CuHaptTER | ‘THe Best INVESTMENT You Can MAKE Is AN INVESTMENT IN YOURSELF I constantly see people tise in life who are not the smartest, some times not even che most diligent, buc they are learning machin They go to bed every night a litele wiser than they were when they got up and boy does thac help, particularly when you have a long run ahead of you Charlie Munger, 2007 USC School of Law commencement In his 2007 USt is paramount to long-term success. Without it, we won't succeed, because we won't ommencement speech, Charlie Munger said that lifelong learning get far based on what we already know If you cake Berkshire Hathaway, which is certainly one of the best-regarded corporations in the world and may have che best long-term investment te Il har got Berkshire through cord in the entire history of civilization, the s one decade would not have sufficed to get it through the next decade with the achievements made. Wirhour Warren Bufferr being a learning machine, a continuous learning machine, rhe record would have been absolutely impossible. During the 2007 Berkshire Hathaway annual meeting, Munger was asked by a ss of the member of the audience to explain the secret behind che extraordinary su firm, This was his response:Chaprer 1 What has caused this reme record to go on for such a long time? I would argue thae it started with a young man reading everything when he was 10 years old, becoming @ learning machine, He started this long run carly. Had he nor been learning all this time, our record would be a mere shadow of what ic is. And he’s actually improved since he passed the age at which most other people retire. Most people don't even try this —it takes practice. So its been a long run, with extraordinarily ferocious learner concentrated power by a man who i a Most people go through life not really getting any smarcer. Bue you can acquire wisdom if you cruly want to obtain ie, In fact, there is a simple formula, which, if followed, is almost cerrain to make you smarter over time. Simple, but not easy. Because it involves a lot of hard work, patience, discipline, and focus. Read. A lor This is how Warren Buffett, one of the most successful people in the business world, describes his typical day: “] just sit in my office and read all day” (figure 1.1) gure 1.1, Warren Buffett in bis off Sitting, Reading, Thinking, Buffett credits many of his successful decisions to hi incredible reading habit He estimates he spends as much as 80% of his day reading and thinking. You could hardly find a partnership in which nwo people settle on reading more hours of the day than in ours —Charlie Munger, in Griffin, The Complete fir In the 2014 letter to Berkshire shareholders, Munger outlined his expectations of the chairman of the firm: “Hix first priority would be reservation of much time for quietThe Best Investmene You Can Make Ts an Investment in Yourself | 3 cularly thar hich might advance his determined lea reading and thinking, par ing, no master botw old he became.”® Once, when asked abour che key to his success, Buffett held up stacks of paper and said, “Read 500 pages like this every day. Thats how knowledge works. Ie builds up, like compound interest. All of you can do it, but J guarantee not many of you will do it? All of us can work to improve our knowledge, but most of us won't put in the effort More important than the will to win is che will to prepare: —Charlie Munger, in Kaufman, Poor Charlies Almana Selfimprovement is the ultimate form of investing in oneself. It requires devor- ing time, money, attention, and hard effort now for payoff lacer, sometimes in the far distant future. A lor of people are unwilling to make this trade-off because they crave instant gratification and desire instant results These short-term costs, when applied the right way along an axis of time, offer an exponential payoff when applied over a long lite (figure 1.2) Ifthe probability and/or objective is great, work, work, work.. Relative Performance -and you may succeed in an epic way Figure 1.2, This is compounding in action. I is what my life experienced in 2018, afte years of determined efforts amid repeated setbacks. Resilience is a superpower “Compound interest,” Albert Finstein reputedly said, “is the most powerful force in the universe.” So whar happens when you apply such an incredible power w knowl edge building? You become a learning machine.4| Chapter 1 One person who took Buffert’s advice, Tadd Combs (figure 1.3), now works for the legendary investor. After hearing Buffert talk, Combs scarted keeping crack of what he read and how many pages he was reading, Figure 1.3. Todd Combs in his office. “Eventually finding and reading productive material became second nature, a 50, discovered thac Buffer’ formula worked, giving him more knowledge that helped him with what became his primary job—seeking the sruth about potential investments.” habit. As he began his investing career, he would read even more, hitting 600, 7 even 1,000 pages a day. Comb: Reading five hundred pages a day might not be feasible for you. However, if you can find ways to read (or to listen to an audiobook) during your day, at night, or on the weekends, you are likely to see multiple benefits Research published in the Journal of American Academy of Neurology hay shown that people who engage in mentally stimulating activities like reading experience slow- er memory decline than those who do not. Reading iy also linked with higher emo: tional intelligence, reduced stress, a wider vocabulary, and improved comprehension. Ifyou think of your mind as a library, chree things should concern you: 1. The information you store in there—its accuracy and relevance. Your abilicy to findirerrie that information on demand. be Your ability co put thac information ro use when you need it—you need to he able to apply ic There is no point having a repository of knowledge in your mind if you can't find and apply its contents, Here, | am reminded of what Sherlock Holmes told his accomplice, Watson, in A Study in SiThe Best Investment You Can Make Is an Investment in Yourself | 5 I consider thar a man’s brain originally is like a little empry attic, and you have to stock it with such furniture as you choose. A fool takes in all the lumber of every sore that he comes across, so that the knowledge which might be useful w him gets crowded out, or at best is jumbled up with a lot of other things so that he has a difficulty in laying his hands upon it Now the skillfial workman is very careful indeed as to what he takes into his brain-attie. He will have nothing but the tools which may help him in doing his work, but of these he has a large assortment, and all in the most perfect order. It is a mistake to think that that little room has elastic walls and can distend to any extent. Depend upon it chere comes a time when for every addition of knowledge you forget something that you knew before. [eis of the highest importance, therefore, not to have useless facts elbowing out the useful ones.’ In The Reigare Puzzle Holmes said, “It is of the highest importance in the art of decection to be able to recognize, out of a number of facts, which are incidental and which vital. Otherwise your energy and attention must be dissipated instead of being concentrated. So be very careful of what you take in THE PASSIONATE PURSUIT OF LIFELONG LEARNIN! ‘The game of life is the game of everlasting learning, —Charlie Munger Formal education will make you a living; selfeducation will make you a fortune —Jim Rohn Rich people have small TVs and big libraries. Poor people have small libraries and big TVs Zig Ziglar Even after achieving such enormous success, Buffett still reads for five ro six hours every day. He often credits this good habit for much of his success in life. Reading allows him to lear the lessons of others, hundred-page book is often the accumulation of thousands of hours and decades of work. Where else can you get the entire lif What many people see as a three work of someone in the space ofa few hours?6 | Chaprer 1 The most talented people in any given field are self-educared. Contrary to some belief, it doesn’t mean grinding without teachers. Rather, it’s about drawing your raw material and building our of it from a large number of sources, Books. Experiences People. Everyshing in life can be a teacher when you possess the right mindset. The ben- efits of recognizing just a few extra learning opportunities compound over time and unlock promising possibilities in the future The best way to learn something is to try it yourself, but the next best way t0 | learn is from someone who has already done it. This is the importance of reading and vicarious learning, Understanding and learning from the mindset of successful people provides insights on approaching life with che right attitude, developing a sound work ethic and improving the quality of our decisions on a continuing basis. In Michael Eisner and Aaron Cohen's book Working Together: W Partnerships Succeed, Buffett talked about his and Munger’ fierce dedication to lite long learning: Great Sue I don't think any other twosome in business was better at continuous learn ing than we were... And if we hadn't been continuous learners, the record wouldnt have been ay good. And we were so extreme about ir that we both spent the hetter part of our days reading, so we could learn more, which is not a common pattern in business... We don’t read other people’s opinions We want to get the ficts, and then shinks Here is an excerpt fiom an October 2013 interview of Buffete and Munger by Fortune, wherein they discuss how they were able to leap ahead of their peers and competitors: Munger: We've learned how to outsmart people who are clearly smarter [than we are Buffece: Temperament is more importane than 1Q. Munger: The other big secret is that we're good at lifelong learning. Warren is better in his seventies and eighties, in many ways, than he was when he was younger Uf'yot keep learning all the time, you have a wonderfial advantage? Is there a better investment than selimprovement? Here is what Buffett has to say on the topic: “The best investment you can make is an investment in yourself” “The more you learn, the more you'll earn.” “Learn from your mistakes, and the mistakes of others.”The Best Investmene You Can Make Ts an Investment in Yourself Self-improvement is the best way to spend some time every day: And finding the time to read is easier chan you think, One way to help make char happen is to carve an hour our of each day just for yourself, If you need inspiration, read on to see how Munger used to sell himself the best hour of each day, In an interview he gave for his authorized biography, The Snowball, Buffere shared this story about Munger Charlie, as a very young lawyer, was probably getting $20 an hour, He thought to himself, “Who's my most valuable client?” And he decided ic was himself. So he decided co sell himself an hour each day. He did it early in the morning, working on these construction projects and real estare deals Everybody should do this, be the client, and then work for other people, coo, and sell yourself an hour a day." Ic is very important to understand the opportunity cost of this one hour. On the one hand, you can indulge in getting dopamine-laced rushes from emails and social media feeds while multitasking, On the other hand, you can dedicate the time to deep work and improve yourself. An hour’ time spent acquiring in-depth knowledge about an important principle pays off in the long ran. This current investment is minuscule compared fo the significant net present vale that comes out of it over a lifetime. Ie is akin to buying a dollar for less than one cent, /r is why goad books are the most undervalued asser class: the right ideas can be worth millions, if nor billions, of dollars over time. Time is a resource that keeps becoming s arcer for everyone with every passing second. Learn to value your time very highly. Buffete avoids long daily commut to work for this very reason. No matter how much money you have, you can't buy more time. There are only owenty-four hours available to all of us every day. Time ts the currency of life that appreciates in v ue the more its spent. Minimize your commute time to work and outsource all the noncore time-consuming menial tasks to free up valuable time for your self-development. ‘The extra money spent on these small luxuries will pinch initally, bue over time you will realize that they were well worth it. In the long term, the daily investment in learning something new and improving yourself goes a long way. So, che best investment of rime is to invest in your personal development, | hope the time you are investing in reading this book today yields pos itive results for the rest of your life, Today, after having successfully achieved financial 1 happily say char esror because Lam a lifelong learner, and Lam a berser lifelong learner because Lam an investor freedom through my passionate pursuit of lifelong learning, I « Lam a berter in Icseems fitting to end this chapter with the golden words of wisdom from owo of the greatest learners and thinkers to have ever lived8) Chaprer 1 An investment in knowledge pays the hest interest Benjamin Franklin Develop into a lifelong self'learner through voracious reading: cultivate curiosity and strive to become a little wiser every day. Charlie Munger