Notes on Poor Charlie's Almanack

As long as you are well-prepared, seize a few opportunities, take appropriate action quickly, and do simple and logical things, your wealth will grow tremendously in your lifetime.
The opportunities mentioned above are rare. They usually fall to those who are constantly searching and waiting, full of intellectual curiosity, and passionate about analyzing various different possibilities.
Poor outcomes are acceptable (because some results are not within their control), but being unprepared and making hasty decisions are unforgivable, because these factors can be controlled.
Good ideas are extremely rare—when the timing is in your favor, bet heavily.

Analyze the “ecosystem”
If all of a person’s information is limited to their field of work, then their work will not be done very well.
You must have multiple mental models—because if you can only use one or two, the psychology of human nature shows that you will distort reality until it fits your mental models, or at least until you think it fits your models.
Master all the major psychological models and use them as a checklist to examine the results of various complex systems.

Destroy our own most beloved ideas
Don’t fool yourself, and remember that you are the easiest person for you to fool
Face our personal knowledge deficiencies. You must figure out where your strengths are and must compete within your circle of competence.
Keynes said: “Introducing new ideas is not so difficult; the difficulty is clearing out the old ones.”

I don’t like to be around people who always confidently answer questions they don’t actually understand.
Excellent literary works require readers to think a little to understand them, so they have a deep impact on readers, and you will remember them more firmly. This is the tendency to commitment and consistency. If you use your brain to understand a truth, you will remember it better.

The ideal situation is—we have encountered many such situations—you buy a great company that happens to have a great manager, because management matters.
You can find a few companies whose managers can greatly increase profits just by raising prices—but they haven’t done so yet. So they have untapped pricing power. People don’t need to think to know these are good stocks.
We don’t jump over seven-foot bars. What we look for are one-foot bars with rich rewards on the other side. So the secret of our success is to do simple things, not solve difficult problems.

Conditioned reflex
Humans have a powerful tendency to “monkey see, monkey do,” which psychologists usually call “social proof.” Social proof, imitative consumption caused simply by seeing others’ consumption, can not only make consumers more receptive to our products, but also make consumers feel they are getting more rewards.
Bias from incentive mechanisms. Professional people with this innate cognitive bias will think that what is good for themselves is good for clients and for the entire civilized society.
Man-with-a-hammer tendency. This name comes from the proverb: “To a man with a hammer, every problem looks like a nail.”
Inversion (thinking about problems in reverse)
Pay attention to the combined effect of multiple factors—the lollapalooza effect
If you want to persuade others, appeal to interests, not to reason.
This tendency echoes a lyric: “If the girl I love is not around, I love the girl who is around.” The human brain is limited and imperfect; it is easily satisfied with what is readily available. The brain cannot use what it cannot remember or recognize, because it is influenced by one or several psychological tendencies, such as the guy in the song above who is influenced by the girl around him. So the human brain overestimates the importance of readily available things, thus exhibiting the availability-misweighing tendency.

Our training of pilots follows a strict six-element system. These six elements include:

Teach him comprehensive enough knowledge so that he can master all the knowledge used in flight.
Teach him all this knowledge not just to pass one or two exams, but to enable him to apply this knowledge skillfully, even to handle two or three intertwined complex dangerous situations simultaneously.
Like any good algebraist, he must learn to sometimes use forward thinking and sometimes use reverse thinking, so he can understand when to focus mainly on what he wants and when to focus on situations he wants to avoid.
He must receive training in various disciplines, striving to minimize the possibility of future losses due to incorrect operations; the most important operational steps must receive the strictest training to achieve the highest level of mastery.
He must develop the habit of checking the “checklist.”
After receiving initial training, he must routinely maintain mastery of this knowledge: regularly use flight simulators to prevent knowledge for dealing with rare but important problems from becoming rusty due to long-term disuse.

The correct strategy to avoid doing stupid things because of past successes is:

Carefully review each past success and identify the accidental factors in those successes, so as not to be misled by these factors and exaggerate the probability of success of new planned actions.
Look at what dangerous factors the new action will encounter that did not appear in past successful experiences.