Poor Charlie's Almanack

The book collects Munger's speeches from 1986 to 2007, including the 1994 USC Business School lecture on elementary worldly wisdom and The Psychology of Human Misjudgment, first given in 1995 and revised in 2005.

Munger was a Los Angeles lawyer who turned to investing, ran his own partnership and served as Berkshire's vice chairman for decades until his death in November 2023 at 99. Peter Kaufman, chairman and CEO of Glenair and a longtime director of Wesco Financial, edited and published the original 2005 edition. Stripe Press reissued it in 2023 in this abridged edition, with a new foreword by Stripe cofounder John Collison.

What sets it apart is the method: a latticework of mental models drawn from psychology, math, physics, biology and economics; inversion; and the lollapalooza effect, when several tendencies push the same way. The talks overlap and repeat ideas, and readers who want the original's fuller, illustrated format should look for the Donning editions.

Read it with Buffett's shareholder letters. It suits investors, analysts and anyone who makes high-stakes decisions.

1. Build a latticework of models. Learn the big ideas from many disciplines so that one discipline's tools don't distort your judgment.
2. Invert. Ask what would guarantee failure, then avoid it; it's often easier than defining success directly.
3. Watch for lollapalooza effects. When several psychological tendencies push the same way, outcomes become extreme, which helps explain manias, frauds and cult-like behavior.
4. Bet big, rarely. Munger favored a few well-understood businesses held for a long time, waiting for the rare mispriced opportunity rather than spreading money across average ideas.
5. Never underrate incentives. Munger said he spent his life underestimating the power of incentives, even though he understood them better than most people; design pay and deals with that in mind.

The talks run roughly in chronological order, and their themes build on each other.

1. Guaranteed misery. The 1986 Harvard-Westlake commencement inverts the usual advice by listing the surest ways to make a life miserable.
2. Elementary worldly wisdom. The 1994 USC and 1996 Stanford Law lectures set out the latticework of mental models and apply it to stock picking, moats, concentration and Berkshire's approach.
3. Practical thought about practical thought. A 1996 thought experiment asks how to build a giant business from scratch in 1884 and arrives at Coca-Cola.
4. Professionals and institutions. Talks to Harvard Law alumni, foundation officers and the Philanthropy Roundtable argue for multidisciplinary education and criticize how foundations invest.
5. Satire and economics. The Great Financial Scandal of 2003 is a fable about accounting abuse, and the 2003 UC Santa Barbara lecture faults academic economics for ignoring other disciplines.
6. Misjudgment. The 2007 USC Law commencement and The Psychology of Human Misjudgment, Munger's catalog of about two dozen tendencies, from reward and punishment super-response to denial and social proof.