Reading paves the way for the future
True learning and sustained success belongs to those who first build a grid mindset model and then think with a holistic, diverse approach.
- Charlie Munger.
About the book
The book is written by Robert GHagstrom is the Chief Investment Strategist and Managing Director of Legg Mason Investment Advisors, a well-known American writer known for his ability to write about Warren Buffett and Munger's ideas.
The author mentions in the preface that this is not a book to guide investment, and the core of the investment philosophy that the author wants to show is:Develop a theoretical model that considers finance and investment as part of society as a whole, part of all knowledgeIn the author's view, investors learn basic investment lessons that fail to build a comprehensive understanding of how the market works and how investors operate, which will inevitably lead to confusion and mistakes, and this book aims to improve investors' understanding of investment and market operations.
The author first introduces the concept and importance of Charlie Munger's G-Grid thinking model, and then expands on the basic concepts, origins, and promotions of the seven subject areas of physics, biology, sociology, psychology, philosophy, literature, and mathematics, and how they relate to and promote markets and investment.
Latticework thinking model
The latticework thinking model is one of the familiar concepts of value investors, and Munger advises investors to "study hard to master more knowledge of markets, finance, and economics, but at the same time learn not to isolate this knowledge, but to see it as part of the treasure trove of human knowledge that includes psychology, engineering, mathematics, and physics." With such a broad perspective, it is possible to see that each discipline intersects with each other and is thus strengthened. A person who likes to think is able to summarize his or her unique thinking patterns from each discipline and combine them with associations to achieve a coherent understanding. ”
Munger told usConnecting the mindsets of different disciplines and establishing a coherent grid is the best decision-making model for investment。If you think about the same investment problem with the mindset of different disciplines, it is more correct to make such investment decisions if you can come to the same conclusion. The more you know, the more you understand, the smarter and wiser your investors will be.
How do I model a grille?
To put it succinctly,It's a gradual processFirst, it is necessary to obtain those valuable concepts, or models, from many different fields of knowledge; The second is to learn how to identify similar patterns. The former is self-learning, and the latter is learning to think and see things from different perspectives.
In order to help readers quickly establish an initial understanding of each subject area, the author first sorts out the basic concepts of each discipline, such as physics is the science that studies matter, energy and the interaction between the two; Sociology is the study of how humans behave in society, with the ultimate goal of understanding the behavior of groups; Psychology is the study of how the brain works, divided into two broad directions: emotion, cognition, and the study of what dominates our behavior......
Then, the authors extract the main research directions and promotion processes of each discipline, and further extend them to the fields of economics and investment. For example, the equilibrium theory of physics has been applied to economics to form the concept of dynamic equilibrium, but with the advancement of time, the logic that has been used to observe the market and regarded as the classical equilibrium theory cannot or even describe the stock market crash in 1987 and 2007 and 2009, prompting people to begin to understand the market from other perspectives, and biology provides people with an important perspective.
In the field of biology, from Darwin's theory of progressive evolution to Gould's theory of "punctuated equilibrium", economists' understanding of economic theory has also undergone a corresponding transformation. On the first page of the first edition of Principles of Economics, the British economist Marshall quoted Darwin's "nature never leaps"; Schumpeter, on the other hand, argues that change can also be immediate and drastic, and that innovation can be leapfrogging and lead to great disruption and discontinuity. Scholars believe that economics is more like biology than physics, and the transition from a mechanical worldview to a biological worldview is called the "second scientific revolution".
Complex adaptive systems
The scientific team at the Santa Fe Institute in the United States studies the economy and the market under a complex adaptive system that biology and ecology are very familiar with, such as ant colonies and bee colonies. Complex adaptive systemsThere are many units, each of which has to adapt to or respond to the patterns generated by the system itself, and the complex adaptive system is constantly evolvingEvolutionprocess.
The author again describes this system in the chapter on sociology, whether in economics, political science or sociology, we can say that they are complex systems (with numerous independent units), they are adaptive (individuals in a system regulate their behavior based on their interaction with other individuals and with the system as a whole). These systems have:Self-organizing natureand once organized, they will exhibit mutational behavior (1+1+...+n>n）。Complex adaptive systems are unstable and periodically reach tipping points of self-organization.
High IQ does not equal rationality
Think, Fast and Slow by Daniel. Kahneman was awarded the 2002 Nobel Prize in Economic Sciences for "integrating the study of psychology into economics, particularly on the impact of uncertainty on human judgment and decision-making." Therefore, psychology is undoubtedly the most important field of study for investment.
Munger also believes that psychology is the most important thing for investing, especially the psychology of misjudgment. The most common thinking mistakes are often not so much to do with IQ as to be related to rationality。Most people usually fail to recognize their bad decisions and must understand our irrationality. The market and investors are irrational, the author believesMoneyIt is the psychological reason for the irrational behavior of investors.
Learning to think correctly can overcome the influence of irrational factors, and philosophy is the discipline of "thinking about it", and for investors, learning in the field of philosophy can undoubtedly play a positive rolePragmatismIt is the best philosophy to build and apply the grid thinking model.
Better on top of better
When foundational concepts are combined and aligned in a consistent direction, they create a magnifying effect and reinforce foundational truths in their respective fields. The Santa Fe Institute is calledMutations", Munger called itBetter on top of better”。Actually, that's onePositive feedbackprocess, the book shows how different subject areas can generate positive feedback on the process of investment. The grid mindset model is as effective for investing as it is for life, because people like to be better than good, whether it is investment or life.
Although this book is not thick, it is very knowledge-dense. Like Munger, the author has developed such a broad framework of knowledge through extensive reading. ReadIt is the only way to the grid thinking model, and it is also one of the actions that can have a positive feedback on life.
Through reading this book, I realized that it is not enough to limit my reading to investment, economics, finance, business and other fields, and I need to make up for different disciplinesGeneral Education LessonsThis is also one of the main directions of my reading this year.