Munger is 96 years old this year. But the old man's investment philosophy has never changed.

What he always thought he was going to beat.It's not the market, it's not the Black Swan incident, it's human nature.

Sometimes when a disaster is destroyed, it is mistaken for an opportunity. Old friend Buffett often says "keep the principal", which is actually Munger's investment truth.

But there are still some people who are lucky and busy copying at a low price, failing to resist the temptation of greed in human nature.

Overcome human natureIt is an important part of Munger's investment wisdom. As one of the market participants, he has been studying the weaknesses of human nature all his life, and he has made great efforts to avoid the fallacies brought about by his own human nature.

AndPrudence is his most powerful weapon to avoid making mistakes.Created his distinct investment style: self-restraint, risk aversion, careful choice.

So today, Xiao Baoer summed up Munger's eight valuable theories of "human nature and prudence" and shared them with you.

1 、Be afraid when others are greedy

Munger once gave a piece of advice: when other people are ecstatic, you have to be not interested, but when others are unsure or scared, you can get involved.

Because most people are never winners. He said in his 2013 Daily Journal annual meeting speech:

"the idea that everyone can make a lot of money from the stock market is crazy. No one expects everyone to win. "

Greed is an instinct, which means that you have it, and so do others. But a cake is only that big, how many can it be divided into? In other words, who is entitled to the cake? Definitely not a follower, Munger said.

2 、Pricking and pushing is tantamount to jumping into the sea together.

In Keynesian economics, "speculation" is defined as "the activity of predicting market psychology". It is believed that it is necessary to think over and over again what the market is thinking before making a decision.

It is commonly known as following the crowd. From Munger's point of view, this is simply ridiculous.

He said that people gathered together like a litter of lemmings, like to trek long distances and then jump into the sea together. If you bet on Volkswagen, you will never get higher-than-average returns.

3 、Investment is an act against human nature.

A few people can play with the value investment of Buffett and Charlie Munger. The difficulty of this kind of investment is not to understand the system itself, but to control emotion and psychology.

When the market falls, Munger never panics and waits for opportunities more calmly. You have to be anti-human in order to be objective and calm enough.

For those who are easily emotional and complacent, Munger absolutely says no to him:

"megalomaniacs can occasionally be big winners, but I don't want a bunch of megalomaniacs dangling in front of me. I choose prudent people. "

In the relationship between the two, Buffett is a stock picker, Munger is a skeptic and a skeptic. He has enough objective insight to allow Buffett to constantly test his subjective guesses and find the most profitable "golden fruit".

4 、Reason is useless in the face of uncertainty

Munger believes that even the most intelligent people can make the most crazy mistakes.

He once mentioned a tragic counterexample: there was a company that asked each of its financial elites to choose an investment opportunity, brainstorm and put it together. I tried three times, but none of them succeeded, and I lost a lot of money.

Why? Munger commented:

"We have never naively thought that if we recruit a group of talented young people, we can know everything and know more about canned soup, aerospace, or public utilities than others. "

Their mistake is that they believe in their own reason too much, think that they are highly intelligent, highly educated, and have enough data models on hand, so that the plan they come up with will be correct.

However, the results of investment are always uncertain. Even the great god, such as Munger himself, who has made a net profit of tens of billions of dollars after investing for decades, still admits that he makes mistakes occasionally and does not have a strategy that will win.

5 、Remember, instinctive judgment will deceive you.

When studying behavioral economics, Daniel Kalman found that instinctive thinking tends to be overconfident, extreme predictions and planning fallacies.

The reason is simple. Hundreds of years ago, the environment in which our ancestors lived still influenced the way modern people think and feel.

Instinctive judgment can save scarce resources, which is one of the benefits. But the downside is that it is easy for people to make harmful systemic mistakes.

In this regard, careful thinking is particularly important. The market is a large and complex organism, and we must reorganize the data, process and process it correctly in order to get infinitely close to the truth.

6 、Sometimes, it's better to do nothing.

People tend to think that the level of activity has something to do with value, and they always feel like "don't just sit there and do something." In Munger's view, this is precisely the wrong advice.

"when we do not feel a strong desire to change, we are willing to wait for good things to come."

Whether an investment opportunity is good or not, or whether a bear market is worth entering, does not depend on you trying to know.

Investment is like playing bridge, each round has to evaluate new possibilities and weigh the gains and losses, which takes at least a hundred times to think and analyze.

The smartest people are wise to be prudent, avoid a lot of risks in life, calm down, and prepare for the really big opportunities in the future.

7 、 7 、The highest difficulty = the highest return? Wrong

Munger has a prudent principle: choose only the simplest things to do.

People with high IQs often enjoy the moment of solving problems and think that enough mental investment will bring high returns.

But the reality is that a problem is a problem, which will only be very difficult, but it does not say that the reward will be high. Especially in the investment community, the fault tolerance rate is very low, which is the law of death.

Munger is well aware of the size of his circle of ability, does not easily cross the line, and always deals with what he can do.

Just like this sell-off, he said, those airlines did not even call him to "ask for money." it is unthinkable that they have seen him for a long time. He said that this is impossible to understand, so be conservative and quit.

8 、Prudence will keep you alive.

The investment community is a magical area where jumps occur frequently. Loss aversion, fear and despair, gambler psychology in human nature. It often pops up when you lose money on your account.

Deeply influenced by stoicism, Munger used to say that there are many flaws and faults in human nature, but complaining is futile. The most important thing is not to destroy yourself-don't do anything stupid, don't expect from others, just ask yourself to do as well as you can.

He used his life experience to sort out 25 human fallacies, carefully delineated his own ability circle, and often used multiple thinking models to screen the current situation.

These many principles, rules and models help Munger examine himself for a long time, always maintain the ability to be cautious, protect himself from the bad aspects of human nature, and avoid making mistakes and failures.

End

Know human nature and not be bad for yourself, be prudent in the way, and act steadily and far away.

Such a simple wisdom has made the investment legend of old Charlie Munger, and it is also the conservative way of thinking that we have always respected.