Saturday Serendipity
Quote, Mental Model, Tweet, .
Quote
“We both (Charlie Munger and Warren Buffett) insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think.”
― Charles T. Munger
Mental Model
Principle of least action: Another mental model from physics. Let’s understand what it means from a physics perspective first.
The principle of least action is a fundamental principle in physics that describes how systems in motion move from one state to another. It states that the path taken by a system between two states is the one that minimizes the action, which is a mathematical expression that describes the total energy of the system.
In Life
Simply put, this mental model is telling us to use the most efficient way to solve our problems. Let’s say you have to get your household chores done. You have two options: use the vacuum cleaner, the dishwasher and all the other appliances to clean your house and do all the chores or do it the old-fashioned way and use more energy. The principle of least action tells us that you should minimize the total energy that is spent and hence you would choose the first option and get done faster. This theory can be applied to many aspects of life but not all. It is not always better to take the easier or less energized route. For example, in the long run, it is beneficial for you if you simply do all your homework after working hard but this principle would say otherwise.
In Investing
We can use the most efficient way to make decisions as a tool to make decisions while investing. Munger has applied this mental model to investing by emphasizing the importance of finding investments that offer the greatest potential returns for the least amount of risk, focusing on the long-term, and avoiding short-term thinking. If we think about the short term we are spending our energy on things that we do not need to do as there is a better alternative which requires lesser decision-making and less stress. So we should have a long-term mindset and apply the most efficient methods to invest our money.
Tweet
That’s it for this week! Enjoy the weekend!