Charlie Munger: Mental Models For The Rest Of Your Life (Part 5)
Lesson summary:
In the fifth video of Munger’s Mental Model series, viewers learned that using filters can narrow down investment options to better opportunities, and that patience is key in investing. The importance of understanding probability trees and conditional probabilities was also highlighted, along with the dangers of applying elegant mathematics to subjects involving human behaviour. The transcript warned against “physics envy” and the over-reliance on easily quantifiable variables, as well as the importance of considering secondary and tertiary effects. The “Cancer Surgery Formula” was introduced as a way to identify investments with great potential that are disguised by distracting and bad surrounding factors. Finally, the importance of scale was discussed as a key advantage in many industries.
