Developing a 'Circle of Competence' is Hard. But Charlie Munger (and Barry Hecker!) Can Help.

I don't much care for investing. I don't have much money invested and don't spend a lot of time worrying about the stock market. People who pay close attention to the market, like Mason Meyers, love Charlie Munger. And I think I know why. Because his approach to learning makes people smarter. 

Charlie Munger

Of course, his track record also has a lot to do with it. So does his willingness to share his ideas. People will try almost anything if they think it’ll make them rich. Munger had to trick people into it a little, but he provided a functional set of guiding principles for acquiring wisdom. He was once asked to give a talk on stock picking. There was a reason he was invited to address the topic—he certainly was qualified. But he wasn’t all that interested in ‘just’ talking about stocks. The talk he gave was on the art of stock picking as a subdivision of the art of worldly wisdom.

“That enables me to start talking about worldly wisdom—a much broader topic that interests me because I think all too little of it is delivered by modern educational systems, at least in an effective way,” Munger said. “And therefore, the talk is sort of along the lines that some behaviorist psychologists call Grandma's rule after the wisdom of Grandma when she said that you have to eat the carrots before you get the dessert.

The carrot part of this talk is about the general subject of worldly wisdom which is a pretty good way to start. After all, the theory of modern education is that you need a general education before you specialize. And I think to some extent, before you're going to be a great stock picker, you need some general education.”

He’s right. Picking stocks is hard. There’s a lot of competition. And there are a lot of variables. So people do need to have some more general education.

Munger & Warren Buffett are famous for arguing that people would do well to carve out a well-defined ‘circle of competence’ and stay in it as much as possible. On it’s face, such advice seems like a vapid truism, akin to writing programs with little more to offer than ‘write what you know.’

But investing is so complicated that commanding a circle of competence isn’t easy—even confined to a narrow set of businesses in a small grouping of industries. Fortunately, for investors and the rest of us, Munger's thought extends far beyond investing. His approach to learning doesn’t just lead to wise investment decisions, but more general wisdom. I’m reminded of CrossFit’s recent official tweet: "What we’ve discovered is that #CrossFit increases work capacity across broad time and modal domains. #Fitness." Munger’s approach leads to cognitive, not physical, fitness. But the approach is the same.

And Munger’s thought is so great because it challenges people to question, to dig, and to look to multiple disciplines and to a diversity of ideas for insight and inspiration. (It also helpfully recommends being honest about what we do and don’t and cannot know). Mason Meyer’s piece was helpful in combining Munger's thought with Clayton Christensen’s to determine when and how to use different models. People who follow Munger’s approach learn a lot about investing by learning from other disciplines; and people who follow his approach learn a lot about various disciplines by learning to invest.

The Barry Hecker Axiom.

A couple weeks ago, Barry Hecker, an assistant coach for the NBA’s Memphis Grizzles, resigned. I believe he was the head coach of my high school’s basketball coach at Westminster College. My introduction to the basketball program at my high school came at a summer camp just before the start of my freshman year. One of the most memorable guests was Barry Hecker. He was working as a scout for another NBA team at the time. Our coach had the 200 or so campers all assemble on the gym floor to hear him. We all sat with our legs crossed facing him.

Basketball Guy Barry Hecker.

After his introduction, the first thing Hecker said was, “I fly in 400 (or whatever) miles to be here, and this is the thanks I get? 200 crotch shots? Some thanks!”

It was hilarious. At least to me as a 14-year old kid. He was cocksure and crass and outrageous. I won’t soon forget it. Another bit of advice that was just as provocative and every bit as memorable. He told us that to improve as shooters, we should shoot with our off-hand. He said, “The more you shoot with your left, the better you’ll understand how to shoot with your right.”

He was exaggerating a little. But, shooting with the opposite hand, for most of us, required that we rethink how to do a task we’d all done thousands of times. It also helpfully allowed the staff to start from scratch and demonstrate our mechanics from the bottom up. The coaches could put the ball in our hands and explain were it should sit, how we should hold it. They could tell us how we should set our feet, everything. Because we didn’t have the built-in experience doing it any other way, they had something of a tabula rasa. And challenging even our best, most deeply held ideas by trying to shoot with our off hands did help us to understand shooting with our dominant hand better.

When Two Great Thinkers Come Up With A Similar Idea, I Pay Attention

This post's headline is a paraphrase of a wonderful piece by investor Mason Myers. Here's his opening line verbatim: "When two great thinkers come to a similar idea from different starting points and careers, I pay attention."

Investor Mason Myers

Obviously, I agree. This blog is founded because two guys with very different starting points and careers came up with strikingly similar ideas. 

CrossFit founder Greg Glassman thought that the fitness industry was failing people by being too specialized. He came up with an idea that would develop greater general physical preparedness. Berkshire Hathaway partner Charlie Munger, similarly,  had previously come to the conclusion that the way people had learned (and were taught) to think was too narrow and too specialized. He came up with an idea that would combat what he saw as the 'fatal disconnectedness' of academic training: a acquiring a latticework of mental models. Munger's aim is cognitive, rather than physical, fitness. But the ideas are virtually identical.

Charles T. Munger Sr.

Myers has identified similarities that Munger's approach shares with another thinker and businessman: Clayton Christensen. This Harvard professor's ideas illuminate how to use Munger's approach, and signal how one can become adept at recognizing when and how to apply the various models Munger thinks are important.

Myers' piece is a must read in full for anyone interested in putting Munger's ideas into practice. But here's a snapshot of his argument:

"When I took Christensen’s class in 2001 or 2002, I remember being handed at the beginning of class a couple of summary papers with maybe 15-20 different hieroglyphic-like symbols representing different theories and models that are “true” in some circumstances." 

Clayton Christensen. Famous, among other things, for being Mason Myers' teacher at Harvard.

"For Munger, his ideas of “worldly wisdom” have been circulated from talks he gave in the 1990′s. The idea is that a wise person needs a “latticework of mental models” rather than the ability to crunch numbers in his head or regurgitate facts.  He explains that multiple models are better (shades of Christensen emphasizing a collection of frameworks rather than the singular focus of some academics), the models should be cross-disciplinary, and the best people can figure out which models are relevant to which situation."

Those at all interested in Munger need to read the full piece; it's one of the best, most useful things I've ever read on Munger.

Scientific Revolution, Fitness Revolution...Education Revolution?

CrossFit founder Greg Glassman made some waves (and enemies, no doubt) when he wrote about his befuddlement at Outside magazine calling Mark Allen, then the world's best triathlete, the fittest man alive and putting him on its cover.

Glassman argued that the cover's claim was absurd. Instead, he averred, Simon Poelman, a seven-time New Zealand national decathlon champion, was fitter. Glassman thought that Poelman was a better model for fitness because he, like Allen, had plenty of endurance and stamina "yet crushes Mr. Allen in any comparison that includes strength, power, speed, and coordination.”

brian mackenzie

brian mackenzie on Fitness

Author and noted CrossFitter brian mackenzie recently had the opportunity to interview Mark Allen and wrote this about the exchange, "FWIW, Mark Allen says he makes sure he is surfing and in the gym every week, lifting, not logging miles. Let that resonate if it bothers you before you defensively react to it. Mark Allen prefers to lift now rather than log miles for health and fitness. Mark Allen."

So, now, even the guy who was the paragon of long distances is mixing things up. That's what Thomas Kuhn's acolytes (and MBAs who were fed his ideas 30 years later) would call a paradigm shift.

Ben Franklin on Education

Long before Kuhn wrote his influential book The Structure of Scientific Revolutions, Benjamin Franklin wrote a pamphlet that ushered in an even more impressive change in people's practice. 

Ben Franklin's Proposals Relating to the Education of Youth in Pensilvania.

Franklin's treatise Proposals Relating to the Education of Youth in Pensilvania was revolutionary. Franklin had a simple thought: why not teach people the stuff they'd need to do the jobs they'd get upon graduation: "Things that are likely to be the most useful and most ornamental, Regard being had to the several Professions for which they are intended."

Doesn't seem groundbreaking, much less revolutionary. In fact, it seems obvious. But Franklin's pragmatism was a significant departure from the education then offered. So significant, in fact, that the guy who ran the university Franklin founded quit doing it! Here's how the University of Pennsylvania's current website explains it:

Franklin's educational aims –- to train young people for leadership in business, government and public service -– were innovative for the time. In the 1750s, the other Colonial American colleges educated young men for the Christian ministry, but Franklin's proposed program of study was much more like the modern liberal arts curriculum. His fellow trustees were unwilling to implement most of his ideas, and Penn's first provost, the Rev. Dr. William Smith, soon turned the curriculum back into traditional channels. 

Franklin's picture adorns the $100 bill. Coincidence?

Charlie Munger on Multidisciplinary Education

Charlie Munger loves Ben Franklin. And he has adopted and amplified his hero's call for a multidisciplinary education. He argues against the intellectual specialist in favor of a broader, more general cognitive fitness or general intellectual preparedness. Munger's brand of thinking produces cognitive decathletes rather than triathletes.  

He thinks that to be smart, one must have models in her head. And one isn't enough, because reality requires more. That why we make fun of the guy who can bench press 500 pounds but can't run 500 meters or throw a baseball 50 feet. Munger cites the old addage: "To the man with only a hammer, every problem looks like a nail." 

He thinks that much education is insufficiently multidisciplinary, and the result is that we produce the cognitive equivalent of chiropractors instead of doctors. Just as Glassman thinks traditional fitness routines had been producing too many triathletes and not enough decathletes.

And Munger thinks that's a "perfectly disastrous way to think and a perfectly disastrous way to operate in the world." So, just as CrossFit requires people to be able to perform across a broad range of physical activities, Munger requires people to be able to think using multiple mental models. 

"And the models have to come from multiple disciplines—because all the wisdom of the world is not to be found in one little academic department. That's why poetry professors, by and large, are so unwise in a worldly sense. They don't have enough models in their heads. So you've got to have models across a fair array of disciplines." 

Did Ben Franklin Invent CrossFit?

Franklin in his 1749 treatise, by the way, not only provides a nice template for Munger's multidisciplinary 'mental models' approach to education, but a template for Glassman's functional fitness program as well. One of the most important, and my favorite, parts of the CrossFit charter is this: regularly learn and play new sports. Here's Franklin circa 1749:

Ben Franklin: Founding Father...of CrossFit?

Looking for a Few Good Men (& Women to Teach Munger's Mental Models)

CrossFit instructor and participant Josh Everett has landed his dream job. He provides strength and conditioning training to U.S. soldiers in the Naval Special Warfare Group.



Few if any jobs place more, or more unpredictable, demands on the human body. Being physically prepared to be a special forces soldier is a tall order.

CrossFit founder Greg Glassman's formula: constantly varied, high-intensity, functional movement is just about a perfect recipe for a special forces soldier. And Josh Everett is just about the perfect coach. He's right when he says that the training he provides has a "real world analog," and that the exercises his troops do "carry over very greatly" to the demands of their jobs. When you don't have any idea just what your job will require of you, it's good to be broadly, generally prepared. 



A 'real world analog' to the physical demands placed on special forces soldiers is your job. Few if any jobs in today's economy (at least any that anyone would want) draw on neatly-defined, unchanging mental skills and capacities. Even the best training by the greatest teachers and leaders in any field will inevitably come up short.

I've taken a look at what Warren Buffett called the life-changing moment when he encountered Benjamin Graham's book. Buffett went on to study with Graham. But, as great as the education Buffett got from Graham was (Charlie Munger said that what Buffett learned from Graham was enough to make anyone rich), that if his partner hadn't learned anything else Berkshire Hathaway would be a pale shadow of its present self.

CrossFit recently re-tweeted CrossFit Games runner-up Julie Foucher who wrote, "Two hour AMRAP of practice questions, 100 flash cards for time, then time for the gym!" with the analysis: Cognitive fitness.

Med Student Julie Foucher is Physically & Cognitively Fit.

Charlie Munger's ideas on building a latticework of mental models prepares people for general intellectual fitness even better than the advice from this Harvard Business Review piece on 'cognitive fitness' (some examples from HBR: manage by walking, read funny books, play games, learn a new language or instrument, exercise). Not surprisingly, the HBR piece cites Charlie Munger's partner Warren Buffett as someone who defies "the widespread belief that our mental capacity inevitably deteriorates as we get older.

Now all we need are a few Josh Everetts to teach Munger's mental models and some educational institutions with the will and wherewithal to do it.

 

When Will Education Copy Charlie Munger Like The Fitness Industry Copies CrossFit?

I came across an advertisement today from an established, well-respected shoe company. It announces the 'Asics training collection'. The ad doesn't really show what the shoes look like. and it doesn't really matter. The point is that the company is designing shoes for a market that CrossFit (and CrossFit-type movements) makes possible.

Asics shoes, CrossFit movement.

The ad is linked to a site that proclaims 'what's next' for Asics fitness (of course, it's a look in the rear-view mirror for regular CrossFitters), and has a pic of a guy with a prosthetic leg using the kind of 20 lb. medicine ball popularized by CrossFit.

And that's a good thing.
 
I've long been frustrated by the lack of citations in educational literature for Michael Oakeshott and Richard Flathman who offer clear-headed writing on the theory and practice of the engagement of teaching and learning.

Just as frustrating is the relative lack of influence Munger's thinking has had on educational thought and practice. Many (even many academics) would agree with his diagnosis that the academic disconnectedness is the worst plague higher education faces. It's a topic that gets a lot of lip service in academic circles. But almost no one would adopt anything close to Munger's multidisciplinary 'latticework of mental models' approach to addressing that plague.

And that's a shame.

Because his system works. Just like CrossFit works. Perhaps Munger's models need an evangelist (strange that he's not enough, given that he and his partner Warren Buffett regularly draw thousands to hear them talk, an audience Munger often remarks is full of cultists!). Maybe it's because the people devoted to implementing the kind of system he suggests would rather spend their time making money and investing in the stock market than changing educational practice. 

But the opportunity is there. As Munger argues, “There will be immense worldly rewards, for law schools and other academic domains, as for Charlie Munger, in a more multidisciplinary approach to many problems…and more fun as well as more achievement.” 

I look forward to the day when I come across ads for education companies that mimic Munger's mental models. Because that will mean that someone, somewhere has implemented his ideas. 

Greg Glassman with a reason for optimism: "Suppressing truth is like holding a beach ball under water; it takes constant work against a tireless resistance."

Charlie Munger Explains Why CrossFit Works

He only needs one word: Lollapalloza.

F. Murray Abraham as Antonio Salieri  

CrossFit workouts almost always look easier on paper than they are to do. Anyone who has done more than a couple CrossFit workouts has probably looked at a workout on the whiteboard or CrossFit.com and said or thought, "Doesn't look so bad." But they're always bad. No matter how they look on paper. Staring at a CrossFit workout before doing it is a little like F. Murray Abraham's Salieri looking at a Mozart score immediately after hearing it played. "On the page, it looked, nothing. The beginning, simple, almost comic. But..."

Charlie Munger's Lollapalooza Principle Explains Secret of CrossFit's Success

Charlie Munger's 'lollapalooza' effect explains why.

Munger gave a talk that focused on the causes of psychological misjudgement. He lists 24 factors total, but what's truly interesting for CrossFit is what he went on to describe as the 'lollapalooza' effect that occurs when several of these psychological factors combine. He asks, "What happens when the situation, or the artful manipulation of man, causes several of these tendencies to operate on a person toward the same end at the same time?"
And his answer is that, "the combination greatly increases power to change behavior, compared to the power of merely one tendency acting alone." The difference, though, isn't just one of addition, but multiplication. Sometimes exponential multiplication.

Munger notes that "When you get these lollapalooza effects you will almost always find four or five of these things working together."

What does that have to do with CrossFit? Take a look at a CrossFit workout. Any will do. Doesn't look that bad, does it? They're short. They might tax the upper body heavily and then give the upper body a 'rest' while the lower body gets taxed. One example: 'Diane' 21-15-9 repetitions of deadlifts and handstand pushups. Deadlifts work the lower body, & handstand pushups mostly upper body, right? So, when a person does one she's basically resting the parts of the body required to do the other.

Only it doesn't work that way.

Here's a personal example. About two weeks into CrossFit, I came across a workout called 'Helen.' I had been running a lot, & 400 meter repeats were a major staple of my (pre-CrossFit) routine. I was very light weight (from all the running), and about the only lifting I'd been doing was weighted pullups. So this workout looked easy: 3 rounds of 400 meter run, 21 kettlebell swings, and 12 pullups. Simple. I thought I'd kill it.


On days when I had just 400 meter repeats, I could manage 1:15s for 10 rounds with 60 seconds of rest in between. So I planned on running 'easy' 1:30s for the runs to conserve energy. I had already learned the (in)famous CrossFit 'kipping' pullup. So, 12 pullups would take just a matter of seconds. I chalked 30 seconds including the transition from the swings to the pullups back to the run. And I'd never done kettlebell swings. Might be tricky, I thought. But I tried them & they weren't that hard. Should take 45 seconds, tops. 

So, adding these together (without a 'lollapalooza' effect), even with generous time for transition, I should finish in under 8:30. Simply adding the time I 'should' have been able to do the exercises with minimal transition time should yield a time of about 7 minutes. Probably less, because the last three 400 meter repeats are a lot harder than the first three.

It's not just me: CrossFit's 'lollapalooza' effect works on everyone.

I did the workout. My goal was 8:30. Thought it'd be easy. I did finish. But not in 8:30. It took nearly 10 minutes. And almost killed me. It felt like I stood bent over with my hands on my knees staring at that dumbbell (didn't have a kettlebell) for longer than 8:30 my last round.

I hadn't been that tired in years. Not since high school. Maybe ever. And certainly not from doing 400 meter repeats. I didn't need math--my legs could tell me--that there was a Mungeresque lollapalooza effect with that workout.

As far as I know Munger's never heard of CrossFit. The program is infinitely scalable, but Charlie's disdain for manual labor leads me to believe he's unlikely to try it. But I'm sure he'd be interested in seeing the physical example of his lollapalooza effect in it. Here's Munger's favorite example of a psychological lollapalooza effect:


"McDonald-Douglas airliner evacuation disaster. The government requires that airliners pass a bunch of tests, one of them is evacuation: get everybody out, I think it’s 90 seconds or something like that. It’s some short period of time. The government has rules, make it very realistic, so on and so on. You can’t select nothing but 20-year-old athletes to evacuate your airline. So McDonald-Douglas schedules one of these things in a hangar, and they make the hangar dark and the concrete floor is 25 feet down, and they’ve got these little rubber chutes, and they’ve got all these old people, and they ring the bell and they all rush out, and in the morning, when the first test is done, they create, I don’t know, 20 terrible injuries when people go off to hospitals, and of course they scheduled another one for the afternoon. 

"By the way they didn’t meet the time schedule either, in addition to causing all the injuries. Well...so what do they do? They do it again in the afternoon. Now they create 20 more injuries and one case of a severed spinal column with permanent, unfixable paralysis. These are engineers, these are brilliant people, this is thought over through in a big bureaucracy. Again, it’s a combination of [psychological tendencies]: authorities told you to do it. He told you to make it realistic. You’ve decided to do it. You’d decided to do it twice. Incentive-caused bias. If you pass you save a lot of money. You’ve got to jump this hurdle before you can sell your new airliner. Again, three, four, five of these things work together and it turns human brains into mush. And maybe you think this doesn’t happen in picking investments? If so, you’re living in a different world than I am."

My Favorite? Helen. (And not just because that's my mom's name). My favorite thing about CrossFit, other than the fact it works? That the people running it are interested in gathering data. Munger told people to figure out how psychological effects really work in practice. Greg Glassman and others at CrossFit are into collecting data. "Science is about measurement and prediction. Without measurable, observable, repeatable data concerning the fundamental physical units of kinematics (mass, distance, and time or MKS) there is no science of human performance."

The Abominable No Man Strikes Again

Charlie Munger is famous for his belief that he isn't entitled to hold an opinion unless (I should probably write 'until'!) he can state the arguments against his position better than those who oppose it. "I think that I am qualified to speak only when I've reached that state," he has said.

Charlie Munger & Warren Buffett.

He means it. Warren Buffett and Munger--who has earned Buffett's nickname for his 'the abominable no man'--are so serious about getting dissenting opinions and outlooks that they invited a guy to join them because he disagrees with them.

Berkshire 'Bear' Doug Kass.

This isn't a first. Concerned that the annual Berkshire Hathaway shareholder meetings were becoming too friendly and the questions raised were becoming more laudatory than interesting, reporters were invited to spice things up.

Munger is fond of rehearsing Richard Feynman's line, "the easiest person to fool is yourself." And for good reason. We don't all have the ability to invite our harshest critics over for a sit down. I wonder, though, how many of us take advantage of the chances we do have to hear, consider, and learn from conflicting points of view.

John Stuart Mill argued that no opinion--no matter how repulsive--should be suppressed by society.  And he didn't argue for such a position based on first-amendment grounds (he was British, after all). Instead, like the utilitarian he was, Mill advocated for allowing all opinions because doing so would lead to a healthier, more robust society.

J.S. Mill: Getting different opinions is good for you.

Among the reasons he provided for this position was that voicing an incorrect opinion strengthens a correct opinion because it allows for a healthy contestation of ideas. It goes without saying that the ideas that emerge after a vigorous debate are likely to be stronger than those who carry the day unopposed.

"The peculiar evil of silencing the expression of an opinion is, that it is robbing the human race; posterity as well as the existing generation; those who dissent from the opinion, still more than those who hold it," Mill wrote in On Liberty. And here's why, "If the opinion is right, they are deprived of the opportunity of exchanging error for truth: if wrong, they lose, what is almost as great a benefit, the clearer perception and livelier impression of truth, produced by its collision with error."

It's no coincidence that the most famous writer on liberty is a guy so careful not to trample on people's opinions. Charlie Munger is hardly bashful about letting people know they're wrong. But his example in inviting the strongest critics he can find is instructive. It means that the he lives by the creed J.S. Mill recommended for society.

The thing we can take from this, to my mind, is what a good idea it is to go out of our way to expose ourselves to ideas that differ from our own. what better way, after all, too destroy your best ideas? How often do we seek out not only someone with a differing view, but someone who passionately, ardently disagrees? But how beneficial would such a practice be?

Here's Mill again discussing the effects that strongly held beliefs carry more weight in the contest of ideas:

"He who knows only his own side of the case knows little of that. His reasons may be good, and no one may have been able to refute them. But if he is equally unable to refute the reasons on the opposite side, if he does not so much as know what they are, he has no ground for preferring either opinion... Nor is it enough that he should hear the opinions of adversaries from his own teachers, presented as they state them, and accompanied by what they offer as refutations. He must be able to hear them from persons who actually believe them...he must know them in their most plausible and persuasive form." 

Those sentiments could have been written by Munger. The two thinkers share a diagnosis for the disease of uncontested opinion and the likely outcome. Mill's dad James made the arguement that no one knows how a man's shoe fits better than himself. And so he was rightly skeptical about people telling other people how to think or act. And J.S. was pretty sympathetic to that position. But it was possible for the latter to ignore what a person (or porcine) thinks. And failing to buttress one's opinion with the dissenting viewpoints of others was a good way to warrant such disdain:  "It is better to be a human being dissatisfied than a pig satisfied; better to be Socrates dissatisfied than a fool satisfied. And if the fool, or the pig, are of a different opinion, it is because they only know their own side of the question.

But being a fool or a pig might be preferable to Munger's take on what not subjecting your ideas to real challenges makes a person: a one-legged man in an ass-kicking competition.

Learning from Munger & Glassman...Copying Abbott

Innovate...Like Henry Abbott 

 

Henry Abbott is an excellent writer. He’s smart, articulate, and passionate. He loves basketball. And he wants to make it better. His blog ‘TrueHoop’ was an invaluable source of basketball information long before ESPN picked it up.

Henry Abbott, TrueHoop founder, innovator.

As informative and timely as his blog is, though, I think the best thing about it isn’t that it provides enough material that a person could be well-informed about basketball without ever leaving the site. The best thing about it is that Abbott tries to make the game he loves better. And his method is instructive.

This fledgling blog is devoted to learning from two businessmen: Charlie Munger and Greg Glassman. And Abbott’s success can be described by their respective principles. Glassman wasn’t thinking of Abbott (but he may well have been) when he said, “I can tell you what it is that makes you successful in business…the blind and relentless constant pursuit of excellence.”

It’s clear that Abbott loves basketball. And he provided people with stuff they could use: timely insights into the game, interesting analysis, and quick links to some of the best writing on each team. Provided every morning (he had a feature called ‘first cup’ with a nice coffee mug logo that included a short snippet from some of the most compelling basketball writing from across the country).

I don’t know how he wound up landing at ESPN. But I’ll guess it’s pretty similar to the way Glassman went from training a few friends & clients in a couple rooms of a larger center to running a worldwide operation with thousands and thousands of affiliates. Here’s Glassman’s account of how it happened. He outgrew the 1,250-square-foot space where he was training athletes, and didn’t know what to do. He didn’t know anything about business, so he went to the bookstore (maybe he should have tried the library!) “And there wasn’t one book on the shelf, not one, that told me how to improve my product or service.”

Glassman made a list of pros & cons, to determine whether expanding was a good business decision.

“And the mindset was that business is about makin’ money, ’cause if you can’t pay the rent, you won’t be in business. But then it hit me in just a blinding flash: ‘Wait a minute. I’m not trying to make money. Money’s what happens when you do something right.’”

So he threw away the checklist, and asked a different question: “Will it be good for clients?”

And the surest way to make a difference for clients was to be good. Really good. Excellent. And Glassman was able to provide excellence. People noticed. “Excellence is obvious to everyone,” Glassman said. “It’s just that easy.”

“I believe that business is the art and science of providing uniquely attractive opportunities for other people,” he says. “That’s what we’ve done. That’s it. Nothing else.”

Excellence...and then?

Abbott’s blog was excellent. He provided people useful material on a topic they loved. But then, he did something else. Abbott looked around at the sport he loved, and decided that it could be better. So, in addition to his wildly successful blog TrueHoop, he founded another endeavor: HoopIdea. It’s motto: ‘Basketball is the best game ever. Now let’s make it better.’

Abbott set out to make basketball more exciting, more, fun, and more intelligent, and to feature smarter rules, continuous action that features creativity and athleticism, and that got fans on the edge of their seats.

This pursuit mirrors Munger’s favored practice of problem solving via the process of inversion. Munger argues, “The way complex adaptive systems work and the way mental constructs work is that problems frequently get easier, I’d even say usually are easier to solve if you turn them around in reverse. In other words, if you want to help India, the question you should ask is not ‘how can I help India’, it’s ‘what is doing the worst damage in India? What will automatically do the worst damage and how do I avoid it?’”

A recent post on HoopIdea argues that the engine of success is innovation. At HoopIdea, we’re trying to make sure that the right kind of innovation takes root and improves the game we love.

HoopIdea: a great example of solving problems via inversion.

Just as CrossFit enthusiasts dislike seeing young, healthy athletes go from one isolation bicep curl exercise to another to another when they could be pursuing more functional fitness, Abbott disliked seeing the game he loved be less exciting than it could easily be.

And he did something about it. Abbott's recent post makes the following points:

A near-perfect illustration of the HoopIdea motto, that basketball is the best game on earth ... now let's make it better. Hell yes, changing the game makes sense ... if the idea is right.

Is wondering about how the game could be better a waste of time?...people doing just that have already saved the sport once -- and are role models for the leaders of the free world.

The best thing leadership can do is make sure it doesn't become "ossified." What was the cost of coming to the 3 decades after the idea emerged? How many mistakes like that can the league tolerate?

Don't you love the idea of basketball being open-minded and nimble in a way a leading economist says the whole nation should emulate?

Looking for that 3-point shot 

 

Abbott cites a New Your Times piece that comes to the conclusion the U.S. economy needs to find it's own 3-point shot.

Charlie Munger has made a great living by doing something that might be described as ‘General Intellectual Preparedness.’ Munger’s approach to making sense of the human experience draws on something very much like the mental counterpart of Glassman’s General Physical Preparedness (GPP) model that is at the heart of CrossFit. And the soon-to-be nonagenarian's thinking is innovative in just the way Abbott describes.

I think looking at the world in a sane, intelligent way is worth trying to do well. And I think it's possible to emulate Abbott in doing so. Abbott is at his best when he asks us to consider the costs for taking too long to adopt clearly good ideas. Mungers ideas are, I think, obviously good. While I continue to love basketball, I’m even more interested in exploring ways we can use Munger’s ideas to realize the kind of (mental) excellence Glassman has achieved.

Listen to Charlie: Televised Interview May 6

Listen to Charlie

This blog is founded on the idea of learning from Charlie Munger & Greg Glassman. One of the best ways to learn from Charlie Munger is to listen to him when he talks.

And he’ll be talking in a televised interview on Monday, May 6. He won’t be the only guy on stage (in fact he won’t be among only guys—Berkshire’s newest board member Meryl Witmer will be among those interviewed). And his fellow interviewees will probably talk a lot more than Charlie. Fortunately, Warren Buffett, Bill Gates, and Meryl Witmer will also offer compelling insights over the course of the 50-minute interview. Berkshire Hathaway CEO Warren Buffett, Berkshire Hathaway Vice Chairman Charles Munger, Microsoft Chairman Bill Gates and the newest addition to the Berkshire Hathaway board Meryl Witmer after the company’s shareholder meeting.

Meryl Witmer: Berkshire Hathaway's newest board member

Business school students from Georgetown, Wake Forest, and Columbia will get to ask questions. So if you can’t make it to Omaha this weekend, or if you do but any of your burning questions for Charlie & the gang go unanswered, float a question or two to your closest B-school friend from any of those institutions.

The interview will be broadcast live on Monday, May 6th at 9:30 a.m. Eastern time on Fox Business Network. 

Need Berkshire Updates? 

Warren Buffett is on Twitter. But Reuters editor of U.S. investment strategy Jennifer Ablan will be a lot more helpful. She’s in Omaha & tweeting updates from the weekends proceedings. Follow her: @jennablan.

Jennifer Ablan on Twitter

  Quick Munger update: not trying to 'out-Apple Apple.'

Women & Business: Buffett, Witmer, Berkshire’s Board, & more

With Berkshire’s appointment of Meryl Witmer, a principal at Eagle Capital Partners, much is being made about the company’s stance toward women. She is the third woman to be appointed to Berkshire's board; three of the past five Berkshire board appointees have been women. Still, a recent Calvert Investments report lists Berkshire as the worst company for diversity in the country. And one of the report’s co-authors, Christine De Groot, Calvert associate sustainability analyst, said that, “there’s no evidence that diversity is a priority for [Berkshire Hathaway] at all. In fact, the company takes an active stance against diversity in the board room.”

Buffett has also argued that diversity on Berkshire’s board lagged because he basically made all the decisions himself and didn’t rely much on the board for help.

Warren Buffett not only joined twitter (Munger won't be joining him--not his milleu), but he also just authored a piece for Fortune magazine on women in business that speaks to the topic of diversity.

It’s an interesting piece. Especially given Buffett’s belief that diversity shouldn’t be a consideration. He cites Washington Post magnate Katherine Graham as a paradigm case of the way women had the deck stacked against them for years. “I met Kay in 1973 and quickly saw that she was a person of unusual ability and character. But the gender-related self-doubt was certainly there too. Her brain knew better, but she could never quite still the voice inside her that said, ‘Men know more about running a business than you ever will.’”

And then he makes the same utilitarian argument for women’s full inclusion that John Stuart Mill advanced in “The Subjugation of Women” in 1869. “The legal subordination of one sex to another — is wrong in itself, and now one of the chief hindrances to human improvement,” Mill wrote. “And that it ought to be replaced by a system of perfect equality, admitting no power and privilege on the one side, nor disability on the other." 

Utilitarian John Stuart Mill.

Buffett’s case for equality is remarkably utilitarian—every bit as utilitarian as J.S. Mill’s was. “No manager operates his or her plants at 80% efficiency when steps could be taken that would increase output. And no CEO wants male employees to be underutilized when improved training or working conditions would boost productivity. So take it one step further: If obvious benefits flow from helping the male component of the workforce achieve its potential, why in the world wouldn't you want to include its counterpart?...The closer that America comes to fully employing the talents of all its citizens, the greater its output of goods and services will be. We've seen what can be accomplished when we use 50% of our human capacity. If you visualize what 100% can do, you'll join me as an unbridled optimist about America's future.”

And, interestingly, the Calvert investments report lists Coca-Cola among the best companies. Buffett is, famously, Coca-Cola’s largest shareholder. He recently made an appearance at the company's annual meeting:



It’s not a coincidence that a company Buffett owns a lot of stock in has such a record. According to Buffett, Berkshire doesn’t have a corporate diversity policy because he doesn’t dictate one to the company managers. “They do run their own businesses.”

Is that good enough?

Learning & Fun at Berkshire Hathaway's Annual Meeting

Fund manager and columnist Whitney Tilson explains to Business Insider why he doesn't miss the Warren Buffett & Charlie Munger show at Berkshire Hathaway's annual meeting in Omaha.

Whitney Tilson.

He basically gives two reasons: he learns a lot and it's fun.

Tilson makes a simple point about learning: repetition helps. "Even though I have been to so many of these, I find that while many of the questions have been asked over the years, the answers sometimes change and hearing a repetition of things I've already heard is good to reinforce a lot of the principles of sound investing," he said. "There are always new questions and new topics that get addressed."

Tilson made a fascinating comparison when he reached for a non-investing comparison: Ted Williams. Williams, like Buffett, was famous for possessing unmatched wisdom and practical success in his chosen passion. Williams, also like Buffett, was known to dispense his wisdom regularly.

"If I were really interested in being a great hitter in baseball and Ted Williams, the last guy to hit .400, were to once a year host a weekend long baseball clinic, would I go? Absolutely," Tilson said.

Ted Williams. Boston Red Sox.

A lot of people go to Omaha for the Berkshire meeting. And a lot of people engaged Williams on hitting over the years. But one thing I find interesting is that it was Williams, who enlisted in the Navy rather than enroll in college, instead of Buffett, of whom Munger declares, “plainly could have gotten a PhD in any field he wanted to pursue”, who wrote the book on his topic. Buffett famously learned under the guy, Benjamin Graham, who had previously written the authoritative tome on investing: The Intelligent Investor.

Buffett's teacher: Benjamin Graham.

Buffett has said that the book “changed my life,” and it provided the “bedrock of investment philosophy.”



Maybe Buffett has been too busy or just never had an interest in writing such a book. Maybe he just never thought he could improve on the original. Buy such a book by Buffett would certainly offer insights The Intelligent Investor didn’t. As Munger has argued, “if Warren Buffett had never learned anything new after graduating from the Colombia Business School, Berkshire would be a pale shadow of its present self. Warren would have gotten rich—because what he learned form Ben Graham at Colombia was enough to make anybody rich. But he wouldn’t have the kind of enterprise Berkshire is today if he hadn’t kept learning.”

Munger has done better, leaving a trove of staggering insights in his book Poor Charlie’s Almanack. This blog is dedicated to getting the most out of those insights (and CrossFit founder Greg Glassman’s very similar ideas). But even Munger hasn’t written a book on investing.

One thing is for certain: Ted Williams didn’t think himself incapable of improving on the best conventional wisdom when he wrote The Science of Hitting.

Ted Williams offers insight that works for baseball & investing: get a good pitch to hit!

Williams taught a lot of people about hitting. His book provided many insights that informed people’s practice for many years, and continued to be influential. Imagine what a book by Buffett and Munger could do for their field.

I’m sure investors mourn the lacuna caused by Buffett’s and Munger’s decision not to pen an investing manual. Even though I’m not personally interested in investing, I do, too. Though, I admit to being more grateful that Munger has turned his considerable insight to loftier stuff—or at least topics I take to be far more interesting, like what he calls ‘worldly wisdom.’

Despite authoring no investment books, Buffett & Munger have offered a lot of insights on the topic. And they’ve done so in ways that are superior to books. The Berkshire annual shareholders meeting is a great example. Tilson’s second factor for attending shouldn’t be discounted. Fun is important. "It's a huge amount of fun,” he said of attending Berkshire’s meetings. And that’s a big draw.

But it’s more than fun. Learning at someone’s feet is important.

The guy I learned the most from in college wrote me a few weeks ago about what it’s like to learn in person versus at a distance, “Affect is an important component of learning, and this tends to get lost when people are not physically proximate. As you know very well, writing is a good example of what [Michael] Oakeshott called ‘practical knowledge.’ I'm skeptical that one can ‘learn by doing’ at a distance. I can remember sitting in professors' offices and being asked, ‘what do you mean by that?’ Often the problem or the solution wasn't revealed until we both struggled to make our meaning clear to one another. (Remember the Pocock article from Political Theory, ‘On Verbalizing a Political Act’?) Reading a verbatim transcript of a conversation shows how difficult it is to convey meaning in non-verbal settings, or at a distance (even if the exchange is verbal).”

As it was for me in that professor’s classroom, the exchange of ideas with Buffett and Munger is possible in Omaha. That’s exciting. And significantly more lively than most of our sessions at the library.

You can also learn from Warren Buffett, now, on Twitter!