When evaluating something or trying to answer a complex question, consistently ask ‘why’ and look for answers from multiple disciplines. This approach helps uncover multiple reasons and second/third-order effects, leading to a more comprehensive understanding.
When answering a complex ‘why’ question, begin your response with the phrase ‘part of the reason is this…’. This mental trick helps remove the ‘availability heuristic’ or ‘first conclusion bias’ by keeping you uncommitted to a single answer and open to exploring other contributing factors.
Strive for financial independence as a primary goal in your life. Once financially independent, you can view the world more objectively and think with a longer-term perspective, free from short-term pressures.
Actively remove distractions from your physical environment, such as giving up television or removing stock price bookmarks from your browser. This creates a more peaceful state, reduces noise, and allows for greater focus on important matters, leading to better decision-making.
When analyzing a business, prioritize understanding its durable competitive advantage (moat) and its ability to scale, rather than focusing on short-term quarterly results. Moats are not eroded quickly, making quarterly results largely insignificant; focusing on long-term durability helps filter out noise and identify truly valuable businesses.
When evaluating business models, consider a low-cost provider advantage as a highly sustainable and admirable moat. This model often leads to less wastage, benefits consumers through lower prices, fosters customer loyalty, and can still generate high returns on capital while paying employees well.
Identify and admire entrepreneurs who operate as ’learning machines’ by making many small, experimental bets that, even if they fail, will not impair the company. This approach, combined with financial discipline (e.g., low or zero debt), allows for innovation and creativity without significant aggregate risk.
Understand that while frameworks like checklists are excellent for reducing error in big decisions, creativity and innovation require a willingness to experiment and make mistakes. Both are necessary; you need the ability to generate unique insights (creativity) and the ability to minimize mistakes (error reduction).
Read multiple books (e.g., three or four) concurrently from different disciplines. This prevents boredom with a single subject, fosters a multidisciplinary mindset, and helps you associate ideas across different fields.
Reread highly influential books, such as ‘Poor Charlie’s Almanac,’ multiple times a year (e.g., three times). Each reread offers new insights, helps connect the material to new experiences, and enhances your thinking.
When identifying a useful mental model or concept, give it a descriptive name (e.g., ‘boiling frog syndrome,’ ‘deprival super reaction’). This helps with quick recall and retrieval of the model when evaluating situations, making it very helpful for organizing thoughts.
When analyzing a business, examine its data over long periods (e.g., 20, 15, 10, 5 years ago, and today) rather than focusing on short-term quarterly results. This helps overcome the ’low contrast effect’ or ‘boiling frog syndrome’ by making slow, significant changes in competitive advantage more apparent.
Read books on a Kindle rather than physical copies. This allows for searching across your entire library, serendipitous discovery, and easy syncing of underlined text and notes to the cloud for later use, while also being environmentally friendly and reducing eye strain compared to computer monitors.
While reading a Kindle book, underline important passages and take notes on the fly; after finishing, extract all underlined text and notes to a separate document (e.g., in Evernote). This serves as a ‘second reading’ of the most impactful parts and helps in recalling information later.
Utilize ‘The Brain’ software to organize and connect your thoughts, emails, sound files, and documents. It replicates how the human brain works by creating new associations between different kinds of thoughts, acting as an ’external brain’.
If in a position to do so (e.g., as a long-term owner with structural advantages), avoid selling off underperforming businesses quickly. This approach, exemplified by Berkshire Hathaway, builds a reputation as a ’natural partner’ for business owners, creating a significant reputational advantage over decades.