Book Review: All I Want To Know Is Where I'm Going To Die So I'll Never Go There

post by Anmoljain · 2021-10-13T03:46:38.098Z · LW · GW · 2 comments

Contents

  Introduction
  1). Backward Thinking
    Begin with the end in mind
    Study errors
    Template for backward thinking
  2). The Dogma Trap
    Recognize it first
    Reality is exposed
    Litmus test of ideologies
    Shape your worldview first
  3). Prevention. 
    Crop your Imagination
    It's very uncomfortable, but you have to do it.
    Premortem
  4). Model of Reality
    Considering many ideas help us achieve a holistic view
    Learn ideas that stick to our memory
    Search for an explanation
  5). The Focus 
    of Attention + Quality of Experience = Quality of Life
    Don’t confuse what’s new with what’s relevant.
    Avoid content or technology that’s “free.”
    Give everything “multimedia” a wide berth.
    Be aware that focus cannot be divided.
    Act from a position of strength, not weakness.
  6). The Smaller Meaning Of Life 
    1 : Let's start with the first one “Who are you?”
    Setting the right goal checklist
    Always ask
  7). The Secret Of Persistence
    what does this mean for you?
  8). Checklist 
  9). Managing Expectation
    how best to handle expectations?
  10). The Ovarian Lottery
    what to do
    Stay humble—especially if you’re successful.
    Remind yourself daily that everything you are, everything you have and can do, is the result of blind chance.
  11). Inner Scorecard
    Focusing on Input
    Success is peace of mind
    No measure and metrics
    Everyone is on the path of inner success
  12). Circle of Competence
    Understand the why
    Become obsessed
    Know your limitations ( Most Important).
    It takes lots of time than you expect.
  13). Become an Opinionless
    Develop a " too complicated bucket "
    It's okay to say " I don't know"
    More mindful.
    Take control of your mind
    Form opinion when .....
    A litmus test of forming opinions
  14). Fuck You Money
    are a few rules of thumb buffet and Munger used for dealing with money.
  15). Be curious and then what?
    Consider the effects of feedback, time, scale, repetition, critical thresholds and limits,
  Conclusion
None
2 comments

Introduction

The pope asked Michelangelo: "Tell me the secret of your genius".

How have you created the statues of David, the masterpiece of all masterpieces?

Michelangelo's answer: " It is simple. I removed everything that is not David"

Let's to the point - since antiquity people have been asking themselves what makes us successful and happy. How should I live? what constitutes a good life? What is the role of money? Is leading a good life a question of mindset, of adopting a particular attitude, or is it more about reaching concrete life goals? Is it better to actively seek happiness or to avoid unhappiness? and other thousand of questions we pose every day.

Over the past 200 years, we have created a world we no longer understand intuitively. This means that entrepreneurs, investors, managers, doctors, journalists, artists, scientists, politicians, and people like you and I will stumble our way through life unless we have the soundbox of the mental toolkit.

Let be honest, we don't know for sure what makes us successful. We can't pinpoint exactly what makes our life happy. But we know with certainty what destroyed success or happiness. This realization, as simple it is the fundamental negative knowledge i.e what not to do. What not to do is much more potent and powerful than what to do.

As the saying goes via negative knowledge is: we cannot say what God is, we can only say what God is not.

And this same applies to the present day: We cannot say what brings us success. We can pin down only what blocks or obliterates success. Eliminate the downside like mistakes, thinking errors and the upside will take care of itself.

This book is about the fictitious Seeker, who has known a lot of misery, and his visit to the “Library of Wisdom” where he meets another fictitious character – the Librarian- along with Warren Buffett and Charles Munger. The Seeker learns how to make better decisions to help his children avoid doing the dumb things he has done. For instance, he learns from Buffett and Munger the best way to prevent trouble is to avoid it altogether by learning what works and what does not. They do so in the spirit of the anonymous man who said: “All I want to know is where I’m going to die so I’ll never go there.”

Charles Munger says " If you want to avoid irrationality, it helps to understand the quirks in your own mental wiring and then you can take appropriate precautions.

In this summary of All I Want to know is where I'm going to die, So I will never go there ", I deep dive into the 15  misjudgments that can be explained by psychological tendencies and cognitive biases and exploring the tools that provide the foundation of rational thinking. These ideas not just eliminate the error in the thinking but give you the purpose, turning the loss into a win, not taking emotions seriously, avoiding the big pitfall, making you happier, Focusing more on experience, reaching financial freedom, knowing your limits, embracing the reality, maintaining inner scorecard, achieving your goal and lastly showing the importance input I.e focus on the process.

Note: I quickly forget whatever I read and this is the same experience with all of us. In this interactive post, At the end of each section, I embed the prompts. You can, of course, read this summary without answering but give it a try and I guarantee you will be remembering the information for better and longer-term. And for the next time you revise, try with prompts first and then working Backwards to create an understanding of the missing points.

1). Backward Thinking

What if I ask the question via negative what action could our company take to destroy as much value as possible in the short time as possible? write down all the misery you think of. 

Treat the employees badly. Reward bad work. Don't appeal to the employee's self-interest but to a goal no one understands. Don't inform people what the company stands for, what rules apply, and the consequences for breaking them. Make sure people don't know their areas of responsibility. Put the right person in the wrong place. Don't let people know if they achieve a goal. Everything should be impossible to measure. Never tell people why something should be done. Surround the CEO with confused, unmotivated subordinates. Give key customers reasons to be angry. Late and wrong deliveries, delays, and arrogance will help. Let the customers associate the business with misery and make sure that this feeling gets reinforced at every contact with the company."

"You must always invert," said the 19th Century German mathematician Karl Jacobi when asked the secret of his mathematical discoveries. Whenever we try to achieve a goal, solve problems, predict what is likely to happen or likely to be true or false, we should think things through backward.

Instead of asking how we can achieve a goal, we need to ask the opposite question: What don't I want to achieve (non-goal)? What causes the non-goal? How can I avoid that? What do I now want to achieve? How can I do that? The downside is always more concrete than the upside. The downside is like granite-hard, tangible, solid. Whereas the upside is like air.

Don't think about the color red. If someone told you not to think of the color red, you might automatically think of that color. Why? Because in order to know what not to think about, your brain must first think about it. So when we tell people what to avoid, we should end with what we want them to achieve.

Charles Munger says on backward thinking:

The mental habit of thinking backward forces objectivity - because one of the ways you think a thing through backward is you take your initial assumption and say, "Let's try and disprove it." That is not what most people do with their initial assumption. They try and confirm it. It's an automatic tendency in psychology - often called "first-conclusion bias". But it's only a tendency. You can train yourself away from the tendency to a substantial degree. You just constantly take your own assumptions and try and disprove them.

Buffett observes: “Charlie and I have not learned how to solve difficult business problems. What we have learned is to avoid them.” You don’t have to be a genius to do that. Charlie Munger has commented, “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.”

How to practice

1). Begin with the end in mind

In the 4th Century, the Greek mathematician Pappus of Alexandria wrote: "Let we start with what is being sought and assume that we already found it." Assume we've achieved our goal, then ask: What was the purpose? Was this what I wanted? If so, from which earlier position do I get there? What is needed to achieve this? Then work backward to the beginning. By working backward we can easier see how and if something may work.

2). Study errors

Marcus Porcius Cato wrote: "Wise men profit more from fools than fools from wise men; for the wise men shun the mistakes of the fools, but fools do not imitate the successes of the wise." To reduce mistakes, we should study failures with severe consequences. Both in business and in life. We should look at their causes over time and see if they are unchanged. Errors are salient and memorable. Studying errors encourage effortful thinking, and improves our capacity to deal with change and new or unusual situation.

3). Template for backward thinking

I believe that a big part of the good life is about steering clear of stupidity, foolishness, and trends instead of striving for ultimate bliss. It’s not what you add that enriches your life—it’s what you omit.

2). The Dogma Trap

Let's experience your dogma trap. How does a zipper work? Rate your understanding on a scale from 0 (no clue) to 10 (easy-peasy). Write the number down.

Now sketch out on a piece of paper how a zipper actually works. Add a brief description, as though you were trying to explain it very precisely to someone who’d never seen a zipper before. Give yourself a couple of minutes. Finished? Now reassess your understanding of zippers on the same scale. The gaps in your understanding is consider as a dogma trap.

How does a toilet work? How does a battery work? And lots of daily interactive scenarios you follow till date. we think we understand these things reasonably well until we’re forced to explain them. Only then do we appreciate how many gaps there are in our knowledge. You’re probably similar. You were convinced you understood more than you actually did. That’s the knowledge illusion.

If we mess up with such simple contraptions as zippers and toilets, imagine how ignorant we much be when it comes to the really big questions. Questions like: how much immigration is good for society in the long term? Or: should gene therapy be allowed? Or: does private gun ownership make societies safer? Or how the economy works or: how global warming affects us?

Even with this complex set of systems - interestingly, especially with these unwieldy questions—answers come shooting out like bullets from a pistol.

But let’s be honest with you: we haven’t thought them through. Not even on a superficial level. Social issues are far more complex than zippers, toilets, and batteries. Why? Because any intervention into social structures has consequences infinitely more far-reaching than flushing the loo. It’s not enough to consider the first wave of effects. You’ve got to account for the effects of the effects. Thinking through the chain reaction properly would take days, weeks, even months, and who’s got the time or the energy for that?

Sadly we’re not the independent thinkers we’d like to imagine we are. Instead, we treat our opinions rather like our clothes. We’ll wear whatever’s in fashion—or, more specifically, whatever’s in fashion among our peers.

Ideologies are highly dangerous. Their effect on the brain is like a high-voltage current, causing an array of rash decisions and blowing all kinds of fuses.

Buffet said

Avoid ideologies and dogmas at all costs—especially if you’re sympathetic to them. Ideologies are guaranteed to be wrong. They narrow your worldview and prompt you to make appalling decisions.

So far so clear. How to practice it 

1). Recognize it first

The problem, however, is that many people don’t notice that they’re falling for an ideology. How do you recognize one? Here are three red flags: a) they explain everything, b) they’re irrefutable, and c) they’re obscure.

2). Reality is exposed

At first glance, such irrefutability appears to be an advantage. Who wouldn’t want a theory on hand that’s so powerful it means you’re always right? In reality, however, irrefutable theories are anything but invulnerable—in fact, they’re very easily exposed.

3). Litmus test of ideologies

When you meet someone showing signs of a dogmatic infection, ask them this question: “Tell me what specific facts you’d need in order to give up your worldview.” If they don’t have an answer, keep that person at arm’s length. And the same applies to your opinion also: You should ask yourself the same question, for that matter, if you suspect you’ve strayed too far into dogma territory.

4). Shape your worldview first

Try to find your own words to express things. Don’t just mindlessly adopt the formulations and imagery of your peer group. An example: don’t talk about “the people” when your party means only one specific social group. Avoid slogans.

Start looking for counterarguments. Imagine you’re on a TV talk show with five other guests, all of whom hold the opposite conviction from yours. Only when you can argue their views at least as eloquently as your own will you truly have earned your opinion.

In sum: think independently, don’t be too faithful to the party line, and above all give dogmas a wide berth.

The quicker you understand that you don’t understand the world, the better you’ll understand the world.

3). Prevention. 

Before you read this chapter, take a moment to answer the following question: what is wisdom?

Maybe you’re getting spontaneous images of wise old ladies and wise uncles popping into your head—people who have a vast amount of experience. Maybe you’re thinking of professors whose books could fill a small library.

Enough imagining; back to the question. What is wisdom? Someone on a TV quiz show who can list the names and star signs of all the winners of the Eurovision Song Contest might be a wise person or anything you imagine. Even being in the lane of the circle of competence which presumes specialized knowledge—is no guarantee of wisdom. So wisdom isn’t identical to the accumulation of knowledge. Then what is wisdom?

Wisdom is a practical ability. It’s a measure of the skill with which we navigate life. Once you’ve come to realize that virtually all difficulties are easier to avoid than to solve, the following simple definition will be self-evident: “Wisdom is prevention.”

The fact is, life is hard. Problems rain down on all sides. You can’t change that.

Einstein put it this way: “A clever person solves a problem. A wise person avoids it.”

The trouble is that avoidance isn’t sexy. Imagine two film plots, A and B. 

In Film A, a ship runs into an iceberg. The ship sinks. The noble captain selflessly, heart-wrenchingly rescues all the passengers from drowning. He’s the last person to leave the ship and clamber into a lifeboat—just moments before it disappears forever.

In Film B, the captain steers the ship around the iceberg, keeping a sensible distance. Which film would you pay to watch? A, of course. But which situation would you prefer as an actual passenger on the ship? That’s equally obvious: B.

What would happen next?

Captain A would be invited onto talk shows. He’d get a six-figure book contract. He’d hang up his captain’s hat and earn a living as a motivational speaker at client events and team meetings for major corporations. His hometown would name a street after him and his children, for the first time ever, would feel something like pride in their father. 

Captain B, on the other hand, would keep avoiding obstacles until his retirement many years later, sticking to Charlie Munger’s maxim: "I have a rule in life, if there is a big whirlpool you don’t want to miss it with 20 feet—you round it with 500 feet.” Although B is demonstrably the better captain, A is the one we celebrate. Why? Because successes achieved through prevention (i.e., failures successfully dodged) are invisible to the outside world.

This is why we systematically overemphasize the role of successful generals, politicians, emergency surgeons, and therapists while underemphasizing the role of people who help society and individuals from veering into catastrophe. They are the true heroes, the truly wise: competent GPs, good teachers, sensible legislators, skillful diplomats.

What about your own life? Even if you don’t believe it, the reality is that at least half your successes are preventative. I’m sure you carry things occasionally that leads to misery, as we all do, but more often you stop stupid mistakes.

How to harness the prevention : 

1). Crop your Imagination

Prevention requires more than just knowledge; it requires imagination, and imagination, sadly, is frequently misunderstood. Many people assume it means letting your mind wander while you’re drinking a glass of wine. Unfortunately, this is unlikely to produce any new ideas. Imagination means forcing yourself to think possibilities and consequences all the way through—until the last drops of juice have been squeezed out. Yeah, imagination is hard work.

2). It's very uncomfortable, but you have to do it.

Do you really have to keep harping on potential disasters? Won’t that just get you down? Experience says no. According to Charlie Munger: “All my life I’ve gone through life anticipating trouble… It didn’t make me unhappy to anticipate trouble all the time and be ready to perform adequately if trouble came.”

3). Premortem

I recommend spending fifteen minutes a week focusing intently on the potentially catastrophic risks in your life. Then forget all about it and spend the rest of the week happy and carefree. What you’re doing in those fifteen minutes is called a premortem. Imagine, for example, that your marriage is on rock bottom, you’ve suddenly gone bankrupt or you’ve had a heart attack. Now trackback, analyzing what led to this —write down to the underlying causes. As a final step, try to address these issues so that the worst never actually happens.

Munger argues that even if you do all this regularly and conscientiously, you’ll still overlook dangers and make the wrong decisions. Those unavoidable disasters can be mitigated by facing up to reality and tackling problems straight away. But in terms of foreseeable difficulties, it’s easier to avoid them than to resolve them. Wisdom is prevention. It’s invisible, so you can’t show it off—but preening isn’t conducive to a good life anyway. You know that already.

4). Model of Reality

A group of blind people approach a strange animal, called an elephant. None of them are aware of its shape and form. So they decide to understand it by touch. The first person, whose hand touches the trunk, says, “This creature is like a thick snake.” For the second person, whose hand finds an ear, it seems like a type of fan. The third person, whose hand is on a leg, says the elephant is a pillarlike a tree trunk. The fourth blind man who places his hand on the side says, “An elephant is a wall.” The fifth, who feels its tail, describes it as a rope. The last touches its tusk and states the elephant is something that is hard and smooth, like a spear.

Learn, understand and use the big ideas and general principles that explain a lot about how the world works. When Charles Munger was asked what would be the best question he should ask himself, he said: If you ask not about investment matters, but about your personal lives, I think the best question is, "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 .. .It's just so much fun - and it works so well.

What exactly is the model?

In a famous speech in the 1990s, Charlie Munger summed up this approach to practical wisdom:

Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ‘em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form. You’ve got to have models in your head. And you’ve got to array your experience both vicarious and direct on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You’ve got to hang experience on a latticework of models in your head.”

How to embrace the model of reality

1). Considering many ideas help us achieve a holistic view

What can help us see the big picture? How can we consider many aspects of an issue? Use knowledge and insights from many disciplines. Most problems need to be studied from a variety of perspectives.

Charles Munger says :

In most messy human problems, you have to be able to use all the big ideas and not just a few of them. The world is multidisciplinary. Physics doesn't explain everything; neither does biology or economics. For example, in a business, it is useful to know how scale changes behavior, how systems may break, how supply influences prices, and how incentives cause behavior

2). Learn ideas that stick to our memory

He is a benefactor of mankind who contracts the great rules of life into short sentences, that may be easily impressed on the memory, and so recur habitually to the mind. A

Whenever I  dealing with big ideas, I write the prompt of the particular idea and used spaced repetition for practicing "What sentence contains the most information in the fewest words?" 

An example of a one-sentence idea from psychology is: "We get what we reward for." 

A sentence from physics is: "Energy is neither created nor destroyed - only changed from one form into another."

If you Associate the model with a dramatic real-life story, analogy, individual, or picture, you can stick the ideas for the longer term, and routine application becomes simpler.

A Chinese proverb says I forget what I hear; I remember what I see; I know what I do."

 

3). Search for an explanation

One way of forcing us to learn models to better deal with reality is to open our eyes and look at the things we see around us and ask "why" and"And that what?" filter.

Take some simple examples as "why do apples fall downward?" or "why do we fall down when we slip?" or "why don't we fall off the earth?"

5). The Focus 

You’re sitting in a restaurant, your eyes scanning the menu. The choice is between a set “menu dégustation surprise” or the à la carte selection. You soon see that every individual combination of appetizers and mains comes out more expensive than the tasting menu, which also includes wine—so that’s what you order. “Good choice,” smiles the waiter. “Most people order that.”

Cut to a dinner that actually took place. More on the traditional side, but highly exclusive when it came to the guests—billionaires, every last one, including Warren Buffett and Bill Gates. Gates asked the group of people what they felt was the most important factor in their success. Buffett said: “Focus.” Gates agreed.

we all know Focus, time, and money are our three most important resources. The latter two are most familiar to us. There’s even a science devoted to time and money—referred to in that context as “work” and “capital.”

But what about Focus? however, is little understood, although today it’s the most valuable of these three resources, the most crucial to our success and our wellbeing. Unfortunately, when it comes to focusing we tend to commit systematic errors. Here are several key ways you can avoid them.

I believe focus is vital but equally crucial is where you direct it. What’s remarkable, then, is that instead of choosing our objects of focus “à la carte” we stuff our faces morning tonight with an “informational tasting menu” that others have selected for us.

E-mails, Facebook updates, texts, tweets, alerts, news items from across the world, document hyperlinks, video clips on websites, and screens as far as the eye can see, in airports, train stations, and trams—all of them vying for our attention.

All these offerings are thefts, not gifts, losses not wins, debits not credits. An Instagram post, no matter how beautifully designed, is a debit. Breaking news is a debit. An e-mail is (in most cases) a debit. The moment we read it, we pay—in focus, time, or even money.

Focus and happiness. What does focus have to do with happiness? Everything. “Our happiness is determined by how you allocate your attention,” wrote Paul Dolan.

Quality of Attention + Quality of Experience  = Quality of Life

The same life events (positive or negative) can influence your happiness strongly, weakly, or not at all—depending on how much attention you give them.

How to focus

1). Don’t confuse what’s new with what’s relevant. 

Every novelty—product, opinion, news item—wants an audience. The louder the world, the louder the novelty must shout in order to be heard. Don’t take this noise too seriously. Most of what’s hailed as revolutionary are irrelevant.

2). Avoid content or technology that’s “free.” 

They’re the definition of focus traps because they’re financed by advertising. Why would you voluntarily walk into a trap?

3). Give everything “multimedia” a wide berth. 

Images, moving images, and—in the future—virtual reality accelerate your emotions above a safe speed, markedly worsening the quality of your decision-making. Information is best absorbed in written form, from documents with the fewest possible hyperlinks—books, ideally.

4). Be aware that focus cannot be divided. 

It’s not like time and money. The attention you’re giving your Facebook stream on your mobile phone is the attention you’re taking away from the person sitting opposite.

5). Act from a position of strength, not weakness. 

When people bring things to your attention unasked, you’re automatically in a position of weakness. Why should an advertiser, a journalist, or a Facebook friend decide where you direct your focus?

Even without an Instagram account, the philosopher Epictetus came to a similar conclusion two thousand years ago:

If a person gave your body to any stranger he met on his way, you would certainly be angry. And do you feel no shame in handing over your own mind to be confused and mystified by anyone who happens to verbally attack you?’

Be critical, strict, and careful when it comes to your intake of information—no less critical, strict, and careful than you are with your food or medication.

6). The Smaller Meaning Of Life 

Our plans miscarry because they have no aim. When a man does not know what harbor he is headingfor, no wind is the right wind. - Lucius Annaeus Seneca

I want you to answer these 2 questions: ‘Who are you?’ and ‘What do you want?’” And if you think those are trivial questions, consider that 95 percent of the population goes through life and never answers either one!” Spend few minutes before proceeding.

Welcome back! How would you answer the question,

Question 1 : Let's start with the first one “Who are you?”

Most people give their name and say what they do for a living, sometimes followed up with a brief snippet of information about their family (“I’m the mother of two children”) or a personality trait (“I like people”). But what uses is a response like that? None. You can’t hold it against them, though, because there is no single-sentence answer to a question about your own identity. Nor a single-paragraph one, for that matter. Nor ten pages.

Because our lives consist of infinitely many facets, any one-line answer is by definition inaccurate. Yet we’re constantly reducing ourselves to that interestingly, with ourselves, as part of our own self-conception. you’re better off not answering the question of who you are. You’ll only be wasting your time.

Question 2 : What do you want? 

Unlike the first, this question is eminently answerable. Indeed, it’s crucial you should reply. It’s asking about your purpose in life, sometimes also referred to as the “meaning of life.”

Now, the word “meaning” is somewhat confusing, so I recommend distinguishing more precisely between the “larger meaning of life” and the “smaller meaning of life.”

If you’re trying to find the larger meaning of life, you’re looking for answers to questions like Why are we on this Earth? Why does the universe exist? And what does it all mean? So far every culture has responded with its own mythology. Particularly lovely is the notion that the Earth is the shell of an enormous tortoise—a myth that can be found in both China and South America. Or the Christian mythos: God created everything in six days, and on the Day of Judgment He will wipe the slate clean. Unlike the writers of mythology, science has found no answer to the “larger meaning of life” question. All it knows about life is that it will continue to develop aimlessly as long as there’s sufficient material and energy available. There is no discernable overarching purpose—not for humanity, life or the universe. The world is fundamentally meaningless. So stop looking for the “larger meaning of life.” You’re only wasting your time.

The question of the “smaller meaning of life,” however, is crucial. It’s about your personal goals, your ambitions, your mission. There can be no good life without personal goals.

Seneca figured that out two thousand years ago: “Let all your efforts be directed to something, let it keep that end in mind.” There’s no guarantee of achieving your end, but if you don’t have one, you’re guaranteed to achieve nothing.

Why do goals work? Because goal-orientated people put more effort into accomplishing them. And because goals make decisions easier. Life consists of endless forks on the road. You could make each choice on a whim—or refer to your goals.

Here Is the checklist I used for the last 3 months : 

1). Setting the right goal checklist

Meaningful goals need to be backed by reasons as a way of testing that we set the right goal. Checklist of goal setting 

Do we know what causes our goal to be achieved? We can't achieve what we want if we don't understand what makes it happen. And are we sure our goal is the right one for what we finally want to achieve?

Lucius Annaeus Seneca said we should: "Never work either for useless goals,or impossible ones."

2). Always ask

What end result do I want? What causes that? What factors have a major impact on the outcome? What single factor has the most impact? Do I have the variable(s) needed for the goal to be achieved? What is the best way to achieve my goal? Have I considered what other effects my actions will have that will influence the final outcome? When we solve problems and know what we want to achieve, we need to prioritize or focus on the right problems. What should we do first? How serious are the problems? Are they fixable? What is the most important problem? Are the assumptions behind them correct? Did we consider the interconnectedness of the problems? The long-term consequences?

The upshot? Goals work. Goals are important. Yet most people don’t think clearly enough about the “smaller meaning of life.” Either they have no goals or they merely accept the ones currently in fashion. What matters is to know where you’re going, not to get to any old place quickly.

7). The Secret Of Persistence

Stockbrokers—collars unbuttoned, sleeves rolled up—are yelling into several telephones at once, gesticulating as though their lives were on the line. The air crackles. Every now and again one of them slams a receiver onto the table like he wants to break it. Then the traders start bawling at each other over their Bloomberg terminals, on which stock prices flash like carnival lights. This is how the media depicts the world of finance, relaying images from the stock-market floor. This is how students baked into the university.

Scene change. A dull office on the fourteenth floor of an unassuming high-rise in sleepy Omaha, Nebraska, the most negligible state in the USA. No Bloomberg terminals, no computers, no e-mails. not even a calculator.Just an old-fashioned desk and a telephone. There he sits, day after day, as he has done for nearly fifty years: Guess who is this? Yes, you are right, the most successful investor of all-time - Warren Buffett.

On the one hand: hyperactive, sweat-drenched, testosterone-laden stockbrokers. On the other: quiet, silver-haired Uncle Warren.

Once you’ve grasped the difference between speculating and investing, you’ll start seeing parallels everywhere—and you’ll have a good mental tool to hand.

So, what exactly is the difference?

Your favorite stockbrokers are trying to make a profit through freely and greedy buying and selling shares. What’s behind the shares—a software firm in California, a copper mine in Peru, Financial technology - PayPal or multinational Giant - Amazon everything irrelevant. What matters is that the share prices move temporarily in the right direction.

Silver-haired classic investors, however, buy shares in only a handful of companies, which they know as thoroughly as the backs of their hands. The opinion of the market means nothing to them. Their commitment is long-term. To avoid transaction costs, they buy and sell as infrequently as possible.

Buffett and Charlie Munger don’t even seek out new investment opportunities. They wait for opportunities to come to them. From the horse’s mouth: “Charlie and I just sit around and wait for the phone to ring.”

Here I need your opinion: Who’s more successful—speculators or investors? There are winners and losers on both sides, but the giants among the winners are to be found only on the side of the investors. Why is that? One central difference: investors take advantage of long timespans; stockbrokers don’t.

What do you think the most purchased books of all time? Not the ones on the current bestseller lists or stacked highest on bookshop tables. I mean the ones that have remained continuously in print for decades or even hundreds of years—the Bible, The Bhagavad Gita, Mao’s Little Red Book, the Koran, The Communist ManifestoThe Lord of the RingsThe Little Prince. They’re known as “long sellers,” and no publisher can live without them.

Long-term successes often have inconspicuous ingredients that function like baking powder, producing incremental progress that builds up over a long period of time.

Take the example of investment: if you invest $10,000 at a five percent return, after a year you’ll be $500 richer. Piece of cake. But if you keep reinvesting these modest profits, after ten years you’ll achieve a capital of $16,000; after twenty years an impressive $26,000; and after fifty an incredible $115,000. Your capital will accrue not linearly but exponentially. Because our brains have no instinct for the duration, they also have no feel for exponential growth.

This, then, is the secret of persistence: long-term successes are like making cakes with baking powder. Slow, boring, long-winded processes lead to the best results. The same goes for your life.

So what does this mean for you?

Buffet says Less busy work, more endurance. Once you’ve identified your circle of competence stick at it as long as possible. Perseverance, tenacity, and long-term thinking are highly valuable yet underrated virtues. We should start fostering them again.

“You don’t have to be brilliant,” as Charlie Munger says, “only a little bit wiser than the other guys, on average, for a long, long time.”

8). Checklist 

Air carrier cockpit checklists to be reviewed in an effort to ensure that each list provides a means of reminding the crew, immediately prior to takeoff, that all items critical for safe flight have been accomplished - National Transportation Safety Board, 1969

The British de Havilland Comet 1 was the world’s first commercially produced jetliner. In 1953 and 1954, it was involved in a number of mysterious accidents in which the machines broke up in midair. One plane crashed shortly after take-off from Calcutta airport; another split apart as it flew over the Italian island of Elba. A few weeks later, a Comet 1 plummeted into the sea outside Naples. In all three cases, there were no survivors. The fleet was grounded, but investigators couldn’t determine what caused the crashes, so flights were resumed. Just two weeks later, another plane tumbled from the sky just outside Naples (again)—the final nail in Comet 1’s coffin.

Eventually, the flaw was identified: hairline cracks had formed at the corners of the plane’s square windows, spreading across the fuselage and eventually causing the whole machine to come apart. The Comet 1 is the reason why passengers these days only ever peer through oval windows. But there was another, more significant consequence: after the disaster, accident investigator David Warren suggested that a near-indestructible flight data recorder (later dubbed a black box) be installed in each and every jetliner—an idea that was later implemented and Implementation of checklist before prior to taking off A black box records thousands of pieces of data per second, including the pilots’ conversations in the cockpit, making it easier to determine the exact cause of a crash and based on the data and a checklist provides a means of reminding crew to ensure that everything is working well. Checklists are built that are critical for every safe flight. No industry takes mistakes more seriously than airlines.

After his spectacular Captain Sullenberger wrote

“Everything we know in aviation, every rule in the rule book, every procedure we have, we know because someone somewhere died. With each crash, future flights become safer.”

Charles Munger suggests using models of reality in a checklist fashion :

Checklist routines prevent a lot of errors, and not just for pilots. You should not only possess wide-ranging elementary wisdom but also go through mental checklist routines in using it. There is no other procedure that will work as well.

How smart people often be wrong?

 They think they know all and everything is stored in the memory and that's where they losing the game. I think you need mental models - and what I call checklist procedures - where you take a worthwhile list of models and run right down them and using them together in a multimodular way. "Is this here? Is that here? what is missing?" and so on and so on ... 

Now if there are two or three items that are very important that aren't on your checklist - well, if you're an airplane pilot, you can crash. Likewise, if you're trying to analyze a company without using an adequate checklist, you may make a very bad investment.

Munger provides a certain rules to think about when designing checklists are:

Here is an example of how buffet and munger understanding the business, Investment decision and evaluating to what is likely true or false.

If you really want to try, The best way to practice this checklist is to open up your stock portfolio and analyze what is missing? what is important? and so on. This is how rational thinking works.

9). Managing Expectation

Our brain doesn’t function without expectations. Essentially it’s a veritable expectation machine. 4 stages of forming behavior: cue, craving, response, and rewards. The carving part is mainly associated with the expectation and creating a visual image of what rewards you were looking for. E.g When we push down on the handle of a door, we expect the door to open. When we turn on a tap, we expect water to come out. When we board a plane, we expect the laws of aerodynamics to keep us in the air. We expect the sun to rise in the morning and set in the evening. All these expectations are subconscious.

The regularities of life are so engraved into our minds that we don’t have to think about them actively.

Unfortunately, however, the brain also generates expectations when it comes to out-of-the-ordinary situations, if you see expectations consciously you can save yourself for almost as many disappointments.

Research confirms that expectations have a profound impact on happiness, and that unrealistic expectations are among the most effective killjoys. One example: a higher income bolsters wellbeing only up to approximately $75,000 per year, and beyond that point money no longer plays much of a role. Even below that threshold, wellbeing can be negated in a way that seems paradoxical.

Our expectations possess very limited external force but hold immense internal sway. Because we’re so lax in the way we deal with them, we allow others to gain influence.

Examples

Advertising is nothing more than the engineering of expectations; sales are the same.

When a banker sells you a financial product, presenting you with complicated projections of future cash flows, that’s expectation engineering, plain and simple.

So how best to handle expectations?

1). Organize your thoughts like an emergency doctor during tiage.

Before every meeting, every date, every project, every party, every holiday, every book, and every undertaking draw the sharp distinguish between “I have to have it,” “I want to have it” and “I expect it.” The first phrase represents a necessity, the second a desire (a preference, a goal), and the third an expectation. Let’s address them in turn.

You’ll often hear people say things like, “I’ve absolutely got to be an entrepreneur ” or “I have to write this novel” or “I have to have children.” No, you don’t. Besides breathing, eating, and drinking, you don’t have to do anything at all.

Very Few desires are grounded in genuine necessities. So, instead, say, “I want to be an entrepreneur” “I’d like to write a novel” and “My goal is to have children.” Seeing desires as musts will only make you a grumpy, unpleasant person to be around. And no matter how intelligent you are, it will make you act like an idiot

Now, on to desires. A life without goals is a wasted life. Be aware that not all your desires will be satisfied, because so much lies beyond your control. Remember the beyond of control ovarian. The Greek philosophers had a wonderful expression for the things we want: preferred indifferent (indifferent here in the sense of insignificant).

We now come to the third strand in our triage: expectations. Many of your unhappiest moments are down to sloppily managed expectations—particularly expectations of other people.

2). Rate your expectations on a scale from 0 to 10. Are you expecting a disaster (0) or the fulfillment of your life’s dream (10)?

The whole exercise takes ten seconds, max. Rating your expectations interrupts the automatic process of plucking them out of thin air, and you’re also giving yourself a kind of buffer because now your expectations are not simply moderate but have actually been lowered fractionally below their proper value.

Stop lumping together necessities, goals, and expectations. Keep them meticulously separate.

Don't treat our expectations like helium balloons, letting them climb higher and higher until finally they burst and fall in crumpled shreds from the sky.

10). The Ovarian Lottery

Happiness is something you have, but the success you’ve got to earn. This is what we really think.

Here is the exercise - ask yourself: how successful has my life been so far? Use a scale from +10 (superstar) to -10 (total loser). Write down your answer in the margin.

Then ask yourself a follow-up question: how much of this success can be attributed to your own actions—to your effort, your work, your input? In other words, how much of your success is truly your own? And how much is down to chance, to factors beyond your control?

Note down these two as percentages. Take your time.

Ready! I’d guess you attributed something like 60 percent to your own achievement and 40 percent to factors beyond your control.

Last exercise: Now I want you to run a little thought experiment I got from Warren Buffett: “Imagine there are two identical twins in the womb, both equally bright and energetic. And the genie says to them, ‘One of you is going to be born in the United States, and one of you is going to be born in Afghanistan. And if you wind up in Afghanistan will pay no taxes. Now the question is What percentage of your income would you bid to be the one that is born in the United States?’” Buffett is speaking here about the ovarian lottery.

Of course, You could substitute Great Britain, Germany, or any other developed nation for the USA, and Pakistan, Bangladesh for the development. what would you reply?

Most people I ask to put the figure at 80 percent. I’d say the same. In other words, we’re prepared to sacrifice an extremely high proportion of our income to grow up in our preferred country. The fact that our place of birth is worth that much money to us makes it clear how greatly it influences our success.

The ovarian lottery doesn’t end with your country of origin. Country of origin is just the tip of the iceberg here is a lot more. You weren’t just born in a particular nation, but in an area with a particular postcode and into a particular family. None of that is within your control. You have been given values, behaviors, and principles that help or hinder you in everyday life, and again these are beyond your control. You were slotted into an educational system with teachers you didn’t choose. You got sick, suffered fortune’s slings and arrows (or were spared them), and were responsible for absolutely none of it. You slipped into a series of roles and you made decisions—based on what? Perhaps you read a book that changed your life—but how did you come to hear about it? Say you met somebody who opened doors for you, without which you wouldn’t have got where you are today. Who do you have to thank for this acquaintance?

What you are, you owe to your genes—and the environment in which your genetic blueprint was realized. Even your level of intelligence is largely determined by your genes. So is whether you’re introverted or extroverted, open-minded or anxious, reliable or sloppy.

If you believe your success is based on relentlessly hard work, on driving tenacity, and far too many night shifts, you’re not necessarily wrong. It’s just that you owe the willpower you’re so proud of to the interplay between your genes and environment.

So, given all that the last question is what proportion of your success would you ascribe to your own achievement?

Do you think zero? Yes, The logical answer is zero percent. Your successes are fundamentally based on things over which you have no control whatsoever. You haven’t really “earned” your achievements.

Then what to do 

1). Stay humble—especially if you’re successful.

The greater your success, the less you should toot your own horn. Modesty has fallen out of fashion these days, and there’s nothing we like better than showing off on social media. Restrain yourself. I’m not talking about false modesty here, but the genuine article. The thing is, you see, that people who pat themselves on the back—even if they do so quietly—have been taken in by an illusion.

Pride is not only pointless; it’s also factually misplaced.

2). Remind yourself daily that everything you are, everything you have and can do, is the result of blind chance.

3). Gratitude: For those of us blessed with good luck—i.e., for you and me—gratitude is the only appropriate response. One nice side effect is that grateful people are demonstrably happier people.

4). If you are already successful then help others willingly and ungrudgingly surrender part of your (unearned) success to people who were born with the wrong genes into the wrong families, in the areas with the wrong postcodes. It’s not just noble; it’s commonsensical. "

Donations and taxes aren’t financial matters. First and foremost, they’re issues of morality.

11). Inner Scorecard

Every country has its own version of the list. In Switzerland, it’s called the BILANZ 300 List, and it identifies the 300 richest people in Switzerland. In Germany, manager magazine publishes an annual list of the 500 wealthiest Germans. The Sunday Times announces its Rich List in the UK; Challenges publishes an equivalent for France. Forbes puts together a list each year of all the billionaires in the world. The impression they give is always the same: these, then, are the most successful people in the world, all of them businesspeople (or their heirs).

Similar rankings exist for the most powerful CEOs, the most-cited academics, the most-read authors, the highest-paid artists, the most successful musicians, the most expensive sports stars, and the highest-earning actors. Every industry has its own version. Yet how successful are these success stories, really? It depends very much on how you define success.

I really wanted to know Why are modern societies trying to steer their sheep toward material success and not, say, toward additional leisure time? Why are there lists of the richest people, but no lists of the most satisfied?

If we don’t want the Forbes lists to drive us crazy, there are two things we’ve got to understand.

1). definitions of success are products of their time. A thousand years ago, a Forbes list would have been unimaginable; in another thousand, it will be equally so. Warren Buffett, who along with Bill Gates has topped the Forbes list.

2). Depending on the century in which you were born, society would have extolled some other kind of success—but always doing its best to convince you of its particular definition. Don’t just blindly follow the flags. Wherever they lead, you certainly won’t find the good life.

3). Material success is also 100 percent a matter of chance. We’re not fond of chance as an explanation, but it’s just a fact. Your genes, your postcode, your intelligence, your willpower—fundamentally there’s nothing you can do about any of it.

You might be arguing that successful businesspeople worked hard and made smart decisions. Yes, it is true but remembers the ovarian checklist, Yet these factors themselves are the results of their genes, their origins, and their environmental opportunities. This is why you should regard the Forbes lists as basically haphazard. And why you should stop idolizing them.

Let me give you a completely different definition of success, one that’s at least two thousand years old and the best things about is that It is almost universally accessible. Success, according to this definition, neither hinges on how society distributes prestige nor suits vulgar rankings. Here it is: true success is an inner success. Voilà.

How can we achieve inner success?

1). Focusing on Input

By focusing exclusively on the things we can influence and resolutely blocking out everything else. Input, not output. Our input we can control; the output we can’t, because chance keeps sticking its oar in. Money, power, and popularity are things over which we have only limited control. Losing them will send you into hell if they’re the focus of your attention. Simply put, inner success is more stable than the external kind.

2). Success is peace of mind

John Wooden was far and away from the most successful basketball coach in American history. Wooden insisted his players define success in radically different terms: “Success is peace of mind, which is a direct result of self-satisfaction in knowing you made the effort to do your best to become the best that you are capable of becoming.” Success in this sense isn’t winning titles, collecting medals or being transferred for vast sums of money. It’s an attitude.

3). No measure and metrics

Let’s be honest: nobody’s going to strive 100 percent for inner success and pay no heed whatsoever to the external kind. Yet we can edge closer to the ideal of ataraxia through daily practice. Every evening, take stock: When did you fail today? When did you let the day be poisoned by toxic emotions? What things beyond your control did you let upset you? And which mental tools are required for self-improvement?

You don’t have to be the richest person in the cemetery—instead, be the most inwardly successful person in the here and now. “Make each day your masterpiece” was what Wooden hammered into his players’ heads. Take his advice.

Inner success is never fully attainable, and you’ll have to practice it your whole life long. Nobody is going to do that work for you.

4). Everyone is on the path of inner success

Those seeking external success—wealth, a job as CEO, gold medals or honors—are actually striving for inner success too; they just don’t realize it. A CEO might use his bonus to buy a Porsche 911 maybe because he likes the way it looks prestigious, but probably so that he’ll be envied. Either way, he wants the feeling of respect it makes him feel good. Otherwise, he wouldn’t buy it.

Whichever way you look at it, the truth is that people desire external gain because it nets them internal gain. The question that suggests itself is obvious: why take the long way round? Just take the direct route.


12). Circle of Competence

We already discuss how we form the opinions with almost no understanding of it. Nobody understands the world completely. It’s far too complex for a single human brain. Even if you’re highly educated, you can only understand a tiny part. The circle of competence is like a minuscule patch on the runway you need for take-off, what you need to fulfill your high-flying dreams. If you don’t have one, you’ll never leave the ground.

Warren Buffett uses the wonderful term circle of competence.

Inside the circle are the skills you have mastered. Beyond it are the things you understand only partially or not at all. Buffett’s life motto: “Know your circle of competence, and stick within it. The size of that circle is not very important; knowing its boundaries, however, is vital.”

Charlie Munger adds:

Each of you will have to figure out where your talent lies. And you’ll have to use your advantages. But if you try to succeed in what you’re worst at, you’re going to have a very lousy career. I can almost guarantee it.

Tom Watson, the founder of IBM, is living proof of this thesis. As he’s said of himself:

I’m no genius. I’m smart in spots—but I stay around those spots.”

I believe that by rigorous in organizing your professional life around this idea, because a radical focus on your circle of competence will bear more than monetary fruit. Equally important is the emotional variety. You’ll gain an invaluable feeling of mastery, and you’ll also be more efficient because you won’t have to decide every time whether to accept or refuse a task. With a sharply delineated circle of competence, unsuitable but irresistible requests suddenly become resistible.

I remember the incident in the book Risk Intelligence, where Dylan Evans describes a professional backgammon player by the name of J.P. “He would make a few deliberate mistakes to see how well his opponent would exploit them. If the other guy played well, J.P. would stop playing. That way, he wouldn’t throw good money after bad. In other words, J.P. knew something that most gamblers don’t: he knew when not to bet.” He knew which opponents would force him out of his circle of competence, and he learned to avoid them.

Buffet said:

Adam Smith talks about 'Specialization of Labor '...allowing countries to specialize and work on what they are good at. Mike Tyson doesn't try to run Berkshire, and I don't try to get in the ring with Mike Tyson 1534. When my wife and I had a baby, we hired an obstetrician — I didn't try to do it myself. When my tooth hurts, I don't turn to Charlie.

The idea is that you let other people do what they're best at and you do what you're best.

Today, opportunities are immersive and in that passion of pursuing the impulse to step outside your circle of competence is the equally powerful temptation to broaden it. This temptation is especially great if you’re successful within your current circle if you’re entirely comfortable there.

Remember that Skills don’t transfer from one arena to another. 

In other words, skills are domain-specific. A master chess player isn’t automatically going to be a good business strategist. A heart surgeon isn’t automatically a good hospital manager. A real-estate speculator isn’t automatically a good president.

So how do you create a circle of competence?

1). Understand the why

Why is the circle of competence such a powerful idea? What’s its secret?

Simple. A brilliant programmer isn’t just twice as skilled as a good one, nor three times or even ten times; a brilliant programmer would solve the same problem in a thousandth of the time it would take a programmer who was merely “good.”

Ditto for lawyers, surgeons, designers, researchers, salespeople. Inside versus outside the circle of competence—we’re talking about thousandfold differences.

2). Become obsessed

Obsession is a kind of addiction, which is why it’s often spoken of disparagingly. Obsession drives people to invest thousands and thousands of hours into something.

As a young man, Bill Gates had an obsession: programming.

Steve Jobs: calligraphy and design.

Warren Buffett first put his pocket money into stocks and shares as a twelve-year-old; he’s been addicted to investing ever since.

Nobody today would say that Gates, Jobs, or Buffett wasted their youth.

Quite the contrary: it’s because they were so obsessed that they invested the thousands of hours it takes to achieve mastery of something.

Obsession is an engine, not engine failure.

3). Know your limitations ( Most Important).

Stop beating yourself up over your deficiencies. If you’ve got two left feet, forget the salsa lessons.

If your kids can’t tell whether that squiggle is supposed to be a horse or a cow, stop dreaming of a career as an artist.

If you can barely cope with a visit from your aunt, drop the idea of opening your own restaurant.

Remember: The truth is that it’s completely irrelevant how many areas you’re average or below average in. What matters is that you’re far above average in at least one area—ideally, the best in the world.

A single outstanding skill trumps a thousand mediocre ones. Every hour invested into your circle of competence is worth a thousand spent elsewhere.

4). It takes lots of time than you expect.

Clicking around on Wikipedia isn’t enough. Nor is a traditional degree. It takes time—lots of time. “Expect anything worthwhile to take a really long time” is the rule American designer Debbie Millman sticks to it.

13). Become an Opinionless

I need your opinion - Should the minimum wage be increased? Should shops be allowed to sell genetically modified foods? Is it a fact that global warming is caused by human activity or is it the hysterical fantasy of environmentalist politicians? I’m sure you have an answer at the ready for all these questions. As politically interested people, you don’t need more than a second to decide.

In reality, however, these questions are far too complicated to be settled in the blink of an eye. Each of them demands at least an hour’s concentrated deliberation for a sensible resolution to be reached.

The human brain is a volcano of opinions. It spews out viewpoints and ideas nonstop. No matter whether the questions are relevant or irrelevant, answerable or unanswerable, complex or simple—the brain tosses out answers like head and tail.

In doing so it makes three mistakes.

Mistake 1: we express opinions on topics in which we have no interest. In a recent discussion with friends, I caught myself professing a heated opinion on an Olympic, even though I’m not that much interested in elite sports.

Mistake 2: we spew out opinions on unanswerable questions. When can we expect the next stock market crash? Is there more than one universe? What will the weather be like next summer? Nobody can say for sure, not even experts.

Mistake 3: we tend to give over-hasty answers to complex questions—like those at the beginning. This mistake is the most serious of the three.The American psychologist Jonathan Haidt has done extensive studies into what happens inside our brains when we do this, revealing that we tend—especially with difficult questions—to instantly pick aside. Only then do we consult our rational mind, looking to justify and shore up our position.

What to do about it ;

1). Develop a " too complicated bucket "

Get yourself a “too complicated” bucket. Throw in all the questions that don’t interest you, that are unanswerable or too much hard work. Don’t worry, you’ll still be left with a handful of topics every day on which you can or must offer an opinion.

2). It's okay to say " I don't know"

News and journalists, family members in the party's and annual reunions are places where the skill of your opinion flourished. Apparently, you feel qualifies you to answer all the major world questions. Are you in favor of more or less state interference? Did you think a consumption tax was fairer than an income tax? Who will be the next president? And a lot more. Just look into their eye and say “I don’t know.” You don't need an opinion on everything. Because those of the topic is in my ‘too complicated’ bucket.”

3). More mindful.

Poor decisions based on half-baked opinions can be disastrous, but there’s another good reason to prevent opinion incontinence. Not always feeling like you need to have an opinion calms the mind and makes you more relaxed and mindful.

It’s immensely liberating not having to hold an opinion on all and sundry. And there’s no need to worry that opinionlessness is a sign of intellectual weakness. It isn’t. it’s a sign of intelligence.

Opinionlessness is an asset. It’s not information overload besetting our era—it’s opinion overload.

4). Take control of your mind

Select your topics of interest very carefully. Why should you let journalists, bloggers, or tweeters dictate what’s on your mind? They’re not the boss of you! Be extremely selective. Dump everything else into your “too complicated” bucket. When you’re asked to pass judgment on this or that, refrain. And the best thing You’ll find, astonishingly, is that the world keeps spinning even without your commentary.

5). Form opinion when .....

But when you do want to form an opinion, how should you do it? Set aside some time to write about it in peace. Writing is the ideal way to organize your thoughts. A diffuse thought automatically becomes clearer when you have to pour it into sentence form.

Get external viewpoints, preferably from people who think differently from you. When you’re sure of your opinion, question it. Try to poke holes in your argument—that’s the only way to find out whether it holds up.

5). A litmus test of forming opinions

Imagine you’re invited onto a TV talk show with five other guests, all of whom are committed to the opposite standpoint from yours. Only when you can argue their views at least as fluent as your own will you truly have earned your opinion.

All in all, the fewer hasty opinions you hold, the better your life will be. I’d go so far as to say that ninety-nine percent of your opinions are simply unnecessary. Only one percent are truly relevant for you—for your personal or work life

14). Fuck You Money

The sun is burning on your back, and the air shimmers like glass above the sand. Your tongue feels like sandpaper. You drank your last drop of water two days ago.How much would you pay for a liter of water right now? Answer it.

Let’s say you’ve paid for and received the water. You’ve slaked the worst of your thirst. How much would you pay for a second liter? And for a third?

Unless you happen to be some sort of fakir blessed with superhuman powers of endurance, you’d probably give your entire savings plus pension and holiday cottage for the first liter.

For the second, maybe your Breitling watch.

For the third, your headphones.

For the fourth, your insoles.

For the fifth: Go the hell out of here, I don't need anymore.

Economists call this diminishing marginal utility. Each additional liter yields less marginal utility than the last, and after a certain point, it yields nothing at all. This holds true for virtually all goods—water, clothing, TV channels—but above all for money?

Which brings us to a question many thousands of years old: can money buy happiness?

Here’s a test question: how much would you have to earn per year in order to feel that additional income would no longer have any effective impact on your perceived wellbeing? Write down the figure on paper.

Research offers clear answers. If you’re living in poverty, money plays a major role. Financial difficulties are sheer misery. If you’re living on a moderate income of $38,000 per year, money plays a more moderate role. Above a household income of $75,000 per year, the effect of additional income shrinks to nil—and remains there even if you reach the million mark.

The economist Richard Easterlin measured the life satisfaction of Americans in 1946 against that of Americans in 1970. Although living standards nearly doubled during this period (by 1970 nearly everybody had a car, a fridge, a washing machine and hot water), life satisfaction had remained fairly stable. Easterlin found similar results in the eighteen other countries whose data he compared. In other words, people were no happier with their lives in 1970 than immediately after the war. Material progress was not reflected in increased life satisfaction. This revelation has been termed the Easterlin paradox: once basic needs have been met, incremental financial gain contributes nothing to happiness.

Why, then, do we keep yearning to be millionaires—in the face of all scholarly consensus? The main reason is that wealth is relative, not absolute.

Let’s say you and your co-worker have landed a series of very profitable contracts for your employer. Which would you prefer: a) you are given a bonus of $10,000 while your colleague gets nothing; or b) you get a bonus of $15,000 while your colleague gets $20,000? If you’re like most people, you’d choose the $10,000—even though the second option would make you richer.

Money is relative. Not just in comparison to others, but in comparison to your past. If you earned $50,000 per year during the first half of your career and today you earn $75,000 you’ll be happier than if you first earned $75,000 and now earn just $60,000.

There are a few rules of thumb buffet and Munger used for dealing with money.

1). Fuck you money or financial freedom refers to the savings that would allow you to quit your job at a moment’s notice without ending up in dire financial straits. One year’s salary, say. Fuck-you money is freedom. So if you haven’t saved up your fuck-you money yet, keep your fixed costs low. The lower your outgoings, the quicker you’ll reach your goal. In any case, it’s a nice feeling to have money without spending much of it.

Buffet says about the money:

I knew I wanted to make a lot of money. But that's because I knew I wanted to be independent. Then I could do what I wanted to do with my life. And the biggest thing I wanted to do was work for myself. I didn't want other people directing me. I was interested in being in a position to control the decision making process. The idea of doing what I wanted to do every day was important to me. The money itself is all going to charity. I wanted independence. I liked being able to say what I thought instead of what was expected of me.

2). Don’t react to minor fluctuations in your income or assets. Has the value of your stock portfolio risen or dropped by one percent today? Don’t let it worry you. Basically, don’t think so much about money. It won’t multiply more quickly the more often you think about it.

3). Don’t compare yourself with the wealthy. It will make you unhappy. If you must, compare yourself with those who have less than you do—but it’s better not to compare yourself with anyone at all.

4). Even if you’re filthy rich, live modestly. Wealth makes people jealous. Anyone who has enough cash can buy a luxury yacht—there’s no skill to that. If you’re a billionaire, it’s more impressive not to buy one, to live modestly.

Essentially, once you’ve left the poverty line behind you and saved up a financial safety net, money is not among the factors that contribute to a good life. So work on those other factors instead of hoarding money. Genuine success is an inner success.


15). Be curious and then what?

Before it was a park, It was way back in the 1630s, this fifty-acre plot of land in downtown Boston, and Massachusetts was a grazing pasture for cows, and with local families using it collectively as common land. In England, this type of land is referred to legally as commons.

Pasture commons present a problem, but though: Each additional cow that a farmer gets benefits their families but if all the farmers keep getting new cows, then the commons can be depleted. All farmers would experience the negative effects of overgrazing on the health of their herds and land.

In an 1833 essay, " Two lectures on the checks to population" and Economist William Lloyd described the similar hypothetical overgrazing scenario now calls as the tragedy of the commons.

There is a class of unintended consequences that arise when a lot of people choose what they think is best for them individually but the sum total of the decision creates a worse outcome for everyone.

Buffet says

The most important question to ask in economics is 'X happens, and then what? Actually, it's not such a bad idea to ask about everything. But you should always ask, 'And then what?'...What else does that mean? Every action has consequences. Anything you do triggers another corresponding action. There are always other effects that come out of it. When you start focusing on one variable, you often get some side effects you did not expect.

Medical professionals are routinely prescribing opioids to help people with chronic pain. They are, unfortunately, and they their drug are also highly addictive as a result pain patients may abuse their prescribed medication or even seek out similar, but cheaper and more dangerous drugs like heroin. According to the research who inject heroin started abusing prescription opioids first.

This defect is quite understandable because the consequences have consequences, and the consequences of the consequence have consequences and so on, and it is very complex.

Then, How to trace the consequences.

(1) Pay attention to the whole system. Direct and indirect effects,

(2) Consequences have implications or more consequences, some of which may be unwanted. We can't estimate all possible consequences but there is a least one unwanted consequence we should look our for,

(3) Consider the effects of feedback, time, scale, repetition, critical thresholds and limits,

(4) Different alternatives have different consequences in terms of costs and benefits. Estimate the net effects over time and how desirable these are compared to what we want to achieve.

Here is the best article I have found for system thinking: How to simulate the universe in 134 easy steps.


Conclusion

The Roman philosopher Lucius Annaeus Seneca tells us in his Moral Essays that

It's not that we have so little time but that we waste much of it. Life is long if we know how to use it.

Annaeus Seneca says: "You live as if you were destined to live forever, no thought of your frailty ever enters your head, of how much time has already gone by you take no heed."

The part of life we really live is small. For all the rest of existence is not life, but merely time.

Do you remember the pop asked Michelangelo: "Tell me the secret of your genius".

And Michelangelo's answer: " It is simple. I removed everything that is not David. In our case above of errors and misjudgment"

Samuel Johnson said:

Life is too short to waste. It matters not how a man dies, but how he lives. The act of dying is not of importance, it lasts so short a time."

Here is the checklist I used currently

It's time to close the summary and start living into the ideas.  Live those ideas and adapt them according to what suits you best. If you need more information then I highly recommend a book and for more details, you can also areas Tao of Munger, and The Art of thinking clearly

I hope this book summary is helpful in both understandings and improving your thinking. I try my best to simplify these ideas and you can directly put them into practice from day 1.  I hope that you will continue in your search for wisdom. We are still going to make misjudgments (at least I still do them), but we can improve.

I confess that I have been as blind as a mole, but it is better to learn wisdom late than never to learn it at all. - Sherlock Holmes

2 comments

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comment by JBlack · 2021-10-13T07:28:19.810Z · LW(p) · GW(p)

Was this a book review or an infomercial for it?

In a book review, I expect to see things like: the reviewer's overview, overall opinion, discussion of what it did well and what it could have done better, some discussion about how it fits in with related works, and some excerpts illustrating these points. In this post I can't even see any demarcation between reviewer and author, between discussion and literal regurgitation of the text, or between summarising points it raises and exhortation to believe them.

Replies from: Anmoljain
comment by Anmoljain · 2021-10-13T11:48:24.240Z · LW(p) · GW(p)

Hi 

Thanks for showing attention. 

First of all these books is the conversation between buffet, Munger, and seeker (who visit the library of wisdom). The stories, examples are connected with the main problem, and practice is designed by mine and some adopted from others to avoid misjudgment. 

My intent is to write the summary and key ideas in a practical manner, so the first-time reader immediately puts it into practice and then working backward to see things that work and don't. This way internalizing ideas might be a much more effective way.

For the demarcation side, I feel like a knowledge illusion if I argue with the buffet and Munger ideas.