Charlie Munger – Critical Thinking Skills & Mental Models


Charlie Munger, is probably best known as the Vice Chairman of Berkshire Hathaway, Inc and long term business partner of Warren Buffett.
Aside from his extremely successful business career as an investor and his various philanthropic ventures, Charlie Munger is also well known for his thinking skills and especially for his emphasis on developing multiple mental models to cut through complexity and make good judgement calls and good decisions.
He is incredibly well read and has studied many disciplines other than business such as psychology, history, biology physics and economics.
Like all of us, Charlie Munger has had his share of personal setbacks, an early divorce in era when divorce carried enormous social stigma, severe financial setbacks, the death of his son at the age of 9, cataracts when he was 52 followed by failed surgery which led to blindness in his left eye and the removal of that eye.
His insights on life in general and business in particular are extremely perceptive, and frequently correct with an uncommon consistency.
In this article we are going to be looking at some of the core principles of his thinking skills so that we can adopt them and incorporate these principles into our toolkit of thinking skills as we learn how to think more effectively.
“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.”
“… developing the habit of mastering the multiple models which underlie reality is the best thing you can do.”
Charlie Munger – Mental Models
How to think effectively? According to Charlie Munger:
“… developing the habit of mastering the multiple models which underlie reality is the best thing you can do.”
Munger is referring here to mental models.
Two broad categories of mental models that are particularly useful are those that help us understand how:
[1] The world works and thus to predict the future.
[2] Our mental processes can lead us astray via cognitive biases.
Our world is multi-dimensional and our problems are complex. Most problems cannot be solved using one model alone, thus it follows that the more models you have in the toolkit, the better equipped you will be to solve your problems because you can look at the problem from a variety of perspectives and increase the odds that you will come to a better solution.
But if you don’t have the models, you become the proverbial man with a hammer to whom every problem looks like a nail.
Another important consideration is how you prioritise your learning. Trying to keep up-to-date with all the latest information will lead to us chasing our tails, therefore Charlie Munger says that we should focus on things that change slowly:
“The models that come from hard science and engineering are the most reliable models on this Earth.”
Charlie Munger – How To Prioritise Learning Mental Models
“The more basic knowledge you have… the less new knowledge you have to get.”
# Get back to basics. Understanding a simple idea deeply, creates more lasting knowledge and builds a solid foundation for complex ideas later.
# Build your foundation. Take the time to do a Feynman One Pager on an idea you think you know really well. While easy, this process will reveal any gaps you have in your knowledge.
# The multidisciplinary mind understands the basic ideas. You don’t need to understand the latest study in biology, but you sure as heck better understand the concept of evolution because it applies to so much more than animals.
# Understanding the basics allows us to predict what matters. Put simply, people who understand the basics are better at understanding second and subsequent order consequences.
# What has been will continue to be. The longer a technology lives, the longer it can be expected to live.
# Time can predict value. While produce and humans have a mathematical life expectancy that decreases with each day, some things, like books, increase in life expectancy with each passing day.
In the words of Charlie Munger: “… take a simple idea and take it seriously.”
The “Lollapalooza Effect”
But the learning and applying models is not enough, we also need to understand how they interact and combine, and most notably when autocatalysis or [as Charlie Munger calls it] the lollapalooza effect occurs.
The lollapalooza effect occurs when two or more forces are all operating in the same direction and often you don’t get just simple addition but rather you get a nuclear explosion once you reach a certain point of interaction between those forces such as a breakpoint or critical-mass is reached.
In the field of psychology the phenomenon wherein different biases layer and interlock with one another is the “Lollapalooza effect.” It occurs when multiple different tendencies and mental models combine to act in the same direction. This makes them especially powerful drivers of behavior, and can lead to both positive and negative results.
The lollapalooza effect can cause huge negative effects but it can also cause massively positive trade-offs. So, understanding the interconnectedness of the models is critical.
Munger stated that while psychologists have been good at identifying individual biases, they are less good at figuring out how they interact and manifest in the real world, because it is difficult to run controlled experiments in that environment.
Learn more about Critical Thinking Skills: Charlie Munger

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