“Spend each day trying to be a little wiser than you were when you woke up. Day by day, and at the end of the day—if you live long enough—like most people, you will get out of life what you deserve.”
Another important lesson I got from this book is always keeping your mind open for multidisciplinary lifelong learnings and apply those in life, business and everything.
Core Philosophy
- Worldly Wisdom – Acquire multiple mental models from different disciplines to make better decisions
- Latticework of Models – Connect ideas from psychology, economics, biology, physics, and history into an integrated framework
- Elementary Worldly Wisdom – You need roughly 80-90 models to handle 90% of life’s problems
Inversion Principle
- Invert, Always Invert – “All I want to know is where I’m going to die, so I’ll never go there”
- Think backwards – solve problems by avoiding stupidity rather than seeking brilliance
- Ask “What could go wrong?” before asking “What could go right?”
Psychology-Based Models
- Twenty-Five Cognitive Biases – Understanding human misjudgment is critical to success
- Incentives Rule – “Never think about something else when you should be thinking about the power of incentives”
- Social Proof – People imitate others automatically, especially under uncertainty
- Commitment & Consistency – Once committed, people bend their beliefs to maintain consistency
- Deprival Superreaction – Losing something hurts more than gaining something feels good
- Envy & Jealousy – “It is not greed that drives the world, but envy”
- Contrast-Caused Distortion – We judge things by comparison, not absolute value
- Authority Bias – People trust and obey authority figures mindlessly
- Pavlovian Association – We’re trained like dogs – repeated associations become automatic
Circle of Competence
- Know Your Limits – “You have to figure out what your own aptitudes are”
- Stay within your circle – better to know the edge of your competence than fake expertise
- Three Buckets – Put investments in: yes, no, and too tough to understand
Preparation & Hard Work
- No Shortcuts – “There is no such thing as a 100% successful person who hasn’t had to work very hard”
- Preparation Meets Opportunity – Success requires both intense preparation and patience
- Read Constantly – Charlie and Warren are “learning machines” who read 500+ pages daily
Multi-Disciplinary Thinking
- Avoid Man-With-Hammer Syndrome – “To a man with a hammer, everything looks like a nail”
- Use ideas from multiple disciplines – economics alone is insufficient
- Big Ideas from Big Disciplines – Master the core principles of math, physics, chemistry, biology, psychology, and engineering
Mathematics & Probability
- Compound Interest – Understanding exponential growth is essential
- Permutations & Combinations – Calculate probabilities accurately
- Decision Trees – Think through sequential decisions and their consequences
- Bayesian Updating – Update beliefs as new information arrives
Economics Models
- Opportunity Cost – Every decision means giving up the next best alternative
- Creative Destruction – Capitalism constantly destroys old industries
- Comparative Advantage – Specialize in what you do relatively better
- Supply & Demand – The most basic but most violated principle
Business Principles
- Quality Over Quantity – “We don’t train executives, we find them”
- Margin of Safety – Always have room for error in your calculations
- Moats Matter – Invest only in businesses with durable competitive advantages
- Sit On Your Ass – “The big money is not in the buying and selling, but in the waiting”
Decision-Making Frameworks
- Checklists – Avoid disasters by using systematic checklists like pilots
- Reduce Complexity – Break hard problems into simpler sub-problems
- Scale Matters – What works at small scale may fail at large scale (and vice versa)
- Critical Mass – Some systems only work after reaching a threshold
Character & Ethics
- Deserve What You Want – “To get what you want, deserve what you want”
- Trust is Everything – Reputation takes decades to build, seconds to destroy
- Admire the Right People – Associate with and learn from those better than you
- Avoid Toxic People – Life is too short to deal with unreliable or dishonest people
Practical Wisdom
- Avoid Standard Stupidities – Stay away from debt, drugs, jealousy, and resentment
- Accept Your Ignorance – “It is remarkable how much long-term advantage people can get by trying to be consistently not stupid”
- Patience Pays – “Waiting helps you as an investor and a lot of people just can’t stand to wait”
- Keep Learning – Go to bed smarter than when you woke up
Life Philosophy
- Lower Expectations – “The best way to get a good spouse is to deserve a good spouse”
- Reduce Material Needs – Happiness comes from managing desires, not maximizing consumption
Based on my life experience, if I put myself in author’s shoes, following will be the questions I would like to answer:
- How do we inculcate this behavior in family, peers and colleagues?
- How do we ensure future generation is aware of this treasure of the knowledge and start following this way earlier in their life?