Before a Big Decision, Consider the Cross-Disciplinary Thinking in Munger's 11 Speeches

Relying on only one or two models leads people to distort reality to fit the model. According to Farnam Street's write-up, this was the position Charles T. Munger put forward in his 1994 speech at the University of Southern California (USC) business school, "A Lesson on Elementary Worldly Wisdom".

The book, whose full title is Poor Charlie's Almanack: The Essential Wit and Wisdom of Charles T. Munger, is published by Stripe Press and edited by Peter D. Kaufman. The 2023 edition is a reissue of the 2005 original, with a new foreword by Stripe co-founder John Collison.

First, what kind of book it is: a collection of speeches. Stripe Press's official page describes it as a collection of 11 Munger speeches. A review published on 30 November 2023 by the CFA Institute's Enterprising Investor says the book opens with three introductory chapters, a profile of Munger's life, recollections from his children and an overview of his approach to decisions, followed by 11 speeches given between 1986 and 2005.

The latticework of mental models: hanging facts on a framework

The CFA review discusses the concept of a "latticework of mental models", saying Munger used it to explain Berkshire's success and stressed that it was not a secret formula but a way of examining assumptions and downside risk from several angles.

In his 1994 speech, he argued that facts must be hung on a framework made up of multiple models. According to Farnam Street, the models mentioned in the speech come from several disciplines:

• Mathematics: compound interest, permutations and combinations, decision trees, probability
• Engineering and physics: backup systems, critical mass
• Biology
• Psychology: the psychology of misjudgement
• Microeconomics: economies of scale, circle of competence

The CFA review also notes that Munger criticised universities for dividing teaching by subject.

Inversion: first ask how things would fail

The CFA review quotes the mathematician Carl Jacobi, "invert, always invert", to stress managing downside risk. Farnam Street's mental models page describes inversion as asking "how would I guarantee failure", and then avoiding those common paths to failure.

Other people's mistakes as teaching material

The 1994 speech uses cases such as Westinghouse, CBS, Sears and the Nifty-Fifty stocks as warnings. These cases can be read as examples of "learning from others' mistakes", but note that this is our own characterisation: Farnam Street points out that the speech itself does not use that phrase.

When several biases strike at once

The CFA review says Munger used the term "lollapalooza effect" to describe multiple biases, effects or models interacting at the same time to produce a compounded result.

Where the book falls short

The review is not uniformly glowing. The CFA review also points out that Munger's writing style may seem dated, that his examples are mostly male, and that his admiration for Jack Welch has since been questioned by other books.

A borrowed decision checklist (compiled by the editors)

The checklist below was compiled by this publication from the points above. It is not a set of steps listed by Munger himself. Before your next decision to change jobs, buy a home, move house or commit a large sum of money, you can ask yourself, one item at a time:

1. Am I looking at this from only one angle? Try at least three, such as mathematics, psychology and economics.
2. If I wanted this decision to fail for certain, what would I do? List the answers, then avoid them one by one.
3. What is the worst case? Of my assumptions, which one would cost the most if it were wrong?
4. Has anyone made a similar decision and failed? At which step did they go wrong?
5. Are several biases pushing me in the same direction right now?
6. Is this within my circle of competence? If not, who understands it better than I do?

This checklist does not guarantee that every decision will be right. It simply offers a few more angles from which to examine a major decision before you make it.

Prices and details correct as of October 2026

Compiled by the F50 Editorial Team from public sources, for general reference only and not professional advice. Details are correct as of the publication date and may change.