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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
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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