Notes from reading Charlie's Almanack

Charlie counts preparation, patience, discipline, and objectivity among his most fundamental guiding principles.
Much of Franklin's success was due to the essential nature of the man—most especially his appetite for hard work, but also his insatiable curiosity and patient demeanor. Above all, he possessed a quick and willing mind that enabled him to easily master each new field of endeavor he chose to undertake. It is not surprising that Charlie Munger considers Franklin his greatest hero, for Munger is also largely self-taught and shares many of Franklin's unique characteristics. Like Franklin, Charlie has made himself into a grandmaster of preparation, patience, discipline, and objectivity.
Instead of making a superficial stand-alone assessment of a company's financial information, Charlie conducts a comprehensive analysis of both the internal workings of the investment candidate as well as the larger, integrated ecosystem in which it operates. Just as multiple factors shape almost every system, multiple models from a variety of disciplines, applied with fluency, are needed to understand that system. As John Muir observed about the interconnectedness of nature, "When we try to pick out anything by itself, we find it hitched to everything else in the universe."
Charlie generally focuses first on what to avoid—that is, on what not to do—before he considers the affirmative steps he will take in a given situation. "All I want to know is where I'm going to die, so I'll never go there" is one of his favorite quips.
Charlie recognizes that even among the most competent and motivated of people, decisions are not always made on a purely rational basis. For this reason, he considers the psychological factors of human misjudgment some of the most important mental models that can be applied to an investment opportunity: Personally, I've gotten so that I now use a kind of two-track analysis. First, what are the factors that really govern the interests involved, rationally considered? And second, what are the subconscious influences where the brain, at a subconscious level, is automatically doing these things—which, by and large, are useful but which often misfunction? One approach is rationality, the way you'd work out a bridge problem: by evaluating the real interests, the real probabilities, and so forth. And the other is to evaluate the psychological factors that cause subconscious conclusions, many of which are wrong.
Quickly eliminate the big universe of what not to do; follow up with a fluent, multidisciplinary attack on what remains; then act decisively when, and only when, the right circumstances appear.
This habit of committing far more time to learning and thinking than to doing is no accident. It is the blend of discipline and patience exhibited by true masters of a craft.
On those relatively few occasions when all the circumstances are just right and Charlie does invest, he will likely make a large, decisive bet. He does not pick around the edges, take initial positions, or make small, speculative investments. Such behavior implies uncertainty, and Charlie's moves, few as they are, are anything but uncertain. As he says, he practices "extreme patience combined with extreme decisiveness."
"Invert, always invert." I sought good judgment mostly by collecting instances of bad judgment, then pondering ways to avoid such outcomes.
Psychology-based tendencies:
Incentive superpower: People and countries have interests, which determine their actions. Cognition is ordinarily situation-dependent, so that different situations often cause different conclusions, even when the same person is thinking in the same general subject area. If you would persuade, appeal to interest and not to reason. 1) Especially fear professional advice when it is especially good for the adviser, 2) learn and use the basic elements of your adviser's trade as you deal with your adviser, and 3) double-check, disbelieve, or replace much of what you're told, to the degree that seems appropriate after objective thought. Although money is the main driver among rewards, it is not the only reward that works. People also change their behavior and cognition for sex, friendship, companionship, advancement in status, and other nonmonetary items.
Liking/loving tendencies: And what will a man naturally come to like and love, apart from his parent, spouse, and child? Well, he will like and love being liked and loved. One very practical consequence of liking/loving tendency is that it acts as a conditioning device that makes the liker or lover tend to 1) ignore the faults of, and comply with the wishes of, the object of his affection; 2) favor people, products, and actions merely associated with the object of his affection; and 3) distort other facts to facilitate love. For instance, it is obviously desirable to attract a lot of lovable, admirable people into the teaching profession.
Inconsistency-avoidance tendencies: The rare life that is wisely lived has in it many good habits maintained and many bad habits avoided or cured. The great rule that helps here is again from Franklin's Poor Richard's Almanack: "An ounce of prevention is worth a pound of cure." What Franklin is here indicating, in part, is that inconsistency-avoidance tendency makes it much easier to prevent a habit than to change it. It was not the intrinsic difficulty of new ideas that prevented their acceptance, instead, the new ideas were not accepted because they were inconsistent with old ideas in place. Darwin trained himself to intensively consider any evidence tending to disconfirm any hypothesis of his, more so if he thought his hypothesis was a particularly good one.
Envy/jealousy tendency: It is not greed that drives the world but envy.
Reciprocation tendency: Daily interchange in marriage is also assisted by reciprocation tendency, without which marriage would lose much of its allure. Wise employers, therefore, try to oppose the reciprocate-favor tendencies of employees engaged in purchasing. The simplest antidote works best: Don't let them accept any favors from vendors.