Enoch Ko's Blog

Should You Install Email on Your Smart Phone? No. It's a Poor Competitive Advantage and Does Not Improve Productivity.

2011-11-23T00:00:00.000+11:00

A friend recently asked me whether she should install work email on her smart phone. Here is an edited version of my response with additional notes:

The reason you'll want to set up work email on your phone is (1) to satisfy management expectations and/or (2) to improving productivity.

(1) Management Expectations:
1. Do you currently check email when you're not at work?

2. Is there an expectation that you respond to emails within 30-60 minutes, even if outside office hours?

NB: If your company wants you to be available at all times, they'll give you a phone with email already setup.

Unless your manager or (for businesses) your clients expect that you respond promptly to emails at all times, you won’t need to (and shouldn’t be) constantly checking your email. Doing the work is generates value - checking email doesn’t.

Of course, if you’re providing time-critical and mission-critical products and services, you better be there when they call! But you shouldn’t make prompt response time your primary competitive advantage - because it is not a sustainable competitive advantage. Inevitably, someone else will do it faster. Don’t turn intellectual work into factory work.

Become significantly better than anyone else at something unique. focus on your comparative competitive advantage - that's what businesses do. Manage yourself like you would for a business and build your personal value proposition.

(2) Improve Productivity:
1. If you receive an email on your phone, will you be able to take action directly on the phone immediately? Think about most of the emails you currently receive - will you have to wait until you finish whatever you're doing (meeting, etc.) and get back to your desk to take action?

If you can't do anything about the email other than know that you've received it, that does nothing to improve your productivity and will only increase your cognitive load/stress.

Being aware of what you need to do does not increase your productivity. Being productive is about doing valuable work.

2. If you receive an email on your phone, is it likely to be interrupting any other productive activity? If it'll likely be disrupting other productive activities, you must weight the importance of work being done and email received at such moments (think in terms of probabilities/probability distribution).

Research has shown that multitasking reduces productivity. Adding email to your phone means you will be frequently distracted from whatever you are currently doing and your productivity will decrease.

If necessary, give others your mobile number so people can contact you for urgent and important matters. Because it is impossible to know whether an email recipient has read an email, important and urgent matters should not be communicated via email.

Enoch Ko is an accountant based in Melbourne, Australia.
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Enoch Ko's No BS Guide to Personal Finance & Entrepreneurship

2011-10-23T13:22:00.000+11:00

Sir Richard Branson and Tim Ferriss spoke this weekend at the 21st Century Financial Education Summit in Melbourne and they were fantastic! But most other speakers mainly talked fluff and gave hard-to-implement BS advice in order to sell their products.

I have a very low tolerance for fluff and BS. So here’s my “No BS Guide to Personal Finance & Entrepreneurship”!

Who Is This For?
This guide is for beginners - people who have just started learning about personal finance and entrepreneurship. It’s for those who are sick of the bullshit no-substance advice and products being flogged at the 21st Century Financial Education Summit.

This guide is for those who want to take immediate action and get real results towards success and becoming financially educated.

Automate Your Personal Finances
No one keeps a budget or keep track of their expenses. Even though I’m an accountant & a finance geek who track my finances, I still automate my personal finance because it gives me the peace of mind that I will have enough money for the rent at the end of every month and I will be able to pay all my utility bills that come once every 2-3 months. I don’t have to worry whether I’ll be able to afford to service my car and pay car insurance because they’re all taken care of!

This is an actionable idea that you can implement IMMEDIATELY! Unlike the products being hawked at the summit, you don’t need any capital or any significant amount of research to do this. Get started by reading Ramit Sethi’s guide to automating your personal finances.

For Australian readers, here are the bank accounts I personally use:

NAB Classic Banking - everyday banking with no monthly account fees!
NAB iSaver - temporary parking account for my salary and general expenses (not an essential account to have, but I use this in my automatic cash flow system).
UBank - no-fee high-interest savings account that supports up to 10 sub-accounts for you to allocate funds to different areas. This is where I allocate money for rent, utilities, car, education, savings, emergency funds, discretionary expense, etc.

Do you have a question on how to automate your personal finances? Email me!
contact [at] enochko (dot) com

Buying a House
Real estate is outside my area of expertise, but I recommend checking out Ramit Sethi's fantastic collection of articles on buying a house!

Recommended Reading on Personal Finance
I Will Teach You To Be Rich - by Ramit Sethi
The title of the book sounds like a scam, but I guarantee that it is NOT a scam and is very educational and enlightening. This book is structured as a 6-week program to get your personal finances in order. In particular, I would recommend reading week 1 on credit cards, week 4 on conscious spending, week 5 on automatic money flows, and week 6 on investing choices.

Still worried? Check out excerpts from the book here - Introduction & Chapter 1: Optimize Your Credit Cards.

A word of warning - the chapter on investment accounts is contains US-based information, such as 401(k), Roth IRA, etc. Those specific accounts may not be relevant for Australian and other international readers, but the principles still apply.

Entrepreneurship and Starting Your Own Business
If you are just starting out and have absolutely no ideas about businesses, the language of business can be quite overwhelming. There are, literally, tens of thousands of books and millions of articles you can read online.

The curse of expertise means that I can’t really say where a beginner should begin learning about business. My knowledge came from reading over 50 books, hundreds of magazine articles and thousands of online articles and blog posts and accumulated business knowledge through half a decade of practical experience. I can’t possibly remember the point when I started to understand business.

That said, if you can only read ONE book, I would recommend The Personal MBA by Josh Kaufman. He has distilled the building blocks of business into hundreds of 2-3 page easy-to-understand mental models. Josh’s book covers everything from “what is a business?” to marketing, sales, finance, psychology and systems. Once you get the big picture about business, you can dive in read further to develop in-depth knowledge in each area.

This book will help you even if you don’t want to starting your own business. Businesses are the primary driving force in our economy. Even if you have no interest in starting your own business, understanding how businesses work will help you understand how the world works.

Recommended Books for Australia and New Zealand
If you are a reader from Australia and New Zealand, Amazon UK is currently offering FREE shipping for purchases over £25 (offer ends October 31st, 2011). To buy the books I recommended, use these links to go to Amazon UK:

I Will Teach You to be Rich - £9.09
The Personal MBA - £9.09

These 2 items add up to £18.18. If you have a book costing over £6.82 that you want to buy, you’ll be able to reach £25 to qualify for the free shipping. Compare prices with Amazon US, you may save more buying from Amazon UK due to the high shipping costs from US.

If you don’t have any particular book you want to buy on Amazon UK, then I would recommend buying The Boglehead’s Guide to Investing (£11.69) to learn about investing in shares.

Recommended Blogs
If you read blogs, I recommend using Google Reader to subscribe to RSS feed from blogs. If you don’t want to use a RSS reader like Google Reader, then you can subscribe via email.

I Will Teach You To Be Rich - by Ramit Sethi.
Seth’s Blog - by Sethi Godin.
A VC - by Fred Wilson. In particular, I recommend reading his Monday MBA series.
Paul Graham’s Essays.

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Enoch Ko - Me! I share useful articles on business.
Ramit Sethi - Personal finance, entrepreneurship, psychology and behavioural change.
Daniel Pink - Author of Drive, posts lots of useful links.

Want More?
Like what you’ve read? Interested in reading more? Sign up to my mailing list now!

I publish my recommended reading for entrepreneurs every week. I have a soft cap of 5 articles per week, so you won’t be overwhelmed with things to read.

Note that my recommended reading may be quite advanced - I pick them for people who are entrepreneurs and run their own business. But even if you are a beginner and you don’t fully understand the articles, they are still useful for you - because they tell you where the gaps in your knowledge are so you can go fill in those gaps!

If you are interested in starting your own business, please complete this survey and I will contact you for a free consultation to help you get started.

If you already operate your own business but don’t know how to take it to the next level, email me with your details for a free consultation:
contact [at] enochko (dot) com

Enoch Ko is an accountant based in Melbourne, Australia.
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Losers Have Goals... Winners Have Systems!

2011-10-08T00:55:00.002+11:00

“My philosophy is that losers have goals and winners have systems.”

- Scott Adams

I would extend idea that to business.

Dumb businesses have goals, and smart businesses have systems.

Why are Systems Superior to Goals?

“I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”

- Warren Buffett

Goals prescribe the desired outcomes, but it depends on the quality of the people's performance to create that outcome.

Fool-proof systems produce the desired outcomes regardless of the people who may stand in the way or mess things up.

Delivering Consistent Customer Experience
In The E-Myth, Michael Gerber described experience at a barbershop versus his experience at a hotel.

His experience at the barbershop changed every time he went to the shop. There was no consistency of experience. On the other hand, the hotel had systems that created a consistently high quality customer experience for him.

If you want to wow and enchant your customers, like the Apple store for example, you better create systems to consistently deliver that experience to your customers.

Producing High Quality Products and Services
ISO 9001 is arguably the most globally recognised quality management systems standard.

Part of standard requires you to have systems and procedures to deal with everything from product development to manufacturing to customer interaction.

The result of having systems specified by ISO 9001 is that you can be assured of the quality of your products and services delivered and, should any problems arise, you will have the systems and processes to resolve them.

Liberating Yourself from the Business
Tim Ferriss started a sports nutrition company to escape corporate life - only to end up working 80+ hour work weeks and feeling miserable. It took a nervous breakdown for him to use the 80/20 principle to focus his business and delegate responsibilities to assistants. With that breakthrough, he was able to live and breathe The 4-Hour Workweek.

As Michael Gerber said in The E-Myth, most people who start businesses are Technicians - people who are great at doing the technical work. But to be an Entrepreneur, you will need to creating sustainable business systems, take yourself out of the business and have other people work your system. You need to work ON your business, not IN it.

Once you have a business system in place and liberated yourself from the business, you can franchise your business, sell your business, or just kick back and watch your business systems runs itself.

How to Create Systems for Your Business?
I highly recommend reading The 4-Hour Workweek and The E-Myth Revisited. I also recommend reading The Checklist Manifesto to learn how checklists can help you fool-proof your systems - they even helped the best hospitals with highly skilled surgeons avoid errors!

Are you struggling with creating, implementing or optimising systems for your business? Just drop me an email - contact [at] enochko (dot) com - tell me what you are struggling with and I will see how I can help.

I will be more than happy to share my experiences in creating and optimising business processes and in implementing ISO 9001 quality management systems.

Enoch Ko is an accountant based in Melbourne, Australia.
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How Entrepreneurs Maximize Their Chance of Success by Minimizing Risks and Making Small Bets

2011-09-18T11:33:00.003+10:00

Most startups and small businesses fail in the first few years of operation. So how do entrepreneurs survive such terrible odds?

According to Michael Ellsberg, author of The Education of Millionaires, entrepreneurs experiments and make many small bets to survive long enough for them to get lucky. The key is making small bets with non-lethal risks so that they don’t get wiped out by failures!
This is not a new idea.

In sales, it’s called planting many seeds - because of the 100:10:1 sales funnel ratio. You might have to generate and contact 100 leads to find 10 prospects, out of which one might turn into a client.

In investing, it’s called diversification. Prudent investors diversify across different stocks and bonds and across asset classes.

No matter where you work, be it working in a traditional job or working on your own business, you are investing your time and energy. So the question becomes: “Are you making a good investment?”

Entrepreneurs diversify their investment of time and energy by constantly experimenting, testing and learning.

How to Experiment in Your Business
If you have a product idea, you can test whether there’s a market for that online through Google AdWords cheaply. Use the rapid prototyping approach and attempt to sell your minimum viable product to potential customer. This way, you minimize your risk by first seeing whether customers are actually going to buy the product. You can always make changes and improve your product later, but you can’t undo huge investments into a product no one wants.

If you have a service idea, speak with your "colleagues" in different geographical areas (i.e. non-competitors) and they can provide you with valuable insights. Speak with potential clients and see whether they are willing to pay for your services. By micro-testing through market research, you can find yourself a profitable niche. That is better than spending lots of time and resources making business cards, building websites, etc. before realising no one in that target market will buy your services.

Even for an established business, there is always room to experimentation. You can experiment on your pricing structure. You can experiment on your marketing copy and landing page.

Whatever it is that you do, minimize your risk by experimenting. That will minimize your risk of a massive debilitating failure and maximize your chance of success.

Need ideas on how to experiment on your business? Shoot me an email!

P.S. You can download the Introduction and Chapter 1 (PDF file) of Michael Ellsberg's new book The Education of Millionaires free of charge!

If It Won't Fit On A Post-It, It Won't Fit In Your Day :: Tips :: The 99 Percent

2011-08-14T06:00:00.001+10:00

Have you ever had a to-do list that was so long it felt like you'd never get to the end of it? Or have you ever started the day with a manageable list, but by the end of the afternoon it was longer than when you began – because of all the things that got added during the day? Too many days like this, and your to-do list starts to look like a wish list.

This was a familiar scenario to me a few years ago. It was compounded when I started using digital to-do list managers, which enabled me to create a literally endless to-do list. However much I prioritized, however hard I worked, I always seemed to end the day with a longer list than I started with.

The solution turned out to be counterintuitive: I got more done by making my to-do list shorter.

One of my most valuable productivity tools is a stack of Post-It notes. Not the smallest size, but the 3" x 3" squares. The top Post-It contains my to-do list for today, and today only. Because my day is a limited size, I figure it makes sense to limit the size of my to-do list. If I can't fit the day's tasks on the Post-It, I'm not likely to fit them into the day.

Because my day is a limited size, I figure it makes sense to limit the size of my to-do list.

The top left corner is reserved for the “One Big Task” I need to accomplish today. It could be an article, a presentation, a training plan, a client proposal, or the draft of a poem. As I wrote in The Key to Creating Remarkable Things, I start the day by devoting my full creative energy to the most important task on my list. The rest of the Post-It is taken up with everything else I have to do today, roughly in order of priority.

And once I've finished the to-do list, I've finished work for the day. As a self-employed creative workaholic, after years of feeling there was always something else to do at the end of the day, I can assure you this is a magical feeling.

But what about all the rest? All the phone calls, emails, and requests that come in during the day? Not to mention all the new ideas that pop into my head as I work? Good question. There's a place for all of these things, and that place is the second Post-It on the stack, a.k.a. my to-do list for tomorrow. Unless something is seriously urgent AND important (e.g. an emergency request from a client) then I never add anything to today's list once I've finalized it first thing in the morning.

This is a variation on the Do It Tomorrow approach to productivity advocated by Mark Forster in his book of the same name. Mark draws a distinction between “open” and “closed” lists. The endless to-do list I described at the beginning of this article is an open list, because new items can always be added to it. The to-do list on my Post-It is a closed list, because it's finite in size and I don't add anything new to it.

Unless something is seriously urgent AND important then I never add anything to today's list.

Mark points out that we are more motivated to work on a closed list than an open one. If I know that I have 20 things to do today, and I do the first one, then I only have 19 left, and I feel like I'm making progress. But if I work through five items and then another six are added to the list, then I feel like I'm going backwards. And it's hard to muster much enthusiasm for going backwards.

Two great things about my Post-It system are that, firstly, it forces me to think hard about my priorities at the beginning of each day. Every item has to earn its place on that list, so it keeps me disciplined about doing the most important things. And secondly, when I start work I know - barring emergencies - exactly what I need to get through today. If it's a full day, I can see that at once, and it spurs me on to do more and waste less time. And if it's a relatively quiet day, then I get to use the extra time creatively.

Obviously your mileage will vary depending on the nature of your job and working situation. If you're working in a fast-moving agency and it's part of your core role to handle incoming requests and turn them round immediately, then you'll need to be more flexible than me. Although having consulted with a few agencies like that, I'd say that if everything is urgent, nothing is urgent: you can't do everything at once, so you still need to prioritize. And a short to-do list with very strict criteria about what gets on it is a great way to do that.

--

How Big Is Your Day?

How do you manage your daily to-do list?

Could you get more done with a shorter list?
--

Mark McGuinness is a poet and a coach for artists and creatives. For a free 6-month education in how to succeed as a creative professional, sign up for Mark’s course The Creative Pathfinder.

via the99percent.com

This seems to be a great idea - a closed-loop to do list! It works in terms of creating the feeling of making progress and, thus, promoting productivity. However, for now, I will stick with GTD because I know it works for me.
One feature of GTD that is lacking with this "Post-It" method is the "waiting for/delegated" list. A lot of things I do depend on other people's input of data/paperwork, and my "waiting for" list helps me keep on top of what I need from everyone else. Without the "waiting for" list, I'll have a bunch of things "to do" that I can't do anything about because I'll still have to wait for other things to come in!

Posted via email from Enoch Ko's posterous

What are some examples of products or services that are priced by value rather than by cost? - Quora

2011-06-12T20:30:00.001+10:00

Peter Baskerville, Set prices for 1,000's of products.

31 votes by Gregory Farber, Ramit Sethi, Xander Pollock, (more)

The following are examples of attributes that allow products to be priced according to their perceived customer value, rather than having their price determined only by calculations relating to their production/accounting cost. Customers purchasing products with these attributes are totally focused on satisfying a need and push the price attribute well down the list of considerations. Customers value and will pay more for these product attributes:

Urgency - example ... Fedex "When it absolutely, positively has to be there overnight" or the 1hr photo processing being twice the price of the 24hour processing.

Self-esteem - example ... brand name bags like Prada and Louis Vuitton or products aligned with the latest fashion, the latest social cause or the latest tech. innovation.

Pain relief - example ... road side vehicle breakdown service like RACQ in Queensland Australia or the locksmith that opens the door for a person that has locked themselves out of their apartment at 11:00pm at night.

Fear mitigation - example ... every insurance product and the 'stock in trade' product for most legal services.

Scarcity - example ... Hot chips or beer at the football where there is only one outlet selling inside the stadium and it would be too inconvenient to leave the stadium to find something cheaper.

Quality sounding name - example ... "Royal Reserve" in wine, "Gold Class" in movie tickets, "Platinum service" for online subscription or any product name that sounds expensive or luxurious.

High emotional experiences - example ... all wedding products, special anniversary products like 'top-end' restaurant meals, exotic travel or adrenalin-rush products.

One shots - example ... services relating to 'openings' or product/business launches like Mercedes latest car launch, this year's sport final, a one-off entertainer appearance, a famous band's last tour.

Vital small cogs - example ... ENZED rubber hose replacement on expensive machinery in Australia or any small vital product that maintains the operation or function of a larger more expensive machine or operation.

Sentimental value - example ... photos of your daughter's graduation or photos from a memorable cruise or any products that provide great sentimental value for the customer.

Indulgence - example ... a shop called 'Death by chocolate' that sells products that fully honor its name or a pampering day-spar for women.

Products that fit in the categories above should not be priced according to their accounting' costs but should rather be priced according to the perceived value that they deliver to the customer - I call these additional margins "subjective margins" because the margins are achieved with a minimal increase in the underlying costs. I believe at least one of these product attributes should be included in every entrepreneur's startup business model.

via quora.com

Want to make a better-than-healthy margin? Sell products with these attributes.

Posted via email from Enoch Ko's posterous

Compact Calendar 2011 (Australian Version - Victoria)

2011-02-17T14:50:00.001+11:00

"The Compact Calendar is a printable calendar in an Excel spreadsheet, designed to be easy to use for impromptu planning by yourself or with a group of people." - David Seah

I have localised David Seah's Compact Calendar for my personal use - but since this is quite a useful calendar to have (e.g. for creating instant vertical Gantt charts), I thought I would share my Australian (VIC) localisation with the Internet.

Download them here:
- Compact Calendar 2011 (Australia - VIC) Weeks starting on Mondays (with ISO8601 week number)
- Compact Calendar 2011 (Australia - VIC) Weeks starting on Sundays (no ISO8601 week number)

My localisation is based on the State government's Victorian Public Holiday Dates page and calculation formulas are based on Wikipedia's Public holidays in Australia page.

For those wanting to localise the calendar's holiday tables for other states and territories, here's a link list of public holidays in all Australian states and territories.

MythBusters Adam Savage's Problem Solving Checklist

2010-07-03T12:45:00.000+10:00

Here's the problem solving checklist Adam Savage (of MythBusters) presented in his talk "Problem Solving: How I Do It" (link to video @ Fora TV) at Maker Faire 2010.

Some have complained that his talk was boring, but I found it oddly satisfying to know that he uses checklists - much like doctors, pilots, and investors.

MythBusters Adam Savage's Problem Solving Checklist

What is the problem I'm solving?
- Be clear on what problem it is - Jamie's "drill a hole on the X" test.
What is the big picture?
Where does the problem I'm currently solving fit into the larger array?
- Is it a singular problem or part of something bigger?
- How does it fit in?
- Can you see the whole picture?
- How will it relate to other things?
How much time do I have?
- Is there a deadline?
- Is there a way to make this process faster?
How am I doing now?
- How much time do I have now?
- How much time do I have left?
- Where am I now in terms of the goal I'm going to reach?
- How precise do I have to be?
What is my rhythm and how does that fit in to this project?
What are my resources?
- Budget:
  - Is there a budget?
  - Do you have control over the budget?
  - If I do, how much latitude do I have?
  - If it's my money, how much is that project worth to me?
- Facility/Location
  - Does the place I'm working, that I'm solving this problem in, help or hinder the process?
- People
  - How many people do I have?
  - Is the team big enough?
  - Is the team too big?
  - What is their morale like?
  - Do I have all the skill necessary?
  - Do I have a realistic understanding of what my skill level is for the problem I'm about to solve?
    - If I'm not very good at something, is there enough time for me to get good at it to finish it?
    - Do I have to farm it out?
    - How long is that person going to take?
How important is this particular step?
How important is it that I get it right?
- Can I screw it up?
- Do I only have one chance to get it right?
Is my machine deteriorating?
- Myself, or the tools that I'm using?
Is this a step that I might be able to improve later, so that what I'm building is a stand-in for my solution?
Am I missing something stupid?
- Am I being too clever?
- Is there a simpler way?
Am I sure about how what I'm doing fits in to the larger picture?
- How does this part fit in to the whole?
What does the whole picture look like now that I've solved this specific part?
How much time do I have now?
What's the next project?

Photo from Inkyhack.

我的老师：查理·芒格 | My Teacher: Charlie Munger (Chinese-English Bilingual Version)

2010-06-20T02:09:00.003+10:00

Translator’s note: I have attempted to balance maintaining the author’s original style of writing and making a grammatically correct English translation. Obviously, a word-for-word translation would have serious readability issues. As such, I have rewritten Chinese idioms and broken up a few excessive run-on sentences. For those places where I think the peculiarity of the language is still "understandable enough", I have left them as is.

Source: http://www.iceo.com.cn/ttiao/2010/0521/194188.shtml (HT Shai Dardashti from Reflections on Value Investing for finding this article.)

【周末】我的老师：查理·芒格
【Weekend】My Teacher: Charlie Munger

作者 | Author：Li Lu
2010年05月21日 | May 21, 2010
来源：《中国企业家》| Source: “Chinese Entrepreneurs”

【《中国企业家》杂志】20多年前，作为一名年轻学生只身来到美国，我怎么也没有想到后来竟然从事了投资行业，更没想到机缘巧合有幸结识了当代投资大师查理·芒格先生。2004年，芒格先生成为我的投资合伙人，自此成为我终生的良师益友。这样的机遇恐怕是过去做梦也不敢想的。
【"China Entrepreneur" Magazine】Twenty years ago, as a young student coming to the United States, I couldn’t have imagined having a career in investments and would never have thought that I’d be fortunate enough to meet with the contemporary investment guru, Mr. Charlie Munger. In 2004, Mr. Munger became my investment partner and has since become my lifelong mentor and friend -- an opportunity I would have never dared to dream about.

1996年我从哥伦比亚大学毕业，并于1997年创立我的投资公司，自此开始了我的职业投资生涯。从那时到现在，绝大多数个人投资者和机构投资者在投资理念上基本上还是遵从一些“坏理论”。比如他们相信市场完全有效理论，因而相信股价的波动就等同真实的风险，判断你的表现最看重你业绩的波动性如何。而在我看来，投资股市最大的风险其实并不是价格的上下起伏，而是你的投资未来会不会出现永久性的亏损。单纯的股价下跌不仅不是风险，简直就是机会。不然哪里去找便宜的股票呢?然而我发现，表面上那些成名的基金经理接受巴菲特/芒格的理论，而且对他们表现出极大的尊重，但在实际操作上却根本是南辕北辙，因为他们的客户也是南辕北辙的。他们接受的还是一套“波动性就是风险”、“市场总是对的”这样的理论。
I graduated from Columbia University in 1996 and founded my investment company in 1997, thus starting my professional investment career. Till this day, the vast majority of individual investors and institutional investors still follow investment philosophies that are based on "bad theories." For example, they believe in the efficient market hypothesis, and therefore believe that the volatility of stock prices is equivalent to real risk, and they place a strong emphasis on volatility when they judge your performance. In my view, the biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital. Not only is the mere drop in stock prices not risk, but it is an opportunity. Where else do you look for cheap stocks? But I found that while, on the surface, famous fund managers appear to accept the theories of Buffett and Munger and show great respect for their performance, they are in actual practice the exact opposite because their clients are also the exact opposite to Buffett and Munger. They still accept the theories that say "volatility is risk" and "the market is always right."

一个偶然的契机，我遇到了终生的良师益友查理·芒格先生。
A serendipitous opportunity led me to meet my lifelong mentor and friend, Mr. Charlie Munger.

初识查理是我大学刚毕业在洛杉矶投行工作时，在一位共同朋友的家里第一次见到了查理。记得他给人的第一印象是拒人于千里之外，他对谈话者常常心不在焉，非常专注于自己的话题。但这位老先生说话言简意赅，话语中充满了让你回味无穷的智慧。
Charlie and I first met at a mutual friend’s house while I was working on investments in LA after graduating from college. The first impression he gave me was “distant” -- he often appeared to be absent-minded to the presence of his conversation partners and was, instead, very focused on his own topics. But this old man spoke succinctly; his words full of wisdom for you to mull over.

直到我们认识的第七年，在2003年一个感恩节的聚会中，我们进行了一次长时间的推心置腹的交谈。我将我投资的所有公司，我研究过的公司以及引起我兴趣的公司一一介绍给查理，他则逐一点评。我也向他请教我遇到的烦恼。谈到最后，他告诉我，我所遇到的问题几乎就是华尔街的全部问题。整个华尔街的思维方式都有问题，虽然伯克希尔·哈撒韦已经取得了这么大的成功，但在华尔街上却找不到任何一家真正模仿它的公司。如果我继续这样走下去的话，我的那些烦恼永远也不会消除。但我如果愿意放弃现在的路子，想走出与华尔街不同的道路，他愿意给我投资。这真让我受宠若惊。
Seven years after we’ve known each other, at a Thanksgiving gathering in 2003, we had a long heart-to-heart conversation. I introduced every single company I have invested in, or researched, or am interested in to Charlie and he commented on each one of them. I also asked for his advice on the problems I’ve encountered. Towards the end, he told me that the problems I’ve encountered were practically all the problems of Wall Street. The problem is with the way the Wall Street thinks. Even though Berkshire Hathaway has been such a success, there isn’t any company on Wall Street that truly imitates it. If I continue on this path, my worries will never be eliminated. But if I was willing to give up this path right then, to take a path different from Wall Street, he was willing to invest. This really flattered me.

在查理的帮助下，我把(我创建的)公司进行了彻底的改组。在结构上完全改变成早期巴菲特的合伙人公司和芒格的合伙人公司(注：巴菲特和芒格早期各自有一个合伙人公司来管理他们自己的投资组合)那样的结构，同时也除去了典型对冲基金的所有弊端。愿意留下的投资者作出了长期投资的保证，而我们也不再吸收新的投资人。
With Charlie’s help, I completely reorganized the company I founded. The structure was changed into that of the early investment partnerships of Buffett and Munger (note: Buffett and Munger each had partnerships to manage their own investment portfolios) and all the shortcomings of the typical hedge funds were eliminated. Investors who stayed made long-term investment guarantees and we no longer accepted new investors.

我于是进入到投资生涯的又一个黄金时期。我无须再受华尔街那些投资者各式各样的限制。虽然数字依然上下波动，但最终结果却是大幅度的增长。新的基金从2004年第四季度至2009年底，除去营运成本外，每年的复合回报率超过36%。而自1998年1月原基金创建开始计算，每年的复合回报率则超过29%。12年间，回报增长超过20倍。
Thus I entered another golden period in my investment career. I was no longer restricted by the various limitations of Wall Street. The numbers still fluctuate as before, but eventual result is substantial growth. From the fourth quarter of 2004 to the end of 2009, the new fund returned an annual compound growth rate of 36% after deducting operating costs. From the inception of the fund in January 1998, the fund returned an annual compound growth rate in excess of 29%. In 12 years, the capital grew more than 20 folds.

巴菲特说他一生遇人无数，从来没有遇到过像查理这样的人。在同查理交往的这些年里，我有幸能近距离了解查理，也对这一点深信不疑。甚至在我所阅读过的古今中外人物传记中也没有发现类似的人。查理就是如此独特的人，他的独特性既表现在他的思想上，也表现在他的人格上。
Buffett said that, despite the countless people he has met in his life, he has never encountered anyone else like Charlie. And in the years that I’ve known Charlie, and was fortunate to be able to intimately understand him, I am also deeply convinced that. Even from all the biographies of people from all ages, I have yet to see anyone similar to him. Charlie is such a unique man -- his uniqueness is in his thinking and, also, in his personality.

查理思考问题总是从逆向开始。如果要明白人生如何才能得到幸福，查理首先会研究人生如何才能变得痛苦;要研究企业如何做强做大，查理首先研究企业是如何衰败的;大部分人更关心如何在股市投资上成功，查理最关心的却是为什么在股市投资上大部分人都失败了。他的这种思考方法来源于下面这句农夫谚语中所蕴含的哲理：我只想知道将来我会死在什么地方，这样我就永远不去那儿了。
When Charlie thinks about things, he starts by inverting. To understand how to be happy in life, Charlie will study how to make life miserable; to examine how business become big and strong, Charlie first studies how businesses decline and die; most people care more about how to succeed in the stock market, Charlie is most concerned about why most have failed in the stock market. His way of thinking comes from the saying in the farmer’s philosophy: I want to know is where I’m going to die, so I will never go there.

查理持续不断地收集并研究关于各种各样的人物、各行各业的企业以及政府管制、学术研究等各领域中的著名失败案例，并把那些失败的原因排列成作出正确决策前的检查清单，这使他在人生、事业的决策上几乎从不犯重大错误。这点对巴菲特及伯克希尔50年业绩的重要性是再强调也不为过的。
Charlie constantly collects and researches the notable failures in each and every type of people, business, government, and academia, and arranges the causes of failures into a decision-making checklist for making the right decisions. Because of this, he has avoided major mistakes in his decision making in his life and in his career. The importance of this on the performance of Buffett and Berkshire Hathaway over the past 50 years cannot be emphasized enough.

查理的头脑是原创性的，从来不受任何条条框框的束缚，也没有任何教条。他有儿童一样的好奇心，又有第一流科学家所具备的研究素质和科学研究方法，一生都有强烈的求知欲，几乎对所有的问题都感兴趣。任何一个问题在他看来都可以使用正确的方法通过自学完全掌握，并可以在前人的基础上进行创新。他的思想辐射到事业、人生、知识的每个角落。在他看来，世间宇宙万物都是一个相互作用的整体，人类所有的知识都是对这一整体研究的部分尝试，只有把这些知识结合起来，并贯穿在一个思想框架中，才能对正确的认知和决策起到帮助作用。所以他提倡要学习在所有学科中真正重要的理论，并在此基础上形成所谓的“普世智慧”，以此为利器去研究商业投资领域的重要问题。
Charlie's mind is original and creative, never subject to any restrictions, shackles, or dogmas. He has the curiosity of children and possesses the qualities of a top-notch scientists and their scientific research methods. He has a strong thirst for knowledge throughout his life and is interested in practically all areas. To him, with the right approach, any problem can be understood through self-study, building innovations on the foundation laid by those who came earlier. His thinking radiates out to every corner of business, life, and [areas of] knowledge. In his view, everything in the universe is an interactive whole, and all of human knowledge are just pieces to the study of the comprehensive whole. Only by combining of these knowledge through a latticework of mental models can they become useful in decision-making and in developing the proper understanding of things. So he advocates studying all the truly important theories in all disciplines, and building on this foundation the so-called “worldly wisdom” as a tool for studying the important issues in business and investments.

查理这种思维方式是基于对知识的诚实。他认为，这个世界复杂多变，人类的认知永远存在着限制，所以你必须使用所有的工具，同时要注重收集各种新的可以证否的证据，并随时修正，即所谓“知之为知之，不知为不知”。
Charlie’s way of thinking is based on being honest about knowledge. He believes that in this complex and changing world, there will always be limitations to human cognition and understanding, so you must use all the tools at your disposal. And, at the same time, you must constantly collect new verifiable evidences, correcting and updating your knowledge, and knowing what you know and what you don’t know.

但即使这样，一个人在一生中可以得到的真知灼见仍然非常有限，所以正确的决策必须局限在自己的“能力圈”以内。一种不能界定其边界的能力当然不能称为真正的能力。怎么才能界定自己的能力圈呢?查理说，如果我要拥有一种观点，如果我不能够比全世界最聪明、最有能力、最有资格反驳这个观点的人更能够证否自己，我就不配拥有这个观点。所以当查理真正地持有某个观点时，他的想法既原创、独特，又几乎从不犯错。
But even so, the true insights a person can get in life is still very limited, so correct decision-making must necessarily be confined to your "circle of competence". A “competence” that has no defined borders cannot be called a true competence. How do you define your own circle of competence? Charlie said, if I want to hold a view, if I cannot refute or disprove this view better than the smartest, most capable, most qualified person on Earth, then I’m not worthy of holding that view. So when Charlie truly holds a certain point of view, his thinking is not only original and unique, but also almost never wrong.

一次，一位漂亮的女士坚持让查理用一个词来总结他的成功，查理说是“理性”。然而，他对理性有更苛刻的定义。正是这样的“理性”，让他具有敏锐独到的眼光和洞察力，即使对于完全陌生的领域，他也能一眼看穿事物的本质。巴菲特把查理的这个特点称作“两分钟效应”——他说查理比世界上任何人更能在最短时间之内把一个复杂商业的本质说清楚。伯克希尔投资比亚迪的经过就是一个例证。记得2003年我第一次同查理谈到比亚迪时，他虽然从没有见过王传福本人，也从未参观过比亚迪的工厂，甚至对中国的市场和文化也相对陌生，可是他当时对比亚迪提出的问题和评论，今天看来仍然是投资比亚迪最实质的问题。
A beautiful lady once insisted that Charlie use one word to sum up the source of his success, Charlie said it was being “rational.” However, he has a more stringent definition of rationality. It is this kind of “rationality” that grants him the sensitive and unique vision and insight. Even in a completely unfamiliar territory, with just one look he could see through to the essence of things. Buffett calls this characteristic of Charlie the “two-minute effect” -- he said Charlie can, in the shortest time possible, unravel the nature of a complex business and understand it better than anyone else can. The process of Berkshire’s investment in BYD Auto is an example. I remember in 2003, when I first discussed about BYD with Charlie, despite having never met Wang Chuanfu (Chairman of BYD Auto), visited BYD’s factory, and being relatively unfamiliar with the Chinese market and culture, his questions and comments about BYD remains, till this day, the most pertinent questions a BYD investor need to ask.

人人都有盲点，再优秀的人也不例外。巴菲特说：“本杰明·格拉汉姆曾经教我只买便宜的股票，查理让我改变了这种想法。这是查理对我真正的影响。要让我从格拉汉姆的局限理论中走出来，需要一股强大的力量。查理的思想就是那股力量，他扩大了我的视野。”对此，我自己也有深切的体会。查理帮我指出了我思维上的盲点，如果不是他的帮助，我现在还在从猿到人的进化过程中慢慢爬行。
Everyone has blind spots, and even the brightest people are no exceptions. Buffett said: “Benjamin Graham taught me to only buy cheap stocks, Charlie allowed me to change my thinking. That’s the real impact Charlie had on me. I needed a powerful force to walk out of the limitations imposed by Graham’s theories. Charlie’s ideas were that source of power -- he expanded my horizons.” I’ve also had this profound experience. Charlie pointed out the blind spots in my thinking; if it weren’t for his help, I’ll still be still in process of evolution, slowly crawling along.

查理一辈子研究人类灾难性的错误，对由于人类心理倾向引起的灾难性错误尤其情有独钟。最具贡献的是他预测到，金融衍生产品的泛滥和会计审计制度的漏洞将给人类带来灾难。早在1990年代末期，他和巴菲特先生已经提出了金融衍生产品可能造成灾难性的影响，随着金融衍生产品的泛滥愈演愈烈，他们的警告也不断升级，甚至指出金融衍生产品是金融式的大规模杀伤武器，如果不能得到及时有效的制止，将会给现代文明社会带来灾难性的影响。2008年和2009年的金融海啸及全球经济大萧条不幸验证了查理的远见。
Charlie spent a lifetime studying disastrous human mistakes and is particularly fond of catastrophic errors caused by human psychological tendencies. The most valuable contribution is that he predicted the disastrous consequence of the spread of financial derivatives and the loopholes in the accounting and auditing system. Back in the late 1990s, he and Mr. Buffett already raised the disastrous potentials of financial derivative products. They escalated their warnings with the proliferation of financial derivative products, calling financial derivative products finance-based weapons of mass destruction; if they were not stopped in a timely and effective manner, they would have a devastating impact on the modern society. The financial tsunami and global economic recession in 2008 and 2009 unfortunately validated Charlie’s far reaching vision and insights.

与巴菲特相比，查理的兴趣更为广泛。比如他对科学和软科学几乎所有的领域都有强烈的兴趣和广泛的研究，通过融会贯通，形成了原创性的、独特的芒格思想体系。相对于任何来自象牙塔内的思想体系，芒格主义完全为解决实际问题而生。比如说，据我所知，查理最早提出并系统研究人类心理倾向在投资和商业决策中的巨大影响。十几年后的今天，行为金融学已经成为经济学中最热门的研究领域，行为经济学也获得了诺贝尔经济学奖的认可。而查理在本书最后一讲“人类误判心理学”中所展现出的理论框架，在未来也很可能得到人们更广泛的理解和应用。
Compared with Buffett, Charlie has a far wider range of interests. For instance, he has strong interests and has done extensive studies in almost all fields of sciences and social sciences, integrating them to form the original and unique Munger ideology. Compared to anything coming from within the ivory towers’ system of thinking, Munger’s doctrines are built to solve practical problems. For example, as far as I know, Charlie was the first to propose and systematically study human psychological tendencies and its huge impact on decision-making processes in investments and business. Now, tens of years later, behavioral finance has become a popular area of research in economics, with behavioral economics winning the recognition of the Nobel Prize. The theoretical framework Charlie describes in the final chapter of this book, “the Psychology of Human Misjudgment," may become more widely understood and applied by people in the future.

查理天生精力充沛。我认识查理是在1996年，那时他72岁。到今年查理86岁，已经过了十几年了。在这十几年里，查理的精力完全没有变化。他永远是精力旺盛，很早起身。早餐会议永远是七点半开始。同时由于某些晚宴应酬的缘故，他的睡眠时间可能要比常人少，但这些都不妨碍他旺盛的精力。而且他记忆力惊人，我很多年前跟他讲的比亚迪的营运数字，我都已经记忆模糊了，他还记得。
Charlie is naturally full of energy. Charlie was 72 years old when I first met him in 1996. He is 86 years old this year. In the tens of years I’ve known Charlie, his level of energy has never changed. He is always energetic and is an early riser. Breakfast meetings always begin at 7:30 am. At the same time, because of dinner events, his spends less time sleeping than the average people, but that does not affect his exuberant energy. His memory is also amazing. He still remembers BYD's operating figures I discussed with him many years ago while my memories have already blurred.

86岁的他记性比我这个年轻人还好。这些都是他天生的优势，但使他异常成功的特质却都是他后天努力获得的。查理一旦确定了做一件事情，他可以做一辈子。
The 86-year-old man has a better memory than this young man. These are his innate advantages, but he acquired through hard work the unusual qualities that contributed to his success. Once Charlie found one thing he wants to do, he can do it for a lifetime.

查理对我而言，不仅是合伙人，是长辈，是老师，是朋友，是事业成功的典范，也是人生的楷模。我从他的身上不仅学到了价值投资的道理，也学到了很多做人的道理。他让我明白，一个人的成功并不是偶然的，时机固然重要，但人的内在品质更重要。
To me, Charlie is not just a partner, he is also an elder, a teacher, a friend, a role model for success and a role model in life. Not only did I learn from him the principles of value investing, I also learned from him how to live life. He made me understand that a person's success is not accidental. Timing and opportunities are, of course, important, but the inherent qualities of people are even more important.

查理喜欢与人早餐约会，时间通常是七点半。记得第一次与查理吃早餐时，我准时赶到，发现查理已经坐在那里把当天的报纸都看完了。虽然离七点半还差几分钟，但让一位德高望重的老人等我让我心里很不好受。第二次约会时，我大约提前了一刻钟到达，发现查理还是已经坐在那里看报纸了。到第三次约会，我提前半小时到达，结果查理还是在那里看报纸，仿佛他从未离开过那个座位，终年守候。直到第四次，我狠狠心提前一个钟头到达，六点半坐那里等候，到六点四十五的时候，查理悠悠地走进来了，手里拿着一摞报纸，头也不抬地坐下，完全没有注意到我的存在。以后我逐渐了解到，查理与人约会一定早到。到了以后也不浪费时间，会拿出准备好的报纸翻阅。
Charlie likes to meet people for breakfasts, usually starting at 7:30 am. I remember the first time I had breakfast with Charlie, I arrived on time, only to find Charlie sitting there, finished with the day’s newspapers. While it was only a few short minutes away from the 7:30, but I felt bad letting an elderly man I respected wait for me. For our second date, I arrived about fifteen minutes earlier and still found Charlie sitting there, reading the newspaper. For our third meeting, I arrived half an hour earlier and Charlie was still reading the newspaper, as if he had been waiting there all year round and had never left the seat. For the fourth meeting, when I arrived an hour early at sat there to begin waiting at 6:30 am, and at 6:45 am, Charlie leisurely walked in with a pile of newspapers and sat down, not even looking up, completely unaware of my existence. Afterwards, I came to understand that Charlie will always be arrive early for meetings. But he doesn’t waste time either, he will take out the newspaper he prepared to read.

在跟查理的交往中，另有一件事对我影响很大。有一年查理和我共同参加了一个外地的聚会。活动结束后，我要赶回纽约，没想到却在机场的候机厅遇见查理。他庞大的身体在过安检检测器的时候，不知什么原因导致检测器不断鸣叫示警。而查理就一次又一次地折返接受安检，如此折腾半天，好不容易过了安检，他的飞机已经起飞了。
In my interactions with Charlie, there was another thing that made a big impact on me. One year, Charlie and I were attending an out-of-state meeting. After the event, I was hurrying to get back to New York and unexpectedly met Charlie at the airport terminal. When his huge body passed through the security detector, for some unknown reason the detector kept being set off. Charlie returned to again and again for the security check. He finally passed through the security checkpoint after a long and laborious effort, but, by then, his plane had already departed.

可查理不着急，他抽出随身携带的书坐下来阅读，静等下一班飞机。那天正好我的飞机也误点了，我就陪他一起等。
But Charlie was not in a hurry. He took out a book he carried with him and sat down to read while he waited for the next plane. Incidentally, my flight was also delayed so we waited for our flights together.

我问他：“你有自己的私人飞机，伯克希尔也有专机，你为什么要到商用客机机场去经受这么多的麻烦呢?”
I asked Charlie: “You have your own private jet and so does Berkshire, why do you bother going through the trouble of flying commercial?”

查理说：“第一，我一个人坐专机太浪费油了。第二，我觉得坐商用飞机更安全。”但查理想说的真正理由是第三条，“我一辈子想要的就是融入生活(engage life)，我不希望自己被孤立(isolated)。”
Charlie replied:”Firstly, it is a waste of fuel for me to fly in my private jet. Secondly, I feel safer flying in a commercial aircraft.” However, the real reason is Charlie’s third reason, “I want to live an engaged life. I don’t want to be isolated.”

查理最受不了的就是因为拥有了钱财而失去与世界的联系，把自己隔绝在一个单间，隔绝在占地一层的巨型办公室里，见面要层层通报，过五关斩六将，谁都不能轻易接触到。这样就与现实生活脱节了。
What Charlie can’t tolerate is to lose contact with the world because of money and wealth. To isolate yourself in a single room behind a labyrinth of offices, to require layers after layers of approvals to setup meetings, and to hide behind a complicated bureaucracy so you become hard to reach for anyone - that is how you lose touch with the realities of life.

“手里只要有一本书，我就不会觉得浪费时间。”查理任何时候都随身携带一本书，即使坐在经济舱的中间座位上，他只要拿着书，就安之若素。有一次他去西雅图参加一个董事会，依旧按惯例坐经济舱，他身边坐着一位中国小女孩，飞行途中一直在做微积分的功课。他对这个中国小女孩印象深刻，因为他很难想象同龄的美国女孩能有这样的定力，在飞机的嘈杂声中专心学习。如果他乘坐私人飞机，他就永远不会有机会近距离接触这些普通人的故事。
"As long as I have a book in my hand, I don’t feel like I’m wasting time." Charlie always carries a book on him. Even if he’s sitting in the middle seat in economy class, as long as he has a book, he’ll have no complaint. Once he went to Seattle to attend a board meeting, taking the economy class as usual, he sat beside a Chinese girl who was doing her calculus homework throughout the flight. He was impressed with this Chinese girl because he has difficulty imagining American girls of the same age having such power of concentration to ignore noise on the aircraft and concentrate on studying. If he was aboard a private jet, he would have never had the opportunity to come into close contact with these stories of ordinary people.

查理虽然严于律己，却非常宽厚地对待他真正关心和爱的人，他不吝金钱，总希望他人能多受益。他一个人的旅行，无论公务私务都搭乘经济舱，但与太太和家人一起旅行时，他便会乘搭自己的私人飞机。他解释说：太太一辈子为我抚育这么多孩子，付出甚多，身体又不好，我一定要照顾好她。
Though Charlie has very strict self-discipline, he is very generous with others and treat people he cares and love really well. He is not stingy with money, always hoping others will benefit more. For his own travels, whether for business trips or for personal trips, he always flies economy class, but when traveling with his wife and family, he would take his own private jet. He explained: my wife brought up so many children in her lifetime and has given me so much. Now that her health isn’t as good as it used to be, I must take good care of her.

查理一生研究人类失败的原因，所以对人性的弱点有着深刻的理解。基于此，他认为人对自己要严格要求，一生不断提高修养，以克服人性本身的弱点。这种生活方式对查理而言是一种道德要求。在外人看来，查理可能像个苦行僧;但在查理看来，这个过程却是既理性又愉快的，能够让人过上成功、幸福的人生。
Charlie spent his lifetime studying the causes of human failures, so he has a profound understanding of the weaknesses of human nature. Because of this, he believes people must be strict and demanding on themselves, continuously improving their discipline in life in order to overcome the innate weaknesses of human nature. This way of life is, to Charlie, a moral requirement. To an outsider, Charlie might seem like a monk; but to Charlie, this process is both rational and pleasant and it allows people to having a successful and happy life.

查理就是这么独特。但是想想看，如果芒格和巴菲特不是如此独特的话，他们也不可能一起在50年间为伯克希尔创造出在人类投资史上前无古人、后无来者的业绩。
Charlie is such a unique person. But if you think about it, if Munger and Buffett weren’t so so unique, how could they have built Berkshire’s performance over 50 years into one that is unprecedented in the history of investments and one that has yet to be replicated.

与查理交往的这些年，我常常会忘记他是一个美国人。他更接近于我理解的中国传统士大夫。
Over the years I’ve known Charlie, I often forget that he is an American. He is closer to being the traditional Literati (scholar-officials) of Imperial China that I knew.

科举制度结束之后，在过去的上百年里，士大夫精神失去了具体的现实依托，变得无所适从，尤其到了今天商业高度发展的社会，具有士大夫情怀的中国读书人，对于自身的存在及其价值理想往往更加困惑。在一个传统尽失的商业社会，士大夫的精神是否仍然适用呢?晚明时期，资本主义开始在中国萌芽，当时的商人曾经提出过“商才士魂”以彰显其理想。今天，商业市场力量已经成为社会的主导，我以为这种理想更有可能成为现实了。
After the Imperial examination system ended, over the past hundreds of years, the spirit of the Literati has been lost to reality. Especially in the highly developed commercial society of this time and age, the Chinese scholars who bear the spirit of the Chinese Literati are often confused about the value and ideals of their own existence. In a commercial society where tradition has been lost, is the spirit of Literati still applicable or useful? In the late Ming Dynasty, capitalism began to sprout in China, the merchants at that time raised the ideals of "a business person with a Literati’s soul.” Today, the forces of the commercial market has become the dominant power, and I think there are more possibilities for this ideal to become a reality.

查理可以说是“商才士魂”的最好典范。首先，查理在商业领域极为成功。然而在与查理的深度接触中，我却发现查理本质上是一个道德哲学家，一个学者。他阅读广泛，知识渊博，真正关注的是自身道德的修养与对社会的终极关怀。查理的价值系统由内而外，倡导通过自身的修行以达到圣人的境界，从而帮助他人。
Charlie can be said to be the best example of "a businessman with a Literati’s soul". First of all, Charlie is extremely successful in business. However, in the deep intimate interactions I’ve had with Charlie, I found Charlie to be essentially a moral philosopher and a scholar. He reads widely, is knowledgeable over a broad range of topics, is truly concerned about his own moral cultivation, and is ultimately concerned about the society. Charlie's value system, from the inside out, promotes self-cultivation and self-development to become the “saints” who help others.

在取得事业与财富的巨大成功之后，查理还致力于慈善事业，造福天下人。他是一个完全凭借智慧取得成功的人，这对于中国的读书人来讲无疑是一个令人振奋的例子。他用最干净的方法，充分运用自己的智慧，取得了这个商业社会中的巨大成功。在市场经济下的今天，满怀士大夫情怀的中国读书人是否也可以通过学习与自身修养的提升，来取得世俗社会的成功并实现自身的价值理想呢?
After achieving business success and wealth, Charlie is still committed to charity and to benefiting the people of the world. He was complete dependent on his wisdom in achieving his success, and this is undoubtedly an exciting role model for Chinese scholars. He made full use of his own wisdom and achieved great success in business with the utmost integrity. Today, in the market economy, can the Chinese scholars be filled with the spirit of the Literati and, by improving themselves through learning and self-cultivation, achieve the successes of the secular society while realizing the value of their own ideals?

查理非常欣赏孔子。我有时会想，若孔子重生在今天的美国，查理大概会是其最好的化身。若孔子返回到2000年后今天的商业中国，他倡导的大概会是：正心，修身，齐家，致富，助天下吧!
Charlie very much appreciates Confucius. I sometimes think that if Confucius was reborn in America today, Charlie will probably be the best incarnation. If Confucius returned 2000 years later to the commercialized China, his teaching will probably be: have your heart in the right place, cultivate your moral character, fortify your family, acquire wealth, and help the world!

(本文系作者为2010年5月出版的《穷查理宝典:查理·芒格的智慧箴言录》所作序言，有删节，标题为编者所加)
(This article was written for the foreword to "Poor Charlie's Almanack - The Wit and Wisdom of Charles T. Munger” - published in May 2010, some paragraphs were cut, the title was added by the editor.)

[Translator’s notes: Thanks to Ee Lin Sim for her assistance in translation. Please send feedbacks to Enoch Ko: contact (at) enochko [dot] com]

My Teacher: Charlie Munger (English Translation)

2010-06-20T02:09:00.002+10:00

Translator’s note: I have attempted to balance maintaining the author’s original style of writing and making a grammatically correct English translation. Obviously, a word-for-word translation would have serious readability issues. As such, I have rewritten Chinese idioms and broken up a few excessive run-on sentences. For those places where I think the peculiarity of the language is still "understandable enough", I have left them as is.

Source: http://www.iceo.com.cn/ttiao/2010/0521/194188.shtml (HT Shai Dardashti from Reflections on Value Investing for finding this article.)

My Teacher: Charlie Munger

Author: Li Lu
May 21, 2010
Source: “Chinese Entrepreneurs”

【"China Entrepreneur" Magazine】Twenty years ago, as a young student coming to the United States, I couldn’t have imagined having a career in investments and would never have thought that I’d be fortunate enough to meet with the contemporary investment guru, Mr. Charlie Munger. In 2004, Mr. Munger became my investment partner and has since become my lifelong mentor and friend -- an opportunity I would have never dared to dream about.

I graduated from Columbia University in 1996 and founded my investment company in 1997, thus starting my professional investment career. Till this day, the vast majority of individual investors and institutional investors still follow investment philosophies that are based on "bad theories." For example, they believe in the efficient market hypothesis, and therefore believe that the volatility of stock prices is equivalent to real risk, and they place a strong emphasis on volatility when they judge your performance. In my view, the biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital. Not only is the mere drop in stock prices not risk, but it is an opportunity. Where else do you look for cheap stocks? But I found that while, on the surface, famous fund managers appear to accept the theories of Buffett and Munger and show great respect for their performance, they are in actual practice the exact opposite because their clients are also the exact opposite to Buffett and Munger. They still accept the theories that say "volatility is risk" and "the market is always right."

A serendipitous opportunity led me to meet my lifelong mentor and friend, Mr. Charlie Munger.

Charlie and I first met at a mutual friend’s house while I was working on investments in LA after graduating from college. The first impression he gave me was “distant” -- he often appeared to be absent-minded to the presence of his conversation partners and was, instead, very focused on his own topics. But this old man spoke succinctly; his words full of wisdom for you to mull over.

Seven years after we’ve known each other, at a Thanksgiving gathering in 2003, we had a long heart-to-heart conversation. I introduced every single company I have invested in, or researched, or am interested in to Charlie and he commented on each one of them. I also asked for his advice on the problems I’ve encountered. Towards the end, he told me that the problems I’ve encountered were practically all the problems of Wall Street. The problem is with the way the Wall Street thinks. Even though Berkshire Hathaway has been such a success, there isn’t any company on Wall Street that truly imitates it. If I continue on this path, my worries will never be eliminated. But if I was willing to give up this path right then, to take a path different from Wall Street, he was willing to invest. This really flattered me.

With Charlie’s help, I completely reorganized the company I founded. The structure was changed into that of the early investment partnerships of Buffett and Munger (note: Buffett and Munger each had partnerships to manage their own investment portfolios) and all the shortcomings of the typical hedge funds were eliminated. Investors who stayed made long-term investment guarantees and we no longer accepted new investors.

Thus I entered another golden period in my investment career. I was no longer restricted by the various limitations of Wall Street. The numbers still fluctuate as before, but eventual result is substantial growth. From the fourth quarter of 2004 to the end of 2009, the new fund returned an annual compound growth rate of 36% after deducting operating costs. From the inception of the fund in January 1998, the fund returned an annual compound growth rate in excess of 29%. In 12 years, the capital grew more than 20 folds.

Buffett said that, despite the countless people he has met in his life, he has never encountered anyone else like Charlie. And in the years that I’ve known Charlie, and was fortunate to be able to intimately understand him, I am also deeply convinced that. Even from all the biographies of people from all ages, I have yet to see anyone similar to him. Charlie is such a unique man -- his uniqueness is in his thinking and, also, in his personality.

When Charlie thinks about things, he starts by inverting. To understand how to be happy in life, Charlie will study how to make life miserable; to examine how business become big and strong, Charlie first studies how businesses decline and die; most people care more about how to succeed in the stock market, Charlie is most concerned about why most have failed in the stock market. His way of thinking comes from the saying in the farmer’s philosophy: I want to know is where I’m going to die, so I will never go there.

Charlie constantly collects and researches the notable failures in each and every type of people, business, government, and academia, and arranges the causes of failures into a decision-making checklist for making the right decisions. Because of this, he has avoided major mistakes in his decision making in his life and in his career. The importance of this on the performance of Buffett and Berkshire Hathaway over the past 50 years cannot be emphasized enough.

Charlie's mind is original and creative, never subject to any restrictions, shackles, or dogmas. He has the curiosity of children and possesses the qualities of a top-notch scientists and their scientific research methods. He has a strong thirst for knowledge throughout his life and is interested in practically all areas. To him, with the right approach, any problem can be understood through self-study, building innovations on the foundation laid by those who came earlier. His thinking radiates out to every corner of business, life, and [areas of] knowledge. In his view, everything in the universe is an interactive whole, and all of human knowledge are just pieces to the study of the comprehensive whole. Only by combining of these knowledge through a latticework of mental models can they become useful in decision-making and in developing the proper understanding of things. So he advocates studying all the truly important theories in all disciplines, and building on this foundation the so-called “worldly wisdom” as a tool for studying the important issues in business and investments.

Charlie’s way of thinking is based on being honest about knowledge. He believes that in this complex and changing world, there will always be limitations to human cognition and understanding, so you must use all the tools at your disposal. And, at the same time, you must constantly collect new verifiable evidences, correcting and updating your knowledge, and knowing what you know and what you don’t know.

But even so, the true insights a person can get in life is still very limited, so correct decision-making must necessarily be confined to your "circle of competence". A “competence” that has no defined borders cannot be called a true competence. How do you define your own circle of competence? Charlie said, if I want to hold a view, if I cannot refute or disprove this view better than the smartest, most capable, most qualified person on Earth, then I’m not worthy of holding that view. So when Charlie truly holds a certain point of view, his thinking is not only original and unique, but also almost never wrong.

A beautiful lady once insisted that Charlie use one word to sum up the source of his success, Charlie said it was being “rational.” However, he has a more stringent definition of rationality. It is this kind of “rationality” that grants him the sensitive and unique vision and insight. Even in a completely unfamiliar territory, with just one look he could see through to the essence of things. Buffett calls this characteristic of Charlie the “two-minute effect” -- he said Charlie can, in the shortest time possible, unravel the nature of a complex business and understand it better than anyone else can. The process of Berkshire’s investment in BYD Auto is an example. I remember in 2003, when I first discussed about BYD with Charlie, despite having never met Wang Chuanfu (Chairman of BYD Auto), visited BYD’s factory, and being relatively unfamiliar with the Chinese market and culture, his questions and comments about BYD remains, till this day, the most pertinent questions a BYD investor need to ask.

Everyone has blind spots, and even the brightest people are no exceptions. Buffett said: “Benjamin Graham taught me to only buy cheap stocks, Charlie allowed me to change my thinking. That’s the real impact Charlie had on me. I needed a powerful force to walk out of the limitations imposed by Graham’s theories. Charlie’s ideas were that source of power -- he expanded my horizons.” I’ve also had this profound experience. Charlie pointed out the blind spots in my thinking; if it weren’t for his help, I’ll still be still in process of evolution, slowly crawling along.

Charlie spent a lifetime studying disastrous human mistakes and is particularly fond of catastrophic errors caused by human psychological tendencies. The most valuable contribution is that he predicted the disastrous consequence of the spread of financial derivatives and the loopholes in the accounting and auditing system. Back in the late 1990s, he and Mr. Buffett already raised the disastrous potentials of financial derivative products. They escalated their warnings with the proliferation of financial derivative products, calling financial derivative products finance-based weapons of mass destruction; if they were not stopped in a timely and effective manner, they would have a devastating impact on the modern society. The financial tsunami and global economic recession in 2008 and 2009 unfortunately validated Charlie’s far reaching vision and insights.

Compared with Buffett, Charlie has a far wider range of interests. For instance, he has strong interests and has done extensive studies in almost all fields of sciences and social sciences, integrating them to form the original and unique Munger ideology. Compared to anything coming from within the ivory towers’ system of thinking, Munger’s doctrines are built to solve practical problems. For example, as far as I know, Charlie was the first to propose and systematically study human psychological tendencies and its huge impact on decision-making processes in investments and business. Now, tens of years later, behavioral finance has become a popular area of research in economics, with behavioral economics winning the recognition of the Nobel Prize. The theoretical framework Charlie describes in the final chapter of this book, “the Psychology of Human Misjudgment," may become more widely understood and applied by people in the future.

Charlie is naturally full of energy. Charlie was 72 years old when I first met him in 1996. He is 86 years old this year. In the tens of years I’ve known Charlie, his level of energy has never changed. He is always energetic and is an early riser. Breakfast meetings always begin at 7:30 am. At the same time, because of dinner events, his spends less time sleeping than the average people, but that does not affect his exuberant energy. His memory is also amazing. He still remembers BYD's operating figures I discussed with him many years ago while my memories have already blurred.

The 86-year-old man has a better memory than this young man. These are his innate advantages, but he acquired through hard work the unusual qualities that contributed to his success. Once Charlie found one thing he wants to do, he can do it for a lifetime.

To me, Charlie is not just a partner, he is also an elder, a teacher, a friend, a role model for success and a role model in life. Not only did I learn from him the principles of value investing, I also learned from him how to live life. He made me understand that a person's success is not accidental. Timing and opportunities are, of course, important, but the inherent qualities of people are even more important.

Charlie likes to meet people for breakfasts, usually starting at 7:30 am. I remember the first time I had breakfast with Charlie, I arrived on time, only to find Charlie sitting there, finished with the day’s newspapers. While it was only a few short minutes away from the 7:30, but I felt bad letting an elderly man I respected wait for me. For our second date, I arrived about fifteen minutes earlier and still found Charlie sitting there, reading the newspaper. For our third meeting, I arrived half an hour earlier and Charlie was still reading the newspaper, as if he had been waiting there all year round and had never left the seat. For the fourth meeting, when I arrived an hour early at sat there to begin waiting at 6:30 am, and at 6:45 am, Charlie leisurely walked in with a pile of newspapers and sat down, not even looking up, completely unaware of my existence. Afterwards, I came to understand that Charlie will always be arrive early for meetings. But he doesn’t waste time either, he will take out the newspaper he prepared to read.

In my interactions with Charlie, there was another thing that made a big impact on me. One year, Charlie and I were attending an out-of-state meeting. After the event, I was hurrying to get back to New York and unexpectedly met Charlie at the airport terminal. When his huge body passed through the security detector, for some unknown reason the detector kept being set off. Charlie returned to again and again for the security check. He finally passed through the security checkpoint after a long and laborious effort, but, by then, his plane had already departed.

But Charlie was not in a hurry. He took out a book he carried with him and sat down to read while he waited for the next plane. Incidentally, my flight was also delayed so we waited for our flights together.

I asked Charlie: “You have your own private jet and so does Berkshire, why do you bother going through the trouble of flying commercial?”

Charlie replied:”Firstly, it is a waste of fuel for me to fly in my private jet. Secondly, I feel safer flying in a commercial aircraft.” However, the real reason is Charlie’s third reason, “I want to live an engaged life. I don’t want to be isolated.”

What Charlie can’t tolerate is to lose contact with the world because of money and wealth. To isolate yourself in a single room behind a labyrinth of offices, to require layers after layers of approvals to setup meetings, and to hide behind a complicated bureaucracy so you become hard to reach for anyone - that is how you lose touch with the realities of life.

"As long as I have a book in my hand, I don’t feel like I’m wasting time." Charlie always carries a book on him. Even if he’s sitting in the middle seat in economy class, as long as he has a book, he’ll have no complaint. Once he went to Seattle to attend a board meeting, taking the economy class as usual, he sat beside a Chinese girl who was doing her calculus homework throughout the flight. He was impressed with this Chinese girl because he has difficulty imagining American girls of the same age having such power of concentration to ignore noise on the aircraft and concentrate on studying. If he was aboard a private jet, he would have never had the opportunity to come into close contact with these stories of ordinary people.

Though Charlie has very strict self-discipline, he is very generous with others and treat people he cares and love really well. He is not stingy with money, always hoping others will benefit more. For his own travels, whether for business trips or for personal trips, he always flies economy class, but when traveling with his wife and family, he would take his own private jet. He explained: my wife brought up so many children in her lifetime and has given me so much. Now that her health isn’t as good as it used to be, I must take good care of her.

Charlie spent his lifetime studying the causes of human failures, so he has a profound understanding of the weaknesses of human nature. Because of this, he believes people must be strict and demanding on themselves, continuously improving their discipline in life in order to overcome the innate weaknesses of human nature. This way of life is, to Charlie, a moral requirement. To an outsider, Charlie might seem like a monk; but to Charlie, this process is both rational and pleasant and it allows people to having a successful and happy life.

Charlie is such a unique person. But if you think about it, if Munger and Buffett weren’t so so unique, how could they have built Berkshire’s performance over 50 years into one that is unprecedented in the history of investments and one that has yet to be replicated.

Over the years I’ve known Charlie, I often forget that he is an American. He is closer to being the traditional Literati (scholar-officials) of Imperial China that I knew.

After the Imperial examination system ended, over the past hundreds of years, the spirit of the Literati has been lost to reality. Especially in the highly developed commercial society of this time and age, the Chinese scholars who bear the spirit of the Chinese Literati are often confused about the value and ideals of their own existence. In a commercial society where tradition has been lost, is the spirit of Literati still applicable or useful? In the late Ming Dynasty, capitalism began to sprout in China, the merchants at that time raised the ideals of "a business person with a Literati’s soul.” Today, the forces of the commercial market has become the dominant power, and I think there are more possibilities for this ideal to become a reality.

Charlie can be said to be the best example of "a businessman with a Literati’s soul". First of all, Charlie is extremely successful in business. However, in the deep intimate interactions I’ve had with Charlie, I found Charlie to be essentially a moral philosopher and a scholar. He reads widely, is knowledgeable over a broad range of topics, is truly concerned about his own moral cultivation, and is ultimately concerned about the society. Charlie's value system, from the inside out, promotes self-cultivation and self-development to become the “saints” who help others.

After achieving business success and wealth, Charlie is still committed to charity and to benefiting the people of the world. He was complete dependent on his wisdom in achieving his success, and this is undoubtedly an exciting role model for Chinese scholars. He made full use of his own wisdom and achieved great success in business with the utmost integrity. Today, in the market economy, can the Chinese scholars be filled with the spirit of the Literati and, by improving themselves through learning and self-cultivation, achieve the successes of the secular society while realizing the value of their own ideals?

Charlie very much appreciates Confucius. I sometimes think that if Confucius was reborn in America today, Charlie will probably be the best incarnation. If Confucius returned 2000 years later to the commercialized China, his teaching will probably be: have your heart in the right place, cultivate your moral character, fortify your family, acquire wealth, and help the world!

(This article was written for the foreword to "Poor Charlie's Almanack - The Wit and Wisdom of Charles T. Munger” - published in May 2010, some paragraphs were cut, the title was added by the editor.)

[Translator’s notes: Thanks to Ee Lin Sim for her assistance in translation. Please send feedbacks to Enoch Ko: contact (at) enochko [dot] com]

Atul Gawande discusses performance at Authors@Google

2009-09-27T18:45:00.000+10:00

RSS subscribers: Click here for the video.

About Atul Gawande and the Talk

Atul Gawande discusses his latest book, "Better: A Surgeon's Notes on Performance." Dr. Gawande, a surgeon at Brigham and Women's Hospital in Boston, is the author of "Complications: A Surgeon's Notes on an Imperfect Science", a regular contributor to The New Yorker (where he wrote a wonderful article on "The Checklist"), and was named a MacArthur fellow in 2006. This event took place at Google's Mountain View, CA, headquarters on May 1, 2007, as part of the Authors@Google series.

He identified four attributes of top performers:

Diligence - attention to details.
Surveillance - measure and look for failures.
Do the right thing, despite obstacles.
Day-to-day creativity.

Other notes from his talk and the Q&A session:

Weekly meetings to discuss problems and solutions - patients get to benefit from the wisdom of the entire team.
Information technology to measure, notice problems, and spread information.
Look at ourselves as a process and engineer down the problems.
Measure ourselves - it's both simpler and scarier than we think.
Leadership is important and can affect everyone else - identify leaders!
Transparency - expose the best, so the rest can learn from them.

(HT Farnam Street for the great find.)

Jamie Dimon's Speech at HBS Class Day 2009

2009-07-19T13:00:00.000+10:00

Jamie Dimon, chairman and CEO of JPMorgan Chase & Co., spoke at Harvard Business School Class Day 2009.

Brief summary available in HBS's Press Release.

Loyalty vs meritocracy

When someone isn't up to their job, loyalty to organization trumps loyalty to that person. I have seen a fair amount of loyalty to individuals in businesses. While the job may be important to that person (keeping in mind that, someday, that person might be me), keeping a person not suited to the job harms both employee morale and the business! Of course, everyone should be given the opportunity to grow and make mistakes. But at some point, hard as it may be, the right thing must be done.

My impression

I haven't dealt with JP Morgan Chase nor do I personally know anyone working there, but from watching Jamie speak and reading his 2008 JPM shareholder letter, if he does what he says and the entire company operates the same way, JP Morgan Chase is a place I would want to work!