The Multiple Mental Models Approach To Investing

CMQ Investing Presents: Compound Money Quietly

Whether you know about mental models or not, this episode adds something completely unique to the conversation.

The multidisciplinary (aka multiple mental models) approach to thinking gave Charlie Munger an enduring competitive edge as an investor, and he credits it with enhancing all areas of his life.

We put Charlie’s first public discussion about his multiple mental models approach in context of Berkshire Hathaway’s history and the $1 billion dollar bet Berkshire made on Coca-Cola in the late 1980s. We also make a unique discovery i.e. how the using multiple mental models to assess investment opportunities continues to be Berkshire Hathaway’s edge, as illustrated by the $60 billion dollar bet Berkshire on Apple.

Howard Marks is the founder of Oaktree Capital and the author of an excellent book titled The Most Important Thing. In the very first chapter, Marks discusses the kind of thinking that is required to consistently outperform the market, something that only a small club of investors can say they’ve done consistently decade-after-decade.

“Since other investors may be smart, well-informed and highly computerized, you must find an edge they don’t have. You must think of something they haven’t thought of, see things they miss or bring insight they don’t possess.”

If you want an edge an investor, then Charlie Munger’s multidisciplinary approach to thinking is something you need-to-know. Here is what else you will learn:

• The origin of Charlie Munger’s multidisciplinary approach to thinking i.e. why he became multidisciplinary in the first place

• How Charlie Munger changed Warren Buffett’s views on investing in the late 1960s

• How the multidisciplinary—or multiple mental models approach—to investing helped Berkshire Hathaway make it’s biggest bet of all time

• The details of the 1994 speech where Charlie Munger introduced his thinking system, but in context of Berkshire Hathaway’s challenges and triumphs in the 1980s and early 1990s.

• How Berkshire’s $60 billion dollar bet on Apple is an example of the enduring edge that the Munger system provides