Lessons from Charlie Munger-XV - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Lessons from Charlie Munger-XV

Dec 14, 2012

In the previous article, we discussed how investors can avoid falling prey to the availability-misweighing tendency. Today we shall discuss another important tendency which is not just crucial to investing but almost everything you do in your life.

Use-it-or-lose-it tendency

The name is quite self-explanatory. If you don't use a certain skill, you tend to lose it gradually. The most common example that we all grow up hearing is about our tail bone. Human beings, in their evolution from apes, lost their tails as they stopped using it over time. The same holds true for the various mental and physical skills that we possess.

You may recollect that when you were younger, there were many things you could do very well. But as time passed and you lost touch with those things, the skills have either diminished or have been forgotten completely.

Often, you may not immediately notice that a skill is attenuating. For instance, say a person excelled in Science and Sanskrit when he was in school or college. But on account of a marketing job, he made little use of his knowledge in those subjects. Slowly, over time these skills shimmered away. Each of us can name several such instances.

What can one do to avoid such loss of useful skills? The only way to keep such skills alive is to use them regularly. The importance of regular practice is especially very vital in skills of a very higher order. For example, a Polish pianist called Paderewski once admitted that if he did not practice even a single day, he could notice some deterioration in his performance. And if he did not practice for as long as one week, the audience would also be able to notice the difference.

Similar is the case with aircraft pilots. It is crucial that they remember all the necessary skills that are required while flying, though all of them may not be frequently used. Any deterioration in vital skills can result in destruction of people and property.

Charlie Munger suggests using something that is a functional equivalent of the aircraft simulator employed in pilot training. While investing is not a rocket science, there is no reason to take it too casually. Many people take investing as a side business which can be done without putting in too much time and effort. And that is one of the biggest fallacies. Legendary investors such as Warren Buffett, Charlie Munger and Peter Lynch did not create great fortunes out of thin air. They are known to be rigorous practitioners of their art. They all read extensively and spend a huge amount of their daily routine analysing companies. In other words, by using their mental skills meticulously, they have become successful pilots of the investing world.

We will continue to discuss some more thinking errors and psychological tendencies that can affect your investment decisions in the subsequent articles of this series.

Lessons from Charlie Munger Article Series - Previous article | Next | All Articles
Try the Charlie Munger Quiz

Equitymaster requests your view! Post a comment on "Lessons from Charlie Munger-XV". Click here!


More Views on News

This Number Will Give You an Edge Over Other Traders in the Market (Fast Profits Daily)

Sep 30, 2020

In this video, I'll share with you, a crucial number that I track everyday which gives me trading edge.

Is Mirae Asset Ultra Short Duration Fund a Right Solution for Your Short Term Needs? (Outside View)

Sep 30, 2020

PFN explains about the Mirae Asset Ultra Short Duration Fund.

India's Drone Revolution is a 4x Profit Opportunity (Profit Hunter)

Sep 30, 2020

My research on India's leading defence companies brought me to one major player in drone manufacturing.

The Gold and Silver Bull Market is Not Over (Fast Profits Daily)

Sep 29, 2020

The last few days have been nerve-racking for bullion traders. Stay calm. The bull market still has a long way to go.

Earned Short Term Capital Gains on Shares? Here's What You Need to Know While Filing ITR (Outside View)

Sep 29, 2020

PersonalFN explains CBDT's clarification regarding scrip wise disclosure in ITR in case of short term capital gain.

More Views on News

Most Popular

Top Investing Gurus of India

Investing gurus are the champions of value investing. These are the people who've mastered the art of compounding wealth from...

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

I Believe These Stocks Will Deliver the Most Outsized Returns in 2021 and Beyond (Profit Hunter)

Sep 23, 2020

Rules of the racetrack can help you bag the biggest gainers of the coming decade.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Oct 1, 2020 09:49 AM