoying the sun.


Once we know what to do, we should do it.

Perhaps the most valuable result of all education is the ability to make yourself do the thing you have to do when it ought to be done whether you like it or not. It is the first lesson that ought to be learned and however early a person’s training begins, it is probably the last lesson a person learns thoroughly.


Man will do many things to get himself loved; he will do all things to get himself envied.


Envy is the pain at the good fortune of others.

We envy those who are near us in time, place, age or reputation.

There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich.


All mental pleasures consists of being able to compare oneself with others to one’s own advantage.


The best way to avoid envy is to deserve the success you get.


On the other hand, vices such as greed, envy, and vanity all lead to public benefits by encouraging enterprise.


In one experiment, a group was asked to choose between $6 and an elegant pen. Most choose the cash. Another group was asked to choose between $6, the elegant pen, or an inferior pen. Most choose the elegant pen.


One of the problems in society is that the most important issues are often these incremental type things. The 250,000 people tomorrow don’t seem to make any difference, but the cumulative effects of them will make a huge difference over time, just like overeating will make a huge difference over time. The time to attack those problems is early.


Today 14 million people didn’t win the lottery.


There is no duy more indispensable than that of returning a kindness. All men distrust one forgetful of a benefit.


Three quarters of our management are independently wealthy. They don’t need to get up and go to work at all. Most of them have tens and tens of millions of dollars. So I’ve got do create or I’ve got to maintain an environment where the thing they want to do most in the world is to go to work that day and the next day. And, I say to myself, “What would make me feel that way?” One way is to feel you are running your own show. If I had people second-guessing me all day, I would get sick of it. I would say, “What the hell do I need this for?” And, that’s exactly the way our managers would feel if I went around second-guessing them or telling them how to run their business.


If there is any secret to success, it lies in the ability to get the other person’s point of view and see things from his angle as well as from your own.


What you don’t want yourself, don’t do to others.


The deepest principle in human nature is the craving to be appreciated.


John likes his colleague, Ted, because they share the same values and he prefers the same type of suits.

We want to be liked and accepted. We believe, trust and agree with people we know and like. We do things for people we like. We like the people who like us (because we like to be liked.) And if we feel that a person likes us, we tend to like them back.

What can people do to make us like them? We tend to like our kin and romantic partners and people who are similar to us in background, opinion, lifestyle, interest, attitude, looks. values, and belief. Also, those who are physically attractive, popular, cooperative, or people who have positive associations with us. We also like and trust anything familiar.

Aristotle said: “Personal beauty is a greater recommendation than any letter of introduction.” Studies show that we believe that physically attractive people have a more desirable personality than average-looking or unattractive people. Experiments show that attractive criminals are seen as less aggressive and get a milder punishment than ugly criminals.


“I am a sucker for flattery.”

We like people who compliment us — true or not — and make us fee special. “Talk to a man about himself and he will listen for hours.” We also like the people who give us what we are missing in life.


We don’t learn from people we don’t like and we don’t want to be associated with them. The people we don’t like are the ones we perceive as dissimilar to us, people we are in competition with, those we perceive as threatening, or people that are self-absorbed, complaining, greedy, etc. We tend to dislike people who have been dehumanized — for example, people who have been described as evil or animals.


How much time he gains who does not look to see what his neighbor says or does or thinks.


Our enemies’ opinion of us comes closer to the truth than our own.


As happens in Wall Street all too often, what the wise do in the beginning, fools do in the end.


I flattered them and made them feel special. I gave them purpose and hope, and they ate out of my hand.


The masses have never thirsted after truth. They turn aside from evidence that is not to their taste, preferring to deify error, if error seduce them. Whoever can supply them with illusions is easily their master; whoever attempts to destroy their illusions is always their victim.


Madness is a rare thing in individuals — but in groups, parties, peoples, and ages it is the rule. In a group, we feel anonymous, which reduces our feelings of responsibility. We can’t be blamed. This can lead to overconfident, risky behavior. We may also become impulsive and destructive. Especially in situations of severe stress. Ben Franklin said: “A mob has heads enough but no brains.”

Imitation, obedience to authority, and the fear of being different are forces that drive crowds. Groups don’t encourage difference of opinion. If a member of the group disagrees, he may be seen as disloyal.


It is easy in the world to live after the world’s opinion; it is easy in solitude to live after our own; but the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude.

Warren Buffet: “We derive no comfort because important people, vocal people, or great numbers of people agree with us. Nor do we derive comfort if they don’t.”


Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it — even though others may hesitate or differ. (You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.)


The more I didn’t understand, the more I believed the expert.

Experts are sometimes more convincing when we don’t understand them. Sometimes we are too impressed by something that sounds clever.


Ask: Could our explanation of the event help us predict future similar events?

This is the danger of relying on case-based stories. Stories may be selected to prove something and may give us a delusional sense of clarity. Knowledge about outcomes may also cast some doubt on reconstructions of historical events (given that the historian was not there).


Everything seems stupid when it fails.


We love stories and story-telling. Good stories and drama get our attention. They give meaning to events. We rationalize decisions and justify choices by telling ourselves comforting stories. We use stories to understand, remember and makes sense of events. But sometimes we have a hard time separating a true story from a false one. After an event a story is created so that the event makes sense. Remember that a story can have many possible beginnings (and endings).


Sometimes the word “because,” without a sensible reason, is all that matters. We want explanations and the word “because” imply an explanation.


Ask why, ask why, and ask why again. The third why often gets down to the real issue.


Understanding reasons is an important factor in learning. To learn, remember, organize, and use ideas, we must understand the “why” and “how.” There’s no use memorizing what we don’t understand. If we don’t understand the meaning of an idea, we don’t use it. What we don’t use, we forget. We also need to be motivated to learn. And we can’t be motivated if we don’t understand why we need to learn something. We need to see its practical use.

Understanding is about the ability of seeing patterns — how ideas and things relate and hang together. Knowledge that can be used in a variety of situations.

Our brains favor the concrete and practical over the abstract and theoretical. We are special good at remembering images and spatial information. We therefore learn better if the use of ideas and patterns are illustrated through pictures and simple, clear and vivid real-life stories. Stories on what works and what doesn’t increase our ability to retain what we’ve learned.

We also need an organizing framework in order to better retrieve and use knowledge. Charles Munger adds: “You can’t really know anything if you just remember isolated facts and try to bang ‘em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.”


People can’t be persuaded by what they don’t understand. We underestimate the importance of giving people a reason. It is often easier to get people to change with a well-explained reason backed by solid evidence.


Doubting is active and takes effort. Bertrand Russell said: “Believing seems the most mental thing we do.” Why? Because we have to believe in order to understand.


Everybody complains of his memory, and no one complains of his judgment.


I have often said that the sole cause of man’s unhappiness is that he does not know how to sit quietly in his room.


The CEO replied: “All my colleagues do deals like this. Plus how can I keep my job and all my perks if I don’t keep busy?”


Man finds nothing so intolerable as to be in a state of complete rest, without passions, without occupation, without diversion, without effort. We sometimes act because we can’t sit still. We feel bored, impatient, threatened or pressured or we simply desire excitement and stimulation. We act without a sensible reason. It seems easier to explain doing something than actively doing nothing.


Acquisitions are a honey pot for the investment bankers and other professionals on both sides… often the CEO asks a strategic planning staff, consultants or investment bankers whether an acquisition or two might make sense. That’s like asking your interior decorator whether you need a $50K rug.

The acquisition problem is often compounded by a biological bias: Many CEOs attain their positions in part because they possess an abundance of animal spirits and ego. If an executive is heavily endowed with these qualities — which, it should be acknowledged, sometimes have their advantages — they won’t disappear when he reaches the top. When such a CEO is encouraged by his advisors to make deals, he responds much as would a teenage boy who is encouraged by his father to have a normal sex life. It’s not a push he needs.


We’ve got great flexibility and a certain discipline in terms of not doing some foolish thing just to be active — discipline in avoiding just doing any damn thing just because you can’t stand inactivity.


Wise men talk because they have something to say; fools, because they have to say something.


He that would live in peace and at ease, must not speak all he knows, nor judge all he sees.


As long as we do not have it, the object of our desire seems greater than anything else; as soon as we enjoy it, we long for something different with an equal craving.


When we have just gone through an emotional experience, we should hold off on important decisions.

The benefits of cooling-off periods force us to think things through.


They found that executives who stayed healthy had a sense of commitment to work and families, felt in control, and had a positive attitude toward challenges. They saw challenges as part of life and an opportunity for growth rather than as a threat.

Warren Buffet says, “I have no stress whatsoever — zero. I get to do what I love to do every day. I’m surrounded by people that are terrific. All the businesses I run don’t take 5% of my time. We don’t have regular staff meetings and the like. If you’ve got good businesses and the right managers, you don’t need that sort of thing — and if you don’t, they don’t help.”


I’ve suffered a great many catastrophes in my life. Most of them never happened.


When you get two or three of these psychological principles operating together, then you really get irrationality on a tremendous scale.


It’s very, very important to create human systems that are hard to cheat. Otherwise you’re ruining you civilization because these big incentives will create incentive-caused bias and people will rationalize that bad behavior is OK.


The correct system is the Elihu Root system. Elihu Root, who had three different cabinet appointments, said no man was fit to hold public office who wasn’t perfectly willing to leave it at any time. And if Elihu Root didn’t approve of something the government asked him to do, he could always go back and be the most sought-after lawyer int he world. He had an identity to go back to — so he didn’t need the government’s salary.

Well, I think that also ought to be more the test in corporate directorships. Is a director really fit to make tough calls who isn’t perfectly willing to leave the office at any time? My answer is no.


Most social acts have to be understood in their settings, and lose meaning if isolated. No error in thinking about social facts is more serious than the failure to see their place and function.


We put different values on the same dollar, and are more willing to risk money we have won than money we have earned. A gain of $1K from playing roulette has less value than $1K earned from hard work. “I didn’t gamble with my $1K, I only gambled with the $1K I won on the casino.” But it is the same amount of money.


I don’t want you to think we have any way of learning or behaving so you won’t make a lot of mistakes. I’m just saying that you can learn to make fewer mistakes than other people — and how to fix your mistakes faster when you do make them. But there’s no way you can live an adequate life without making many mistakes. 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.”


Take all the main models from psychology and use them as a checklist in reviewing outcomes in complex systems. No pilot takes off without going through his checklist: A, B, C, D…


He who knows men is clever; He who knows himself has insight; He who conquers men has force; He who conquers himself is truly strong.


System thinking:

  • Failing to consider that actions have both intended and unintended consequences. Including failing to consider secondary and higher order consequences and inevitable implications.
  • Failing to consider the whole system in which actions and reactions take place, the important factors that make up the system, their relationships and effects of changes on system outcome.
  • Failing to consider the likely reactions of others — what is best to do may depend on what others do.

Numbers and their meaning:

  • Looking at isolated numbers — failing to consider relationships and magnitudes. Not differentiating between relative and absolute risk.
  • Underestimating the effect of exponential growth.
  • Underestimating the time value of money.

We often take too little notice of how variables interact. Take the economy as an example. There are many factors to consider. They include interest rates, currency exchange rates, balance of trade figures, unemployment rates, consumer confidence, political factors, the stock market, business cycles, biases… These factors are interconnected, and it is hard to tell which is most important. Add to this that people’s behavior isn’t fixed. We are emotional creatures, our preferences change, and we react to each other’s actual or expected decisions. A prediction may also make us change our expectations and behavior, making the prediction more or less likely to come true.


If someone could forecast the stock market, why are they selling advice through $100 newsletters?


Predictions about the future are often just projections of past curves and present trends. This is natural since our predictions about the future are made in the present. We therefore assume the future will be much like the present.


Everywhere nature works true to scale, and everything has its proper size accordingly. Men and trees, birds and fishes, stars and star-systems, have their appropriate dimensions, and their more or less narrow range of absolute magnitudes.


“This is the first time I’ve seen this disease. I estimated there is a 50-50 chance that the patient will survive.”

Does it really make any sense to say 50-50 if there are no past data or other evidence to base the probability on?


The brain can be developed just the same way as the muscles can be developed, if one will only take the pains to train the mind to think.


The general who wins a battle makes many calculations in his temple before the battle is fought.


Is there anything I can do to make my whole life and my whole mental process work better? And I would say that developing the habit of mastering the multiple models which underlie reality is the best thing you can do.


Physical forces act on animals differently. Gravity has a more powerful effect on bigger things, than on smaller things.


Bad terminology is the enemy of good thinking.

Words, definitions, propositions, statements, or goals don’t tell us anything. We need to understand what they mean. It is the same with knowledge. Knowledge is only valuable if it’s useful and something is only useful if we understand what it means.


As many investors in “growth” companies are well aware of, some businesses seem to need a never-ending supply of new cash. Growth can destroy value if it requires cash inputs in the early years of a project or enterprise that exceed the discounted value of the cash that those assets will generate in later years. Growth is simply a component — usually a plus, sometimes a minus — in the value equation.


First, we try to stick to businesses we believe we understand. That means they must be relatively simple and stable in character. If a business is complex or subject to constant change, we’re not smart enough to predict future cash flows. Incidentally, that shortcoming doesn’t bother us. What counts for most people in investing is not how much they know, but rather how realistically they define what they don’t know. An investor needs to do very few things right as long as he or she avoids big mistakes.


When we look at the future of businesses, we look at riskiness as being sort of a go/no-go value. In other words, if we think that we simply don’t know what’s going to happen in the future, that doesn’t mean it’s risky for everyone. It means we don’t know — that it’s risky for us. It may not be risky for someone else who understands the business.

However, in that case, we just give up. We don’t try to predict those things.


You can’t believe how hard it is for people to be simple, how much they fear being simple. They worry that if they’re simple, people will think they’re simple-minded. In reality, of course, it’s just the reverse. Clear tough-minded people are the most simple.


If something is too hard, we move on to something else. What could be more simple than that?


It’s amazing how people even today use a computer to do something you can do with a pencil and paper in less time.


Look for good enough solutions appropriate to the problem at hand. Not perfection and beauty.


The art of being wise is the art of knowing what to overlook. Charles Munger tells us about the importance of eliminating nonsense: “Part of having uncommon sense, I think, is being able to tune out folly, as distinguished from recognizing wisdom. You’ve got whole categories of things you just bat away so your brain isn’t cluttered with them. That way, you’re better able to pick up a few sensible things to do.”


We don’t consider many stupid things. I mean, we get rid of them fast. Just getting rid of nonsense — just figuring out that if people call you and say, “I’ve got this great, wonderful idea,” you don’t spend 10 minutes once you know in the first sentence that it isn’t a great, wonderful idea… Don’t be polite and go through the whole process.


Are there dangers in getting too caught up in the minutiae of using a computer so that you miss the organized common sense. There are huge dangers. People calculate too much and think too little.


It is impossible for our brain to think too many things at the same time and expect to do well. Shifting our mental attention between tasks costs time and comprehension, especially when we switch between more complicated and unfamiliar tasks.

To do two things at once is to do neither.


Loss of focus is what most worries Charlie and me when we contemplate investing in businesses that in general look outstanding. All too often, we’ve seen value stagnate in the presence of hubris or of boredom that caused the attention of managers to wander…


The formulation of a problem is often more essential than its solution, which may be merely a matter of mathematical or experimental skill.


Sometimes it is harder to understand a problem than to solve it.

Start with basic questions like: What does it mean? What is the simplest example? What is the number one question? How can I tell if the answer is right? Can I come up with an example that makes it clear what the problem is?


The best thinking is often done when there is no stress, time limit, threats, or judging. Thinking takes time and the simple truths often reveal themselves when we’re doing something else.


Rules are for the obedience of fools and the guidance of wise men.


They avoid business involving moral risk: No matter what the rate, trying to write good contracts with bad people doesn’t work.


4 filters:

  • Can I understand it?
  • Does it look like it has some kind of sustainable competitive advantage?
  • Is the management composed of able and honest people?
  • Is the price right?

Our definition of understanding is thinking that we have a reasonable probability of being able to assess where the business will be in 10 years.


Avoid low quality people.


Look for someone who will love you unconditionally and will subtly encourage you to be better than you thought you can be.


A lot of success in life and success in business comes from knowing what you really want to avoid — like early death and a bad marriage.


Do the best that you can do. Never tell a lie. If you say you’re going to do it, get it done. Nobody gives a shit about an excuse. Leave for a meeting early. Don’t be late, but if you are late, don’t bother giving people excuses. Just apologize. Return your calls quickly.


To know that we know what we know, and that we do not know, what we do not know; that is true knowledge.


You have to stick within what I call your circle of competence. You have to know what you understand and what you don’t understand. It’s not terribly important how big the circle is. But it’s terribly important that you know where the perimeter is.


We’d rather deal with what we understand. Why should we want to play a competitive game in a field where we have no advantage — maybe a disadvantage — instead of playing in a field where we have a clear advantage?


Honesty is the first chapter of the book of wisdom.


The content of your character is your choice. Day by day, what you choose, what you think, and what you do is who you become. You integrity is your destiny… it is the light that guides your way.


Why is integrity the real freedom? Because if we have nothing to hide we have nothing to fear.


A person who rises high in the Army or becomes a Supreme Court justice is expected to be an exemplar, so why shouldn’t someone who rises high in a big corporation act as an exemplar?


The only way to be loved is to be lovable. You always get back more than you give away. If you don’t give any you won’t get any.


Be unreliable. Master this one habit and you can always play the role of the hare in the fable, except that instead of being outrun by one fine turtle you will be outrun by hordes and hordes of mediocre turtles and even by some mediocre turtles on crutches.


Curiosity, concentration, perseverance and self-criticism. And by self-criticism he meant that the testing and destruction of his own well-loved ideas.


On disadvantages of scale.

So somebody would create one which was addressed solely at corporate travel departments. Like an ecosystem, you’re getting a narrower and narrower specialization.

Well, they got much more efficient. They could tell more to the guys who ran corporate travel departments. Plus, they didn’t have to waste the ink and paper mailing out stuff that corporate travel departments weren’t interested in reading. It was a more efficient system. And they beat our brains out as we relied on our broader magazine.

The great defect of scale, of course, which makes the game interesting — so that the big people don’t always win — is that you get big, you get the bureaucracy. And with the bureaucracy comes the territoriality — which is again grounded in human nature.


You can’t learn those 100 big ideas the way many students do — where you learn ‘em well enough to bang ‘em back to the professor and get your grade and then you empty them out as though you were emptying a bathtub so you can take in more water next time. If that’s the way you learn, you’ll be an “also ran” in the game of life. You have to learn the models so that they become part of your ever-used repertoire.