Masters in Munger

I am an MBA. As a Master of Business Administration, I am fluent in business-speak. I can speak about the Black-Scholes pricing model, run regression analyses correlating employee production to the color of office walls, and examine any business plan from the perspective of Michael Porter’s Five Forces. And don’t forget that I can do all of this on a PowerPoint presentation with bar charts, pictures, and flying bullet points. As I said, I am a Master of Business.

As you can see, my MBA gave me the tools and terminology I need to be a “business man.” I can put on my suit and talk business concepts with the best of them. I can give you a dash of Six Sigma and a heavy dose of Economic Value Added (EVA). If I decide to get real crazy, I will have a few drinks and do a SWOT analysis or two.

While everything I’ve just described might sound valuable and important, since graduation I’ve realized that my MBA fell a little short in teaching me how to truly succeed in business and in life.

So, if you are thinking of getting an MBA, I applaud you and wish you luck. However, I strongly recommend that you supplement (or totally replace) your MBA education with the careful study of one man and one book: Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger.

Charlie Munger is Warren Buffett’s business partner and one of the smartest men on the face of the earth. Poor Charlie’s Almanack is a compilation of Mr. Munger’s wisdom and knowledge.

After graduating from Harvard Law School, Charlie Munger founded and practiced real estate law with Munger, Tolles & Olson, a California law firm with offices in Los Angeles and San Francisco. He soon tired of fixing other people’s mistakes and decided to get into the investment business. Currently he is chairman of Wesco Financial Corporation, a subsidiary of Buffett’s Berkshire Hathaway. Wesco has an equity portfolio of over $1 billion dollars that is concentrated in Coca-Cola, American Express, Wells Fargo, and Procter & Gamble.

Munger is brilliant in a very classical sense. He is a Renaissance man. In fact, his hero is Benjamin Franklin, the ultimate Renaissance man. Munger is a thinker, philosopher, scholar, and gentleman. Anyone who desires to succeed in business will find valuable wisdom in just a few lessons from Munger.

An MBA will give you the tools you need to ace a corporate interview. A Masters in Munger will teach you how to become a better thinker, a better learner, and will give you the ultimate education in how to succeed in a global economy that is dominated by knowledge workers.

Here are six things Charlie Munger taught me that my MBA did not:

1) It is more important to focus on not being consistently stupid than it is to focus on being consistently smart. An MBA is all about sounding and acting smart. Charlie Munger is all about avoiding stupidity.

2) Modern Portfolio and Risk Theory are nonsense. Forget about trying to make investing a scientific study of risk and efficient markets. Risk is risk because it is risky and unpredictable. Markets are inefficient because people, companies, and governments are inefficient. As Munger has stated, “We're trying to buy businesses with sustainable competitive advantages at a low, or even a fair, price.”

3) Study the main tenets of psychology, and use them to evaluate your decision-making. Instead of taking a course on derivatives, take a course on the psychology of human misjudgment. Businesses don’t fail because people don’t understand what a derivative is or forgot how to interpret the R-squared figure on a regression analysis. Businesses fail because of people’s misjudgment. If people understand some of the basic tenants of psychology, they can greatly increase their chances of avoiding stupidity.

4) Always invert. This will help you avoid the first conclusion bias. Instead of trying to prove that your new marketing campaign will work, try to prove that it will fail.

5) Use multiple models for solving problems—know the big ideas from math, physics, economics, engineering, philosophy, political science, and history. To the man with a hammer, every problem looks like a nail. Don’t be the man with a hammer.

6) Collect instances of bad judgment, and ponder ways to avoid them in the future. Everyone should have a wall of shame of bad decision-making to consult on a daily basis.

An MBA is a great education, but it is entirely too focused on theory, rules, and “best practices.” Study Charlie Munger and get an education in the art of thinking well. Learn to think well, and you will learn to succeed simply by not being stupid.