Failure and Fall

"All I want to know is where I'm going to die, so I'll never go there." Charlie Munger

If there were only one concept that Charlie Munger were known for (as if that were possible) it is perhaps his concept of inversion - solving problems backwards by identifying and avoiding what would cause failure.

If you excuse the crudeness, his abovementioned quote is a major example of this concept of inversion.

How do you live? It is not possible to identify and/or prescribe to another person an exhaustive list of how a person should live their life. Neither is it possible to set up in simplistic terms the answer to such a question. Instead, in the alternative, Munger inverts the problem and tells you how not to do so - by identifying where you'll die so you'll never go there!

An associated concept perhaps is the idea of the Pareto rule. Also known as the 80/20 rule, the Pareto rule states that roughly 80% of results come from 20% of effort. And indeed, living, if you will excuse the morbidity of the example, comes from avoiding passing on.

Invert, Always Invert

This approach of inversion will not get you the full answer to every problem. Perhaps what it does do is to start you off on your critical thinking. If you identify what the problem is, it is halfway towards the solution.

Indeed, Munger is also known, in contrast, for his second quote - to a man with a hammer, everything is a nail. Unfortunately, whilst you may be able to identify the problem, not everything can be solved (in its entirety) by hammering into the problem like it is a nail.

Ironically, the second quote for which Munger is also known for, is also an inversion on his principle of inversion!

Yin and Yang

A lot more ideas and materials about life and investing can be found in Charlie Munger's book, Poor Charlie's Alamanack. Click in the link provided to get a copy of this book. Or leave a comment / question / like in the comments section below!