038 – Poor Charlie’s Almanack

In this episode, I dig into “Poor Charlie’s Almanack“.

You can listen to the episode here:

Full Transcript:

There are a relatively small number of disciplines and a relatively small number of truly big ideas. It’s a lot of fun to figure it out. Plus, if you figure it out and do the outlining yourself, the ideas will stick better than if you memorize them using someone else’s cram list. So that was a little bit from Poor Charlie’s Almanac, a book written and put together by Peter Kaufman, but full of all the Charlie mongers wisdom from over the years. And I’m here just kind of a solo cast today to share. I’ve had some great guests coming up, but I thought I’d just kind of talk about this one myself. It’s been a book that I have more highlights on than any other book I’ve read in recent years.

So I thought I’d share something with you. So before we start, this book is enormous. Like literally, it weighs more than just about two pounds. Thankfully it was released on Kindle in late 2023 so you can read it there much more easily. The big book is impressive and fun to look at but hard to read not only from the size but just the way it’s laid out. It’s very fancy and hard just to kind of go through with footnotes and side notes and all that. So the Kindle version is a lot better to go through. If you listen it’s about 13 hours long and audible. So

If you want to get the physical version, go for it. I would encourage you to get the Kindle or the audiobook to really get through with those. But let’s hit some of the highlights and look some of the things that really stood out to me. So there was a good bit of the book talking about Charlie’s values. They said, the quotes, talks and speeches presented here are rooted in the old fashioned Midwestern values for which Charlie has become known. Lifelong learning, intellectual curiosity, sobriety, avoidance of envy and resentment, reliability, learning from the mistakes of others, perseverance, objectivity,

willingness to test one’s own beliefs, and many more. There was a lot in the book about Charlie’s values and how he just ran his life and ran his businesses. They also said, quote, Charlie counts preparation, patience, discipline, and objectivity among his most fundamental guiding principles. He will not deviate from these principles regardless of group dynamics, emotional itches, or popular wisdom that this time around is different. So Charlie, yeah, very much stood by all of his beliefs through his whole life and worked out very well for it.

Another thing Charlie did well was repeat himself. And this is something I’ve shared before in my blog and probably I hear that I’m bad about not repeating myself when I should and probably should repeat myself more often. From the book it said, Charlie’s redundancy in expressions and examples is purposeful. For the kind of deep fluency he advocates, he knows that repetition is the heart of instruction. This is something I read also in Robert Karn’s The Story Cycle. said, in that book he said, quote, remember that once you’ve heard the story internally a few dozen times, it likely means your audience has only heard it once or twice. Keep sharing.

So this is something I’m trying to do better. If you follow my blog, you’ll see some of the same, not the same posts, but the same ideas coming up from time to time, because it’s things I’ve already forgotten. Certainly anyone that’s read it has forgotten it. it helps solidify more in my brain, helps spread the word a little bit better. I’ve noticed this with great people I follow too, the Seth Godin’s and Gary Vaynerchuk’s and those people that they have just a few things they share and they share them over and over with different examples and different contexts, but it’s the same few ideas and it’s fantastic. I think it’s how you really make a difference is by sharing things over and over and Charlie was great about that.

Another thing Charlie shared here a good bit was making friends with the eminent dead. He said quote, think you learn economics better if you make Adam Smith your friend. That sounds funny, making friends among the eminent dead. But if you go through life making friends with the eminent dead who had the right ideas, I think it would work better for you in life and work better in education. It’s way better than just giving the basic concepts. Later in the book, he also said quote, let me further develop the idea that a multidisciplinary attitude is required if maturity is to be effective. Here I’m following a key idea from the greatest lawyer of antiquity, Marcus Cicero.

Cicero is famous for saying that man who doesn’t know what happened before he’s born goes through life like a child. That’s a very correct idea. Cicero’s right to ridicule someone so foolish as not to know history. So again, reading from history, I mean we’re learning from Charlie Mugger who passed away just a few years ago. Learning from him is fantastic versus trying to learn every lesson for ourselves and making friends in the eminent dead can be great. He also said something that I converted to talk about AI. He didn’t really mean it that way, but he had said quote,

He knew the huge productivity increases that would come from buying a better machine, introducing the production of a commodity product would all go to the benefit of the buyers of the textiles. Nothing was going to stick to our ribs as owners. And think a lot of AI is going to be like that too. Like with our agency, we’re going to start using AI more and more in future years and it’s not really going to create more profit for us. It’s going to create lower prices for everyone else. So it’s going to be a win for the world at large. I’m not sure it’ll be a win for agencies, just like when you had newer machines building your textiles. It’s not that you were able to sell them for

just as much as before. Everyone was making more textiles, so the prices dropped. So it’s a good thing, but it’s hard as an owner to make use of that, and AI may turn out that way for us too, and we’ll see what happens. Another example he shared revolved sauerkraut in trying to convince people to do what they want and avoid mutinies. He shared a story from James Cook. He said, James Cook didn’t want to tell him he was doing it the hope it would prevent scurvy, because sauerkraut can prevent scurvy on long trips. Back to the quote, said, because they might mutiny, and take over the ship if he thought that he was taking them on a voyage so long that scurvy was likely.

He wanted to of trick his crew, not let them know the trip was going be that long, but also not let them die of scurvy. So here’s what he did. Officers ate at one place where the men could observe them, and for a long time he served sauerkraut to the officers, but not to the men. And then finally Captain Cook said, well, the men can have it one day a week. In due course, he had the whole crew eating sauerkraut. So they didn’t want to before, and he didn’t want to scare them, but by giving it to the officers first, the other men wanted it, and he said, all right, I guess I’ll let you have it. And it worked out well, and obviously James Cook did some amazing things.

Another ad he shared talking about people already paying for things without realizing, he says, quote, the situation reminds me of the old time Warner and Swassie ad that was a favorite of mine. The ad read, the company that needs a new machine tool and hasn’t bought it is already paying for it. So the idea here is that if you have a machine that’s breaking down and you don’t want to spend the money on it, well, your productivity’s suffering, you’re losing money anyhow. I see this a lot like a website. If you have a website that’s old and tired, you don’t want to spend the money on a new one, that might be okay, but you’re probably losing money from the one you have now and so you’re already paying for.

the new website even though you’re not getting the benefit of it. Same with the company that’s not willing to buy a new machine. They’re spending the money that could go toward a new machine just losing money from the bad one they have so you’re better off generally buying the new machine, building a new website, doing the things you need to do versus losing money and not getting any benefit out of it on the back end. Another thing I’ve kind of related back to our industry with our agency is about less being often more. It’s a little bit longer quote but I really like this. He said, a special version of this

Man with a hammer syndrome is terrible not only in economics, but practically everywhere else including business. It’s really terrible in business You’ve got a complex system and it spews out a lot of wonderful numbers that enable you to measure some factors But there are other factors that are terribly important yet There’s no precise numbering you can put to those factors, you know, they’re important You just don’t have the numbers Well, practically everybody one overweighs the stuff that can be numbered because it yields to the statistical techniques that they’re taught in academia and two Doesn’t mix in the hard to measure stuff that may be more important

This is a mistake I’ve tried all my life to avoid and I have no regrets for having done that. And so I see this a lot with marketing where you get the easy numbers, say, hey, we got 5,000 followers on Instagram or you have 1,300 visitors to your website or just lots of numbers. And it’s not just the simple numbers, but I think it’s just so many numbers. People run reports. You can run reports from Google Analytics that will be pages and pages and pages long. But what’s really a value there? And Charlie’s saying, hey, less can often be more. Find those hard to measure stuff that’s more important and focus on those.

Sometimes the high level stuff can help. If you have more followers on Instagram, that might be worth mentioning, but that’s not really what you wanna know. What’s really happening and digging into that hard to measure stuff can make a big difference and simpler analytics can be better. In our case specifically, we’ve taken our analytics reports for clients and shrunk them down quite a bit. They used to be huge long reports, but that’s just not helpful for anyone. It’s impressive-ish, I guess, but we wanna shrink it and make it just the stuff that’s valuable and it’s kind of a win for everyone. Another area that Charlie hits a lot, he repeats himself as we’ve talked about, is

He talks about having the idea of keeping your ideas stronger than those you’re debating against. He says, quote, I have what I call an iron prescription that helps keep me sane when I drift toward preferring one intense ideology over another. I feel that I’m not entitled to have an opinion unless I can state the argument against my position better than the people who are in opposition. I think that I’m qualified to speak only when I’ve reached that state. And so he’s not willing to take a stand for something unless he can really understand the other side, because I see two advantages to that. One is he may change his position if you reach.

understands the other side even better, he may switch and take that viewpoint because he’s understood it better and knows that’s the place to be or it’ll strengthen his own side because he now understands the pros and cons of it and knows that he’s in a strong place and can argue for what he believes in. It makes you better in every way. If you just say, hey, my position is right, the other side’s probably stupid, that’s not going to get you real far. But if you can say, hey, here’s why they believe that on the other side, here’s why I’m still right or here’s why they believe that on the other side and I think I’m leaning that way, both are good wins for you.

And then lastly, kind of toward the end of the book, he goes through the psychology of human misjudgment. He has a whole bunch of different tendencies that people go through. think he had 23, sorry, 25 tendencies he goes through. I’m not gonna go through all 25. He has a whole section in the back of the book that talks about it. But I thought I’d share just a few that I thought were interesting that really stood out to me. So his third one he had was called the disliking slash hating tendency. The disliking hating tendency also acts as a conditioning device that makes the disliker hater tend to one, ignore virtues and the objective dislike, and two,

Dislike people, products, and actions that merely associate with the object of his dislike. And three, distort other facts to facilitate hatred. So when you dislike or hate something, you’re going to make decisions that aren’t necessarily sound because you dislike them. You need to try to be more objective in a lot of those decisions, knowing you hate something that still may need to support it or use it or take advantage of it, not just ignore it because you hate it. Now, you may have a good reason for hating it that leads to other things, but simply the fact that you hate something doesn’t necessarily mean you should disassociate from it.

Number nine was the reciprocation tendency. I think I probably said that wrong, but I turn next to man’s reciprocated hostility that falls well short of war. Peace time hostility can be pretty extreme, as in many modern cases of road rage or injury producing temper tantrums on athletic fields. The standard antidote to one’s overactive hostility is to train oneself to defer reaction. As my smart friend Tom Murphy so frequently says, quote, you can always tell the man off tomorrow if it’s such a good idea. If you’re mad, you really want to take a raging action against something.

sleep on it for a night, see what happens and maybe you still need to do that tomorrow but often the temper tantrum just isn’t worthwhile. He mentioned temper tantrums on athletic fields and those are often humorous and a little bit sad to see people just getting so crazy about things that are outside of their control or aren’t really big deal and maybe sometimes they are but yeah generally if you sleep on it for a night then decide how bad it is you can do that tomorrow. The 10th he shares is the influence from mere association tendency.

One example he said, instance, a man foolishly gambles in casino and yet wins. This unlikely correlation causes him to try the casino again, or again and again, to his horror detriment. Or a man gets lucky and then odds against venture headed by an untalented friend. So influenced, he tries again what worked before with terrible results. And so yeah, things can happen. Again, good decisions versus good outcomes. We’ve talked about this on the podcast before. You you can make a bad decision like foolishly gambling in casino and it may have a good outcome. That doesn’t mean it was a good decision.

vice versa. And so understanding that, that influence from mere association can be interesting and be very helpful. It’s similar and another quote he says is quote, another common bad effect from the mere association of a person and hatred outcome is displayed in Persian messenger syndrome. Ancient Persians actually killed some messengers whose sole fault was that they brought home truthful bad news, say of a battle lost. It was actually safer for the messenger to run away and hide instead of doing his job as a wiser boss would have wanted it done.

And says, at Berkshire, there’s a common injunction, always tell us the bad news promptly. It is only the good news that can wait. know, none of us want to hear bad news, but the sooner you hear it and the sooner you can start making changes as a result of it, the better. If you were forced just to listen to good news, it’s not going to work well for you in the long run. Jumping ahead to 16, he talks about the contrast and misreaction tendency. Fewer psychological tendencies do more damage to correct thinking. Small scale damages involve instances such as man’s buying an overpriced thousand dollar leather dashboard

merely because the price is so low compared to concurrent purchase of a $65,000 car. And so that’s kind of a tricky thing. you’re a thousand dollars for a leather dashboard is a ton, but if it’s part of your $65,000 purchase, it’s not that much more. And so keeping things in their own scale can be very helpful to not make those mistakes. There are a bunch more here. Again, there’s 25 of those. I’m not going to go through all of them. I think they’re fantastic, but encourage you to check out the book. Again, it’s an enormous book. It’s worth having. have it. I enjoy having it. It’s behind me in my videos with the little stack of books behind me, but

Again, it’s not very readable just because it’s, again, nearly two pounds and like 10 by 10 inches or something like that and lots of side notes and footnotes and stuff throughout. It’s a fascinating book but hard to get through. So I would encourage you to grab the Kindle version or the Audible version and you can just kind of plow through it from end end, take your notes like I have along the way and it’s fantastic. And yeah, that’s all we got from this one. So go check out Poor Charlie’s Almanac and we’ll talk to you soon. Thanks.