The Secret To Berkshire Hathaway's Success
The Secret To Berkshire Hathaway's Success
CMQ Investors,
Berkshire Hathaway is a multinational conglomerate holding company with over 360,000 employees.
(When I went to confirm the head count, I found out that you can buy Berkshire Hathaway merch! š)
How did Warren Buffett and Charlie Munger do it? What was the secret to their success?
Removing ignorance is the key to continued success
At the 2014 Berkshire Hathaway annual Shareholders meeting, Charlie Munger said āignorance removalā has been key to Berkshire Hathawaysās continued success.
Thereās no question about the fact that its main contribution to Berkshire was ignorance removalā¦If it werenāt for the fact we were so good at removing our ignorance, step by step, Berkshire would be practically nothing today.
What we knew originally wasnāt enough. We were pretty damn stupid when we bought Seeās. We were just barely smart enough to buy it.
And if thereās any secret to Berkshire, itās the fact that weāre pretty good at ignorance removal. And the nice thing about that is we have a lot of ignorance left to remove.
How do you remove ignorance?
John Tooby, is the founding father of Evolutionary Psychology and a professor at UC Santa Barbara. Tooby told Edge.org that learning new concepts is the key to removing ignorance.
We could become far more intelligent than we are by adding to our stock of concepts, and by forcing ourselves to use them even when we don't like what they are telling us. This will be nearly always, because they generally tell us that our self-evidently superior selves and ingroups are error-besotted.
We all start from radical ignorance in a world that is endlessly strange, vast, complex, intricate, and surprising. Deliverance from ignorance lies in good concepts ā inference fountains that geyser out insights that organize and increase the scope of our understanding.
We are drawn to them by the fascination of the discoveries they afford, but resist using them well and freely because they would reveal too many of our apparent achievements to be embarrassing or tragic failures.
Learn these 100 concepts, first.
Charlie Munger encourages multidisciplinary thinking.
You must think in a multidisciplinary manner. You must routinely use all the easy-to-learn concepts from the freshman course in every basic subject.
Charlie Munger estimates there are about 100 concepts that you will need to master before you start using his system.
You need the best 100 or so models from microeconomics, physiology, psychology particularly, elementary mathematics, hard science and engineering (and so on).
Our Members-Only content dives-deeper into the multidisciplinary approach to thinking.
Removing blindspots
How does multidisciplinary thinking remove ignorance? This explanation from Peter Kaufman says it all:
So why is it important to be a multidisciplinary thinker? The answer comes from the Austrian philosopher Ludwig Wittgenstein (linkĀ 1,Ā 2,Ā 3) who said, āTo understand is to know what to do.ā Could there be anything that sounds simpler than that? And yet itās a genius line, to understand is to know what to do. How many mistakes do you make when you understand something? You donāt make any mistakes. Where do mistakes come from? They come from blind spots, a lack of understanding.
Why do you need to be multidisciplinary in your thinking? Because as the Japanese proverb says, āThe frog in the well knows nothing of the mighty ocean.ā You may know everything there is to know about your specialty, your silo, your āwellā, but how are you going to make any good decisions in lifeā¦the complex systems of life, the dynamic system of lifeā¦if all you know is one well?
Thank you for reading this letter!
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