Implementing Charlie Munger's Mental Models to Transform My Life and Achieve My Goals

"Make friends with the eminent dead" - the quote from Charlie Munger that inspired me to start this all.

For those who haven't heard of Charlie Munger, he is the longtime partner of Warren Buffett, a billionaire investor, vice chairman of Berkshire Hathaway, legal scholar turned businessman, and one of the most influential teachers of multidisciplinary decision-making in modern capitalism. As a pioneer of mental-model thinking, I believe there is much I can learn from his documented multidisciplinary approach to business to improve various areas of my own life, ranging from my hobbies to finances and ultimately, my life vocation.

I could have tried to improve my life by following all the self-improvers who are posting on social media nowadays. The reason I chose to follow in Charlie Munger's footprints first though, is because of that one quote - "Make friends with the eminent dead". If you are like me, you would imagine conversing with a cartoon skeleton. Of course, that's not it, and he probably isn't that weird. Munger means that you should deliberately study the great thinkers of the past - across disciplines - and treat their ideas as trusted mentors. This idea might sound normal to some of you, but to me, this sounded profound.

I've always been a fan of learning from history, dating back to my high school days, where a wall-mounted poster with the quote from George Santayana, "those that don't know history are doomed to repeat it" still lingers with me today. I'm sure that poster has since been taken down. In fact, the last time I saw that poster was in 2013, but I haven't needed to revisit that classroom, as the quote has always stuck to the inner walls of my mind. I always wondered how I could put that into practice, after all, history is so expansive that the greatest limitation to learning it all lies in the storage capacity of my mind. You can probably imagine what a fortune it was when I learned about the concept of mental models. I can leverage lessons that those before me have learnt so that I don't have to repeat their mistakes. At least, that is the optimistic outlook on it.

Maybe I'll prove Santayana wrong that I could still repeat history after learning it. After all, Napoleon knew the dangers of invading Russia from Charles XII's failures, but he never learned from that, and Hitler didn't learn from either of them (not that I want to be compared to him), which was probably the nail in the coffin for both of their careers. I may be making a lot of references to history as I continue to blog, since it is something that I have an avid interest in, but I think that is the nature of a blog like this. Truthfully, I had to Google who wrote the original quote because I never paid attention to the name Santayana as the author. I can only hope that paying homage to him is sufficient recompense for my tunnel vision.

Applying mental models to personal growth

Now, I'll embark on a journey to find out how I can preserve and use the knowledge of past luminaries to enhance my own life. Finance has been a big focus of mine recently, and as someone who loves order and processes, I am naturally drawn to Munger and the mental models that he used to assess company finances. These models helped him make better investment decisions by understanding human behaviour, economics, and business principles. Warren Buffett once wrote in a Forbes article, "Charlie has the best 30-second mind in the world. He goes from A to Z in one move. He sees the essence of everything before you even finish the sentence". As someone who strives to become better every day, that became the foundation for what I wanted to learn - how to see the true essence of a problem and how to use it. To do this, I knew I had to adapt his business-focused mental models to solve my everyday problems. Of course, Munger later humbly states that Buffett was just being a supportive friend when he wrote that, but I have no doubt there is a sugary grain of truth in there.

My theory is that, by applying these mental models to my own life, I can bring clarity and focus to my goals. My biggest focuses this year will be to learn a new language, grow my career, improve finances and build stronger relationships. I will be making a series of blogs that explores how I am using Munger’s mental models in these areas, the successes and the outcomes. Maybe it will be one model per blog, maybe it will be more, depending on what is needed. I will share the practical examples and insights that have worked for me regarding when to use which model, and in doing so, hopefully leave behind something for others to do the same. Here is the list of mental models I could find that Munger used. I know - it is seemingly endless and can be discombobulating to read.

1. Psychology

1. Incentive-caused bias

2. Liking / Loving tendency

3. Disliking / Hating tendency

4. Doubt-avoidance tendency

5. Inconsistency-avoidance tendency

6. Curiosity tendency

7. Kantian fairness tendency

8. Envy / Jealousy tendency

9. Reciprocation tendency

10. Influence-from-mere-association

11. Simple, pain-avoiding psychological denial

12. Excessive self-regard tendency

13. Over-optimism tendency

14. Deprival superreaction syndrome

15. Social-proof tendency

16. Contrast misreaction tendency

17. Stress-induced mental changes

18. Availability-misweighing tendency

19. Use-it-or-lose-it tendency

20. Drug-misinfluence tendency

21. Senescence-misinfluence tendency

22. Authority-misinfluence tendency

23. Twaddle tendency

24. Reason-respecting tendency

25. Lollapalooza effect (multiple biases acting together)

26. Commitment & consistency

27. Pavlovian association

28. Skin in the game

29. First-conclusion bias

30. Narrative fallacy

31. Self-serving bias

32. Groupthink

33. Overconfidence

34. Loss aversion

35. Hedonic adaptation

    
    

2. Economics & Business

36. Supply and demand

37. Opportunity cost (one of Munger’s favourites)

38. Competitive advantage (moats)

39. Pricing power

40. Marginal utility

41. Economies of scale

42. Economies of scope

43. Network effects

44. Switching costs

45. Barriers to entry

46. Creative destruction

47. Winner-take-most markets

48. Cost leadership vs differentiation

49. Agency problems

50. Principal–agent problem

51. Incentive alignment

52. Specialisation of labour

53. Transaction costs

54. Returns on capital

55. Capital allocation

56. Path dependence

    
    

3. Mathematics & Probability

57. Compound interest (the eighth wonder of the world)

58. Law of large numbers

59. Regression to the mean

60. Expected value

61. Probability distributions

62. Bayesian updating

63. Base rates

64. Statistics vs anecdotes

65. Normal vs fat-tailed distributions

66. Combinatorics (nonlinear outcomes)

67. Breakpoints / thresholds

68. Order of magnitude thinking

    
    

4. Physics & Engineering

69. Systems thinking

70. Feedback loops (positive & negative)

71. Bottlenecks (critical path)

72. Leverage (mechanical & financial)

73. Redundancy

74. Margin of safety (borrowed from engineering)

75. Stress testing

76. Scale effects

77. Inversion (“Tell me where I’m going to die…”)

78. Critical mass

79. Velocity

    
    

5. Biology & Evolution

80. Natural selection

81. Adaptation

82. Survival of the sufficient (not the best)

83. Ecosystems

84. Co-evolution

85. Competitive niches

86. Replication advantage

87. Extinction events

88. Incentives as evolutionary pressure

    
    

6. History

89. Cycles (economic, social, speculative)

90. Manias, panics, and crashes

91. Repeatable human behaviour

92. Institutional memory loss

93. Path dependency over time

94. Long-term vs short-term civilisations

95. Technological inflection points

    
    

7. Philosophy & Rationality

96. Occam’s Razor

97. First principles thinking

98. Map vs territory

99. Reductionism

100. Avoiding ideology

101. Pragmatism

102. Epistemic humility

103. Circle of competence

104. Second-order effects

105. Wisdom = knowing what to avoid

106. “Sit on your ass” discipline

     
     

8. Ethics & Governance

107. Fiduciary duty

108. Reputation effects

109. Moral hazard

110. Trust-based systems

111. Long-term ethical incentives

112. Culture as a control system

Munger’s Meta-Models (how he used all of this)

121. Latticework of mental models

122. Multidisciplinary thinking

123. Always ask: “What are the incentives?”

124. Always ask: “And then what?”

125. Avoid big mistakes first

126. Invert, always invert

127. Focus on robustness, not precision

Investment-Specific Models (applied latticework)

113. Mr. Market

114. Intrinsic value

115. Margin of safety (financial)

116. Concentration vs diversification

117. Quality over price

118. Time arbitrage

119. Patience as an edge

120. Avoiding stupidity over seeking brilliance