Charlie Munger and His Circle

HFA Padded
Mark Tobak
Published on
Charlie Munger Circle

Charlie Munger was a true polymath.

Bill Gates called him “the broadest thinker I have ever encountered.”

Because Charlie Munger was ceaselessly multidisciplinary:

“Most problems we struggle with can be solved by reaching into another discipline.”---Charlie Munger

“I couldn’t stand reaching for a small idea in my own discipline when there was a big idea right over the fence in somebody else’s discipline.”---Charlie Munger

“If you skillfully follow the multidisciplinary path, you will never wish to come back.  It would be like cutting off your hands.”---Charlie Munger

Charlie was a multidimensional thinker, as well.

Math major in college and past master of Calculus, Charlie was never delimited to the simple arithmetic of business accounting.  Charlie had an inborn appreciation of the advanced mathematical world of multidimensional space, which informed his work as a meteorologist for the Army Air Corps and his later charitable contributions as a lay architect.

Thus one of Charlie’s favorite multidimensional thinking tools was a simple circle, variously reinvented.

 The Circle of Competence

The “circle of competence,” which Charlie developed jointly with his friend and partner, Warren Buffett, describes one’s area of expertise, envisioned geometrically.

As Warren Buffett describes it, you must:

“Know your circle of competence, and stick within it.  The size of the circle is not very important; knowing its boundaries, however, is vital.”---Warren E. Buffett

Per Charlie, again invoking a spatial metaphor,

“It’s not a competence if you don’t know the edge of it.”---Charlie Munger

And as the longtime Chairman and CEO of IBM said, invoking another image of the circle, the spot:

“I’m no genius, but I’m smart in spots—and I stay around those spots.”---Thomas J. Watson, Sr.

Spots, Dots and Hollywood Circles

Brilliant images of ubiquitous circles can help us absorb Charlie’s multidimensional lessons:

In 1943, as newly minted meteorologist Charlie Munger helped pilots navigate icy routes, Busby Berkeley, another US Army veteran, applied marching drill skills honed in World War I to create eye-popping dance routines for Hollywood movies supporting the war effort.

The greatest of these, “The Gang’s All Here,” a Technicolor extravaganza of psychedelic intensity, created a mesmerizing world of feminine beauty and myriad circles, culminating in “The Polka Dot Polka.”

This kaleidoscopic finale, supported by breathtaking swirling orchestrations, composed by, but not credited to, David Raksin (whose greatest work is discussed under “inversion” below), yields sound and image of geometric splendor Hollywood has never surpassed.

Behold the circles that helped win the War:

The Seamless Web of Deserved Trust

Charlie described ideal human interactions as a web of deserved trust.

A web is but a series of concentric circles nestled in space, like so many Russian dolls.

“The highest form which civilization can reach is a seamless web of deserved trust.  Not much procedure, just totally reliable people correctly trusting one another.”---Charlie Munger

Here is Charlie addressing the graduating Law School Class of 2007 at the University of Southern California at Santa Barbara, contrasting distrustful litigation with the supreme trust of an operating theater:

Not only does a circle of deserved trust work best, it is immensely gratifying to all participants:

“There is huge pleasure in life in life to be obtained from getting deserved trust.”---Charlie Munger

Think Berkshire Hathaway.

Think Costco.

The Semi-Circle of Inversion

Charlie Munger’s very favorite thinking tool has always been Carl Jacobi’s algebraic inversion.

“Invert, always invert.”---Carl Jacobi

“Turn a situation or a problem upside down.  Look at it backwards.  What happens if all our plans go wrong?  Where don’t we want to go, and how do you get there?”---Charlie Munger

Inversion is turning but a half-circle: going 180 degrees and doing the opposite.

Charlie’s striking but classic example of inversion derives from his work as a wartime meteorologist.  Have a listen:

In his final interview with Becky Quick, Charlie revealed himself a “Seinfeld” devotee.

Remarkably, Season 5’s  “The Opposite” finds failed George adopting inversion as his modus vivendi with hilarious success:

Like Carl Jacobi, Charlie always inverted, even in the face of life’s cruelest blows:

“Life will have terrible blow, horrible blows, unfair blows.  It doesn’t matter.  And some people recover and others don’t.  And there I think the attitude of Epictetus is the best.  He thought every mischance in life was an opportunity to learn something and your duty was not to be submerged in self-pity, but to utilize the terrible blow in a constructive fashion.  That is a very good idea.”---Charlie Munger

David Raksin and The Terrible, Horrible Blow

David Raksin, Hollywood composer of the thrilling orchestrations of “The Polka Dot Polka” above, was assigned by 20th Century Fox to score the classic 1944 movie mystery, “Laura.”

At a Friday story conference Raksin dared challenge the authority of autocratic director, Otto Preminger.

Preminger had casually chosen Duke Ellington’s “Sophisticated Lady” as the musical theme for the picture in which Gene Tierney portrays a beautiful “career girl” on a perilous rise.

Raksin, punching above his weight, insisted the titular character had more depth and substance than Ellington’s dubious “Lady” and music could make the difference in telling her story.

Begrudgingly, Preminger granted Raksin a short weekend to compose a new theme.

Otherwise, “Sophisticated Lady” would prevail.

Raksin drove straight home that Friday evening and went right to work, but found himself brain-blocked.

In despair he opened a letter his wife had left:

A “terrible, horrible blow”: a Dear John.

Numbed and crushed, Raksin buried himself in his work.

”Like in a corny scene from a bad Warner Brothers movie about a composer, I found myself playing the entire first phrase of what you now know as ‘Laura.’”---David Raksin

Here is Raksin’s brainchild, borne of loss and inversion, the only song Cole Porter regretted he had not written:

When asked why she turned down the title role of “Laura,” then-reigning Hollywood star and unsung progenitor of modern wi-fi, Hedy Lamarr, had a ready answer:

“They sent me the script, not the score.”

For more on Charlie Munger and inversion see also, “The Power of Inversion

HFA Padded

Mark Tobak, MD, is a general adult psychiatrist in private practice. He is the former chief of inpatient geriatric psychiatry and now an attending physician at St. Vincent’s Hospital in Harrison, NY. He graduated the University at Buffalo School of Medicine and Columbia University School of General Studies. Dr. Tobak also has a law degree from Fordham University School of Law and was admitted to the NY State Bar. His work appears in the American Journal of Psychiatry, Psychiatric Times, and American Journal of Medicine and Pathology. He is the author of Anyone Can Be Rich! A Psychiatrist Provides the Mental Tools to Build Your Wealth, which received high praise from Warren Buffett.