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Book · How to decide

Poor Charlie's Almanack

Charlie Munger, edited by Peter Kaufman · 2005

Collected talks and writing from Berkshire Hathaway's vice-chairman, organised around the argument that good decisions require models borrowed from many disciplines.

Why it is here

Munger's recurring theme is that people trained in one discipline apply its single framework to everything, and that better judgement comes from holding a lattice of models drawn from psychology, mathematics, biology and engineering.

The most transferable section for an angel is the catalogue of psychological misjudgement — a practitioner's list of the ways people fool themselves, written with considerably less academic hedging than Kahneman and correspondingly more bite.

It is a strange physical object, expensive, and organised as a collection rather than an argument. Read it in pieces rather than attempting it end to end.

Read it if

You want the practitioner's version of the behavioural material rather than the academic one.

Skip it if

You want a linear argument, or you are put off by the reverential framing around its subject.

Pair it withThinking, Fast and SlowDaniel KahnemanThe foundational account of how human judgement systematically fails, by the psychologist who did more than anyone to demonstrate it.

Poor Charlie's Almanack: common questions

Is a value investor relevant to angel investing?
The specific method is not — buying discounted cash flows has nothing to do with backing pre-revenue companies. The material on decision-making, incentives and self-deception transfers completely, and that is most of the book.
How should it be read?
In pieces. It is a collection of talks and writing rather than a continuous argument, and the psychology of misjudgement section stands alone as the most useful part for an investor.