00:00welcome to the a 16z podcast I'm Michael
00:03Copeland today sonal and I host tren
00:06Griffin who among other things works at
00:08Microsoft and writes a lot about
00:10decision-making and the psychology of
00:12human judgment especially as it applies
00:15to investing and risk Griffin has a new
00:18book out and the title is Charlie Munger
00:20the complete investor in this episode of
00:24the pod we discuss how all of us not
00:27just investors can channel our inner
00:29Munger how the best investors and
00:32business leaders spend more time on what
00:34they don't know and why the best way to
00:37be smart is to not be stupid
00:41welcome trend today on the pod we have a
00:44couple of questions for you because
00:45we're a huge fan of your work
00:47and we see that you have a new book out
00:48called Charlie Munger the complete
00:51investor well we wanted to start off
00:53talking about is actually not your book
00:55but the way I came across your work is
00:58that you write a very popular series of
01:01posts on your blog and among them is a
01:04series of 12 things you learned from
01:07different folks and there a lot of them
01:10are investors and so my first question
01:12is why you're focusing on investors so
01:16much well for me it goes back to the
01:20buffett idea that business fundamentally
01:24makes you a better investor and having
01:27an investing mindset makes you better at
01:30business and so there was that and then
01:35also I needed something to write about
01:36which didn't intersect completely with
01:39my work here because I don't want to be
01:41in a situation where I can't write
01:43freely about topics because of where I
01:46work so what I did was I chose investing
01:49as a place where I could basically
01:51express myself and get ideas that I have
01:55out and get feedback on those ideas so
01:59fundamentally those two things sort of
02:01push me in that direction I guess the
02:04last piece is I was looking for a
02:05community of people on Twitter and on
02:12like to think about thinking and we like
02:14to think and read and I sort of found
02:16this little niche and people are civil
02:19and nice and polite and fun and what's
02:23not to like about that
02:24yeah well why do you think there's such
02:26a parallel beach or not a parallel but
02:28why is there such a strong connection
02:29between thinking about thinking and
02:32investing and and how does that play
02:34into the new book that you've recently
02:36written about Charlie Munger as the
02:39complete investor well I think I guess
02:42the key thing in both business and
02:45investing is that most mistakes that
02:48people make are psychological and
02:50emotional the the process of business
02:53the process of investing is simple
02:58Buffett says but not easy and it's not
03:01easy because we all make mistakes
03:04because we have psychological and
03:07emotional biases which causes us to make
03:11less than perfect decisions so what I
03:14learned from them and people like
03:17is if you think about thinking and do
03:20things like read Kahneman and Taylor and
03:23and really analyze your process and keep
03:26a journal and write things down you can
03:29get better at thinking I'll always make
03:31mistakes but you can learn to make fewer
03:33mistakes so speaking about Kahneman and
03:36Tversky and some of Baylor and some of
03:38the other thinkers of basically I guess
03:41the school was of behavioral economics I
03:43felt like there was a period where
03:45people were suddenly dissing behavioral
03:46economics and sort of saying it's no
03:49longer relevant but I feel like what you
03:51argue is that it's more relevant today
03:52than ever I'm kind of curious to hear
03:54your thoughts on why it might have come
03:56out of favor in the first place and and
03:59some of the heuristics and biases that
04:02you think are particularly interesting
04:05to pay attention to well I think the key
04:08thing is a lot of the people who who do
04:12economics and do finance understand that
04:16what they do has failed in in in in some
04:20cases in a really spectacular ways and I
04:23think you know sort of like the hype
04:25without okay well behavioral economics
04:28is going to appear and fill in the
04:30theory and it'll be predictive and I
04:33think the key thing with behavioral
04:35economics and with complexity theory
04:37which I think has some of the same
04:39criticisms is both of those things teach
04:42you not that that you can create a
04:45predictive theory but that you should be
04:47humble and that you should build in a
04:49margin of safety and so when people
04:52criticize like complexity theory they
04:56say well it's not predictive well but
04:58it's really valuable charlie munger says
05:01to know what you don't know and know
05:02what you can't know and once you know
05:05that then you can do things like
05:06building margin of safety and and not be
05:09overconfident and all these other things
05:11and knowing what you don't know is
05:13really valuable and a key message of the
05:15book is probably the key message is the
05:18best way to be smartest to not be stupid
05:22I'm gonna be a little bit stupid but you
05:26say that investing can help you in
05:29business and it sounds to me like what
05:32you learn in investing in part is kind
05:34of these behaviors and psychologies that
05:37you may not recognize in yourself but is
05:39it helpful because the sort of the
05:42binary is there like either you made
05:43money or your last might show it's
05:45easier to see the outcome than it is in
05:48business and and does it go both ways
05:50does business then help you in investing
05:52as well well I think it absolutely works
05:56in in both directions and and the key
05:59thing for me is is rationality which is
06:02there's a certain logic to business and
06:05there's a certain logic to investing and
06:07it's really pretty simple you know you
06:09need a break on supply which is a
06:11sustainable competitive advantage or a
06:13moat whatever you want to call it and
06:15and then there are certain execution
06:17aspects that people like Jim Barksdale
06:19are amazing at and there are all these
06:21things and they're relatively simple but
06:23the hard part is dealing with things
06:27like confirmation bias and and in
06:30hindsight bias and survivor bias and all
06:33those sorts of things and when you look
06:35at people who fall it
06:39it's usually hubris and the in the
06:41problem with hubris is it can have many
06:43sources and the air can be essentially a
06:45Lollapalooza or a situation where the
06:48where the hole is is greater than the
06:51sum of all the biases and so you really
06:54sort of have to guard against that so
06:56the monger process is be rational
06:59go through a logical process and then
07:01you go through this double and triple
07:03and quadruple and you just keep going on
07:05and on process of saying ok but am I am
07:08i suffering from hindsight bias you know
07:11I am I is this an emperor has no clothes
07:14situation and my colleagues aren't
07:16giving me input so it's sort of this
07:18two-step he calls it a two-track
07:19analysis which is first be rational and
07:22lint and then look for decisional errors
07:25so it's interesting trend because a lot
07:27of what you're describing feels like
07:28evaluating businesses but at the same
07:32time a lot of these mindsets can be
07:34brought to decision making in all areas
07:38of our life it feels like oh absolutely
07:40you know when you're when you you know
07:42Charlie's a big believer in this
07:43opportunity cost mode of thinking when
07:47when you're making the decision about
07:50you know one of the things you should do
07:52is is trying to avoid certain things are
07:54gonna make you make you unhappy so
07:56another sort of funny line he has is
07:59basically you know if basically if you
08:01want to be happy you know avoid things
08:02that make you miserable you could say
08:04well that's obvious but it isn't obvious
08:07because people don't do that you know
08:09people just don't think and this is part
08:12of his whole actually the post I have
08:15for this weekend is on his idea of
08:17inversion which is one great way to
08:19solve problems is to think about things
08:22forwards and backwards and by looking at
08:24things backwards you can say ok well
08:26this is what's making me miserable do
08:28you mean the famous line invert invert
08:31with no Jacobi or who yeah exactly right
08:35exactly but know what he's saying are
08:37things that are simple like you know if
08:40if you if if you want a better spouse be
08:43a better spouse you know you sort of
08:46turning things around you know the best
08:48way to have a great marriages deserve a
08:52way to be a good parent is to deserve to
08:54be a good parent be a good be a good dad
08:56you want good kids be a good dad I mean
08:59that all sounds very rational about how
09:02do you reconcile the sort of human and
09:04the personal with the rational because
09:05it sounds to me like and we all know
09:07people like this who are much more
09:09Spock like shall we say that for whom
09:12this would come much easier than for for
09:15others so if I'm on the sort of non
09:17Spock spectrum how do i how do I get
09:21more rational one of the things I've
09:24done in my blog post is I've interviewed
09:26a series of of individuals and that it's
09:29now over web well over a hundred and
09:31twenty and what I see consistently are
09:34certain personality traits and the key
09:36personality trait I've seen in in what
09:39I've read about but also what I've
09:40experienced my life with people like
09:42Barksdale and macaw and and Bill Gates
09:45and others is they surround themselves
09:47with people who compliment their
09:49weaknesses and when you look at great
09:52people inevitably there's a great team
09:55and the team around them tends to not be
09:58the same as they are but actually have a
10:00different set of skills and you know
10:03those people really create a
10:05Lollapalooza situation where the where
10:08the sum of the parts is is a
10:11Lollapalooza situation where you you're
10:14you're benefiting from synergies you
10:16know the Munger Buffett partnership is
10:19an amazing set of synergies you know the
10:22Frank Wells and eiszner you need start
10:24going down the list you know even in the
10:26a 16 C case you know you've got Ben and
10:30Mark right right and they do thrown
10:33those are lots of people who disagree
10:34with them including me sometimes yeah
10:37and there are different sides of a coin
10:39for sure and and it's not just you know
10:42that they disagree but that they have
10:44different interests and skills and so
10:46that's why I'm a strong believer in
10:48diversity in the broadest possible sense
10:50which is you get a situation where you
10:52have many people some people more
10:54quantitative some people have this
10:56attribute some people are more
10:58reflective some people are act
11:00action-oriented you know you get a guy
11:02like like Bill Campbell coach Campbell
11:06get all these this sort of mix of people
11:08and then if you look at sort of why
11:10Silicon Valley you know so interesting
11:12why is there's so much creativity going
11:14on and a lot of it is there's so many
11:15different types of people with different
11:18backgrounds and different cultures and
11:19just every you know thinking all of that
11:23and then the key thing above and go back
11:24to the Munger book is that mongers a
11:26real believer in investing is the last
11:29liberal art the there's a book actually
11:32by Hagstrom where he actually would that
11:35was the original title and you know
11:37basically to be a good investor you
11:39really need to know a lot about a lot in
11:41this whole metal mental models concept
11:44is really about taking a problem and
11:47using all of the models that exist in
11:50the world and there's about a hundred
11:51major models and you sort of go at every
11:55problem with all these models in your
11:56head I've actually combined compiled a
11:58list of 100 models that that you can use
12:02could you go ahead and explain what a
12:04mental model is and how it plays out in
12:06this context the key thing is it's a way
12:09of looking at the world its way of
12:11modeling the world and so you know you
12:13have psychology you have mathematics you
12:16have physics we have biology you have
12:19architecture you have philosophy you
12:21have all the different schools of
12:23literature and what he believes is by
12:27taking all those things together and
12:29analyzing problems you can basically
12:31find solutions that you wouldn't with
12:34only one model and this is why he called
12:39I love the cover of my book because he
12:41calls himself basically a book with legs
12:44sticking out or as children do and the
12:46important thing there is read widely and
12:47understand a lot about a lot at a lot of
12:50different disciplines and an investor
12:52who only understands business isn't
12:54gonna be a very good investor and I
12:55don't in my view I don't see great
12:58people who are good at business who are
13:00one-dimensional I think somebody said
13:03today on Twitter I forget who it was but
13:05basically if it might have well whoever
13:11it was but the point was made by the
13:13person which is that the really great
13:15founders have a lot of different
13:20read a lot and know a lot about a lot
13:22they tend not to be extremely narrow if
13:25they are extremely narrow they tend to
13:26have somebody or people around them who
13:29basically provide that breadth because
13:32you think about the founder they've got
13:33to know finance they've got to know
13:35people they've got to know product
13:37they've got to know mark you know he's
13:39just this sort of this amazing breadth
13:42and I've watched Bill Gates over the
13:45years i watch Craig McCaw up very very
13:49close i watch some of these people and
13:52you know they're just they're people who
13:55are interested in everything and they're
13:58quiring and they read do you think our
14:02kids in college or young people in
14:04university are we sort of forcing them
14:07down a narrower path and those people
14:10who who choose to be widely read and
14:12like you say have all these wide areas
14:15of interest in also areas of expertise
14:17they're unusual and are I just think
14:19that like the idea of liberality has
14:21gone out of fashion in some sense and
14:22you're saying that that we shouldn't be
14:24so quick to to toss it aside yeah one of
14:28the things that that charli's talked
14:29about is for example in business schools
14:32he believes that it really should be
14:35more taught from a historical case
14:37presented format that you learn from
14:40pattern recognition and until order to
14:43learn from pattern recognition you got
14:44to see a lot of examples on a lot of
14:46patterns and you can get people who are
14:49so caught up in formulas and teaching
14:52formulas like Value at Risk or things
14:54like that the students sort of lose
14:56track of of the forest and they also
15:01become sort of unduly reliant on models
15:04which may have tail risks which are on a
15:06parent and so anyway so having this you
15:11know this this style of learning and and
15:14the and the amazing thing about Munger
15:16is is that his hero is Franklin and the
15:19reason why he worked so hard to get
15:21wealthy when he was young in life as he
15:23wanted to be like Franklin which is what
15:25he loves about wealth is the
15:26independence and the ability to read
15:28whatever books he wants he reads five
15:30new newspapers a day and
15:32three broadly if you look at the books
15:34he recommends Jared Diamond you know
15:37Kahneman you know just sort of a wide
15:40range of books and that all contributes
15:44to basically a deeper understanding the
15:47world and and the other pieces the more
15:49you know the more humble you should be
15:51because the more you know the the more
15:54you know that there's more than you
15:55don't know so one theme that's coming up
15:58a lot here trend is this theme of
16:00humility in sort of the hubris around
16:05but yet to be a risk-taker you have to
16:08have a certain element of hubris to be
16:10able to say I'm gonna take this risk
16:12so hmm how do you how do you see that
16:14playing out like how does that balance
16:16out well so the the key thought there
16:19that that Munger has is that
16:22occasionally in life if you work really
16:24hard and pay close attention you're
16:27gonna find an amazing opportunity and he
16:30equates it to playing poker which is the
16:33great poker players don't play many
16:35hands but when they have a hand they
16:37played extremely aggressively and so his
16:40thesis is basically occasionally in life
16:43you'll see an amazing bet and you have
16:47to basically be super aggressive so for
16:50example one of the most amazing bets any
16:52time anywhere was when Paul Allen and
16:55Bill Gates were in Harvard Square and
16:57they saw the magazine and they realized
16:59that Bill had to drop out of Harvard and
17:01start a company right then and the point
17:04is the great entrepreneurs know that
17:06this is the big opportunity and they
17:08just go for it right then and so the
17:11it's this weird combination that he
17:14describes if people need to be patient
17:15and read and understand but then when
17:18they see the big opportunity you know
17:21like so social networking or you know
17:24something in computational biology you
17:26know name the field when you see it
17:29you'll know it and when you see it you
17:31got a bet big and so just sort of
17:36machine gun style aggression and all
17:39sort of areas really doesn't make a lot
17:41of sense to monger but occasionally in
17:43life if you work really hard you'll find
17:46a bet with a huge potential payoff and
17:49usually it's it's has exhibits extreme
17:52opt optionality and you just go for it
17:55where do you think Talib's notion of
17:59skin in the game comes into play cuz one
18:01of the thoughts that i have is is monger
18:04also more of an analyst versus like say
18:07the entrepreneurs that we come across
18:09every day who are building businesses
18:11and high-risk scenarios like what are
18:13your thoughts on that so so one of the
18:16the great contrasts in life is between
18:18people who know a moat when they see it
18:21and people who know how to build one
18:24potentially out of nothing and you know
18:27it's very clear that Buffett and Munger
18:29are people who basically know a great
18:31moat when they see it and they know one
18:33that's undervalued and they know no one
18:35that has attractive characteristics a
18:36completely different attribute it is
18:39somebody like Craig McCaw who said wow
18:42you know these these mobile phones are
18:45gonna be a hugely valuable and hugely
18:48important thing and I'm gonna double
18:50down I'm gonna sell all my cable
18:51businesses put everything into the into
18:54the mobile phone you know that's that's
18:57an example of somebody who saw something
19:00that didn't exist and I'm sort of
19:01fascinated by this whole idea of
19:04emergence which is I think it's a lot
19:07what Munger says is is that he says I
19:09can see Mount Everest that's my job the
19:12person who actually has to see Mount
19:14Everest it's gonna come out of nowhere
19:15that's like you know Zuck or gates or
19:20you know the the great entrepreneurs see
19:24this thing that isn't there yet and
19:26that's not a Munger attribute that was
19:29my question if we're talking about moats
19:31or mountains for that matter you know
19:33there's it comes a day when nobody's
19:34trying to get across your remote anymore
19:36because the actions moved on to to the
19:39other castle as it were how do you see
19:42that playing out as a is it again just
19:45the ability to see the next Everest the
19:48next moat well the differences is all
19:52modes are constantly under attack you
19:54can't see it but they're constantly
19:55under attack and what Munger says is the
19:58future of every business
19:59worse than the present so they're all
20:01you know they're all being attacked all
20:03the time and but some are bigger and
20:06some are stronger than others and some
20:08are gonna last longer and an
20:10understanding that can help you
20:11basically buy something at a bargain
20:14occasionally but and then you also get
20:17into a situation where there are some
20:18moats that that aren't big and they're
20:20super valuable and you could buy at a
20:22bargain but they're never going to be
20:24sort of you know a Facebook style
20:28sustainable competitive advantage
20:29doesn't come along very often and and
20:33but the point here is that there's two
20:34ways to do it the one way is to is to
20:38basically find the next Facebook the
20:40other way to do it is to find See's
20:43candy at a substantial discount and in
20:47Munger does the the substantial discount
20:51but it's a different approach because
20:53because they have to have a very high
20:55success rate you know the average
20:59the average fund has two or three two or
21:03three monsters that that determine that
21:05success of the of the fund right we talk
21:08about the slugging versus batting
21:09average hero a lot trend let's talk
21:12about the category of people that are
21:14building the moats and and not just
21:16spotting them to your point the two
21:18groups and in your book you have an
21:19entire chapter dedicated to moats and
21:21why they're important and what are some
21:23of the factors I'd love to hear some of
21:25your insights for our audience
21:26especially on what it takes to actually
21:28build those modes we talked about that a
21:30lot around here yeah I think you know in
21:34the technology business there's no
21:36bigger factor than network effects today
21:38they're super super powerful and there
21:41was a great discussion actually on
21:43Twitter last night about the Bloomberg
21:45moat for example you know it's has
21:47amazing network effects and it's it's
21:50made a enduring franchise and the
21:52question that was being what was being
21:55discussed is sort of what's the nature
21:56in that moat and can that be attacked
21:58there people are trying to do it and the
22:00key thing there is network effects are
22:02extremely powerful and they scale better
22:04than anybody's ever been able to scale
22:06things before but they're extremely
22:08fragile as well what built your network
22:11effects can disappear
22:13in an extraordinary just take the
22:16blackberry you know sort of rise and
22:20fall you can realize that what built you
22:22can tear you down at the same time and
22:24so to some extent it's an amazing thing
22:26so the good news it's amazing you can't
22:28get more value than anybody's ever
22:30gotten before the bad news is the rise
22:32just as fast on the way down as opposed
22:36to a moat that might be based on a
22:37regulatory advantage or or like a
22:40railroad which is how do you how would
22:42you ever put together the land required
22:44to make another one there there are
22:46different moats and there are different
22:48attributes and and you sort of have to
22:50look at em all holistically holistically
22:53and there are Lollapalooza elements all
22:55of these things that indicate that the
22:58sum of a mode is is greater than the
23:00parts in many instances so it's just to
23:04clarify some of the I mean I'm not
23:06saying you're necessarily saying there's
23:07a hierarchy of moats but like you said
23:09regulatory capture even patents and IP I
23:14mean in some cases not all cases
23:16obviously but in some cases there are
23:18some businesses who actually don't
23:19really care about their patents or hold
23:22on to their patents or IP because they
23:24have such strong network effects they
23:25don't need to rely on that to build
23:27their business value and then there are
23:30other types of moats that people build
23:32well you know I think probably one of
23:35the all-time great moats was was
23:37regulatory in nature in the Vale
23:40basically was able to convince the
23:42government you've probably seen pictures
23:44of neighborhoods where they're you know
23:469,000 cables going down the street and
23:49all kinds of telephone companies and
23:50basically Vale was able to create a
23:53situation where the government granted
23:55him a monopoly in return for for only
23:58accepting a regulated rate of return so
24:01some moats are based on basically
24:05regulation now there there were pluses
24:07and minuses to that and resulted in Bell
24:10Labs but it also resulted in a lot of
24:12stagnation you know the word thing about
24:14the Bell System was was was over a
24:18hundred years of of work and only seven
24:20apps right voice voice message you know
24:24you call forwarding you just go down the
24:26list you know so that was the bad
24:27the good news was there was Bell Labs
24:29because there was capital to basically
24:31do basic R&D and so you know in the end
24:35it was decided that it really was more
24:37important that there be innovation and
24:38you know people talk about Moore's like
24:41sort of sort of being a hugely powerful
24:44thing that that could help create
24:46Silicon Valley but it's it's it's was
24:48also basically when the Bell System was
24:51basically the carterfone decision was
24:53massive in terms of creating these
24:55connected networks and and creating the
24:58Metcalfe's law phenomenon summary law
25:01but the the the network effects kicked
25:03in as a result of the 80 carterfone
25:07decision what about a network effect due
25:10to something like brand
25:12I think brand is is an important one I
25:15think it's you know Michael Mullen has
25:18some some nice literature on it you know
25:20it's it's it's one of the hardest things
25:23to do and it's it's it's squishier than
25:27the other ones but you know there is
25:29amazing studies around coca-cola around
25:32you know you give somebody a coke and
25:35they don't prefer it to a Pepsi but you
25:37show them the brand and they prefer the
25:39code there's just certain brands that
25:41are extremely you know just powerful and
25:45in yeah but it but even today the coke
25:49brand is obviously under threat by a
25:50whole range of of innovative competitors
25:53and you know you started going down the
25:57list of the iconic brands you know I
26:00think the knife Nike brands amazing but
26:03I also think they have great technology
26:04and they've got you know a lot of solid
26:07execution and you know there are very
26:09impressive company that has a number of
26:12elements I mean what I've done in the
26:13chapter on moats which was originally in
26:16the book itself it was originally its
26:18own chapter but I figured that people
26:21were gonna bog down in it but the
26:22ordinary person who's reading the book
26:25who I wanted to come away with a better
26:27decisional framework was gonna say this
26:30is boring you know I mean to me it's
26:32super exciting but so anyway so we ended
26:34up in an appendix and that was sort of a
26:37call a mine on how do I get people to
26:41how do I get people excited about this
26:44stuff and and you know it's difficult
26:47because financial education is so hard
26:49yeah because people get bored by it my
26:52question is is you know for people who
26:54you know how do we channel our inner
26:57monger you know you've read the book how
26:59do you then step off into the world to
27:02really make it more than just reading
27:03the book to make it part of what you do
27:05and how you move through through the
27:08world yeah that's where you know it's
27:11difficult because we've got Kahneman
27:13who's an amazing guy who's for a decade
27:15studying behavioral economics and he
27:17says flat-out he still falls for the
27:20same problems when it when it came to
27:22writing Thinking Fast and Slow he was
27:24overconfident about how long it would
27:25take to finish it you know so what he's
27:27saying is we're all we're always gonna
27:29be flawed human beings and so but we can
27:33get better and we can be aware of things
27:36and then you can also reach a decision
27:38and say you know what this isn't
27:40interesting to me I should do something
27:43else and so there's this weird thing of
27:45when you go into pitch of a firm like
27:47yours one of the things you're looking
27:51for in the pitch is can this person sell
27:52it's a generalizable skill it's a test
27:55with a book if you can't read my book if
27:58you can't get through it you should be
28:00buying a diversified portfolio of index
28:03funds and so this is in some sense is
28:08sort of a litmus test which is if the
28:10chapter on moats bores you you're not
28:12gonna be a good investor if the chapter
28:15on moats bores you you know you you're
28:17not gonna be able to understand a good
28:18business from from a bad business and so
28:21the the bulk of people Buffett thinks
28:2590% plus of people should be buying a
28:29diversified portfolio of loaf of loafie
28:32index funds but most people are still
28:35buying active funds only 35% of people
28:38are buying indexes so it indicates that
28:40when people do invest they don't think
28:42clearly they don't understand fees
28:44they're lazy they spend more time
28:47picking out their refrigerator than
28:48their mutual funds you know these range
28:50of things that which indicate that
28:52people aren't rational and when
28:54people aren't rational I guess they can
28:57they can do some harm but in in in the
28:59world today we all have to handle our
29:01own retirement and that's kind of scary
29:04because all those people are sort of
29:07approaching retirement not all of them
29:09but so many people are approaching
29:10retirement with insufficient funds to
29:14provide for a comfortable retirement
29:18trend I feel like we've covered a lot of
29:20of here a lot here in a short amount of
29:23time but could you sort of wrap up for
29:26us some of the high-level takeaways both
29:29from people who have read the book or
29:31haven't or do will or won't read the
29:32book and for people who are investors
29:35and who aren't like what are some of the
29:36just main principles that people should
29:38take away from them the key things are
29:40are are learning to make good decisions
29:43and that means learning how to to sort
29:46of recognize certain key problems and
29:49then the other thing is sort of you know
29:51stay humble and and try and avoid things
29:54you know that I guess the key point that
29:56one the one point we didn't really make
29:58was about risk risk doesn't come from
30:01volatility risk comes from not knowing
30:03what you're doing and and I wrote a post
30:07on that two weeks ago my post two weeks
30:08ago so the other thing and then the
30:10final point is and the way to not know
30:13soon to be in fewer situations where you
30:16don't know what you're doing is to avoid
30:17things that are that that have a lot of
30:19downside and to read like mad and to
30:22think about thinking
30:24so yes trend let's talk more about risk
30:26because um I think we need to focus on a
30:29little bit more what are some of the
30:30things that you think we should take
30:31away from about risk the key point about
30:34risk is that it should be defined in the
30:37dictionary sense which is a a
30:39possibility of harm or injury and they
30:42could be financial harm or can be
30:44personal harm and and the key point
30:47about that in a financial sense is the
30:50risk you need to worry about is
30:51permanent loss the fact that stocks may
30:54go up or down in any given day should
30:56not be causing people to trade in and
30:59out of the market so permanent loss of
31:02capital is the key financial risk that
31:05you people should be thinking about so
31:08if we want to live like Charlie Munger
31:10more at least to the extent that we can
31:12how do how do you advise us starting on
31:16I guess the besides reading your book
31:19obviously that's step one but but the
31:26key point is to be smart by not being
31:31dumb to avoid situations where you're
31:35going to have a substantial possibility
31:38of loss or injury and there are ways to
31:41do that which is to be aware of life and
31:44and to read which we just talked about
31:48but there but there are other ways which
31:50is to be intentional about are the
31:53sources of human misjudgment in other
31:55words but we are are as humans very
31:59human and and we know what that means it
32:01means that we make mistakes and mistakes
32:04are inevitable and we'll keep making
32:06them charlie makes them Buffett makes
32:08them the two of them say it's amazing
32:10they did so well by being so dumb but
32:12the important point is if you basically
32:14are aware and you study and you learn
32:19from experience you can get better and
32:21you only have to be substantially better
32:23but awareness is key study is key and
32:28then inversion is key which is which is
32:31be smart by not being dumb well trend
32:33that's all we have time for but thank
32:35you again for joining the a 6nz podcast
32:38yeah trend thanks so much very good
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