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5 Simple Ways To Solve Complex Problems

5 Simple Ways To Solve Complex Problems

FARNAM STREET STRATEGY  JUN. 20, 2014, 3:01 AM

Here are five simple notions, found in “Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger,” that Charlie Munger, the Billionaire business partner of Warren Buffett, finds helpful in solving problems.

1. Simplify

“My first helpful notion is that it is usually best to simplify problems by deciding big “no-brainer” questions first.”

2. Numerical Fluency

“The second helpful notion mimics Galileo’s conclusion that scientific reality is often revealed only by math, as if math was the language of God. Galileo’s attitude also works well in messy practical life. Without numerical fluency, in the part of life most of us inhabit, you are like a one-legged man in an ass-kicking contest.”
3. Invert

Inverting the problem won’t always solve it, but it will help you avoid trouble. Call it the avoiding stupidity filter.

“The third helpful notion is that it is not enough to think problems through forward. You must also think in reverse, much like the rustic who wanted to know where he was going to die so that he’d never go there. Indeed, many problems can’t be solved forward. And that is why the great algebraist, Carl Jacobi, so often said: ‘invert, always invert.’ And why Pythagoras thought in reverse to prove that the square root of two was an irrational number.”

4. Study The Basics

The basics are something that keeps coming up. The first ofthe five elements of effective thinkingis understand deeply.

Munger also believes in the basics:

“The fourth helpful notion is that the best and most practical wisdom is elementary academic wisdom. But there is one extremely important qualification: you must think in a multidisciplinary manner. You must routinely use all the easy-to-learn concepts from the freshman course in every basic subject. Where elementary ideas will serve, your problem solving must not be limited, as academia and many business bureaucracies are limited, by extreme balkanization into disciplines and subdisciplines, with strong taboos against any venture outside assigned territory. …

“If, in your thinking, you rely on others, often through purchase of professional advice, whenever outside a small territory of your own, you will suffer much calamity.”

This happens in part because professional advisors are often undone, not by their conscious malfeasance rather by troubles found in their subconscious bias.

“His cognition will often be impaired, for your purposes, by financial incentives different from yours. And he will also suffer from the psychological defect caught by the proverb: to a man with a hammer, every problem looks like a nail.”

5. Lollapalooza Effects

And you need to combine really big things.

“The fifth helpful notion is that really big effects, lollapalooza effects, will often come only from large combinations of factors. For instance, tuberculosis was tamed, at least for a long time, only by routine combined use in each case of three different drugs. And other lollapalooza effects, like the flight of an airplane, follow a similar pattern.”

 

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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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