Warren Buffett describes Charlie Munger and having “the best 30-second mind in the world”.
Charlie is the long time trusted business partner of Warren Buffett and while Buffett gets most of the glory, Munger has long been known as Buffett’s secret weapon and confidant.
Together the two of them build up Berkshire Hathaway to the giant multinational conglomerate it is today.
Something that Munger is known for is use of “mental modals”. These are essentially ways of looking at things and how we view the world.
For many we view the world based only on our experience usually picked up quite by accident from our surroundings and the job, business or industry that we work in.
Yet for top investors like Warren Buffett and Charlie Munger, these guys are looking at different industries for investing all day long.
It pays as can be seen by their billion dollar bank accounts, to be able to view an investment through a variety of lenses.
And this applies to really any problem or opportunity in the real world. Look at it one way and it seems like a terrible idea, choose another mental model to view it and actually you begin to see opportunity beneath the surface.
These types of ways of thinking allow investors and other smart business people alike to literally generate billions of dollars by taking a contrarian view on investments.
What contrarian means is really going against the grain. Against what the majority of people think about a certain position or investment.
There’s very little money to be made betting alongside the crowd. And there is a lot of money to be made investing into businesses and in industries that are being ignored and are actually about to experience massive growth.
This is how Charlie Munger became a billionaire. By developing and utilizing mental modals and ways of thinking to his investment opportunities.
Allowing him to see almost all angles of specific investments and therefore make the best possible investment based on the information he has.
More importantly, avoiding losing money on investments because more often than not, what comes from using mental modals is the reason why you should not invest your capital.
Both Warren Buffett and Charlie Munger view far more investments that they will not invest in, than they will.
It’s not about investing in every opportunity that comes along. It is about how to cherry pick only the very best of the best investments and ignoring the rest.
It’s about separating the signal from the noise, focusing on the signal and ignoring the noise.
That’s how the greats in investing made their money, became billionaires and held onto their extreme wealth.