Omkar’s Kindle Notes & Highlights for Joys Of Compounding: The Passionate Pursuit of Lifelong Learning

So in addition to Buffett, Munger, and Graham, you will read about what Baid has learned from people like Mohnish Pabrai, Tom Russo, Mike Mauboussin, Peter Bevelin, Saurabh Madaan, Marcelo Lima, Paul Lountzis, and others.

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as he distils his understanding of works by a broad range of authors, including Herbert Simon, Shane Parrish, Nassim Taleb, Rolf Dobelli, Richard Zeckhauser, and others.

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THE BEST INVESTMENT YOU CAN MAKE IS AN INVESTMENT IN YOURSELF

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I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you. —Charlie Munger

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This is how Warren Buffett, one of the most successful people in the business world, describes his typical day: “I just sit in my office and read all day.”2 Sitting. Reading. Thinking.

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More important than the will to win is the will to prepare. —Charlie Munger

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Self-improvement is the ultimate form of investing in oneself. It requires devoting time, money, attention, and hard effort now for a payoff later, sometimes in the far distant future. A lot of people are unwilling to make this trade-off because they crave instant gratification and desire instant results.

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“Compound interest,” Albert Einstein reputedly said, “is the most powerful force in the universe.”

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Research published in the Journal of American Academy of Neurology has shown that people who engage in mentally stimulating activities like reading experience slower memory decline than those who do not. Reading is also linked with higher emotional intelligence, reduced stress, a wider vocabulary, and improved comprehension.

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Rich people have small TVs and big libraries. Poor people have small libraries and big TVs.

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This is why good books are the most undervalued asset class: the right ideas can be worth millions, if not billions, of dollars over time.

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An investment in knowledge pays the best 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

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Those who keep learning, will keep rising in life. —Charlie Munger

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Reading keeps our mind alive and growing. That’s why we should inculcate a healthy reading habit. Reading is also meditative and calming.

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Warren Buffett and Charlie Munger estimate that they spend 80 percent of their day reading or thinking about what they have read.

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The way to achieve success in life is to learn constantly. And the best way to learn is to read, and to do so effectively.

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All successful investors have a common habit. They just love to read all the time.

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Knowledge comes from experience, but it doesn’t have to be your experience.

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The rich invest in time, the poor invest in money.

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The rich have money. The wealthy have control over their time. And time is the scarcest resource, because of its nonrenewability. Time is a universally depleting resource, reduced at the same rate for the wealthy as for the poor. This gives us one way of defining a successful individual, as a person for whom time has become a more binding constraint than money. The ultimate status symbol is time. Time is the new money.

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While most of us don’t have the time to read a whole book in one sitting, we do have the time to read 25 pages a day. Reading the right books, even if it’s a few pages a day, is one of the best ways to ensure that you go to bed a little smarter than you woke up.

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The true scarce commodity of the near future will be human attention. —Satya Nadella

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In an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it. —Herbert Simon

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The man who doesn’t read good books has no advantage over the man who cannot read them. —Mark Twain

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One should read on varied topics, such as health and fitness, personal finance, investing, business, economics, decision making, human behavior, history, philosophy, self-awareness, and, of course, life.

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Elementary reading. This is the most basic level of reading as taught in our elementary schools. It is when we move from illiteracy to literacy. 2. Inspectional reading. This is another name for “scanning” or “superficial reading.” It means giving a piece of writing a quick yet meaningful advance review to evaluate the merits of a deeper reading experience. Whereas the question that is asked at the first level (elementary reading) is “What does the sentence say?” the question typically asked at this level is “What is the book about?” 3. Analytical reading. Analytical reading is a thorough ...more

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Five words separate the good from the great: flawless execution of the fundamentals.

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Look at stocks as part ownership of a business. 2. Look at Mr. Market—volatile stock price fluctuations—as your friend rather than your enemy. View risk as the possibility of permanent loss of purchasing power, and uncertainty as the unpredictability regarding the degree of variability in the possible range of outcomes. 3. Remember the three most important words in investing: “margin of safety.” 4. Evaluate any news item or event only in terms of its impact on (a) future interest rates and (b) the intrinsic value of the business, which is the discounted value of the cash that can be taken out ...more

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When making decisions, involve both the left side of your brain (logic, analysis, and math) and the right side (intuition, creativity, and emotions). 9. Engage in visual thinking, which helps us to better understand complex information, organize our thoughts, and improve our ability to think and communicate. 10. Invert, always invert. You can avoid a lot of pain by visualizing your life after you have lost a lot of money trading or speculating using derivatives or leverage. If the visuals unnerve you, don’t do anything that could get you remotely close to reaching such a situation. 11. ...more

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Knowledge is overrated. Wisdom is underrated. Intellect is overrated. Temperament is underrated. Outcome is overrated. Process is underrated. Short-term outperformance is overrated. Long-term adherence to one’s investment philosophy is underrated. Gross return is overrated. Stress-adjusted return is underrated. Upside potential is overrated. Downside protection is underrated.

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Maximization of returns is overrated. Avoidance of ruin is underrated. Growth is overrated. Longevity is underrated. Entry multiple is overrated. Exit multiple is underrated. Price-to-earnings ratio is overrated. Duration of competitive advantage period is underrated. Categorization of stocks into large cap, mid cap, and small cap is overrated. Categorization of businesses into great, good, and gruesome is underrated. Being more frequently right than others is overrated. Being less wrong than others is underrated. Forecasting is overrated. Preparation is underrated. Confidence is overrated. ...more

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investing is a liberal art that involves cross-pollination of ideas from multiple disciplines.

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Compounding is one of the most powerful forces in the world. In fact, it is the only power law in the universe that exists with a variable in its exponent. The power law of compounding not only is applicable to investing but also, and more important, can be applied to continued learning. The fastest way to simplify things is to spot the symmetries, or invariances—that is, the fundamental properties that do not change from one object under study to another.

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And mistakes are great teachers. As Michael Jordan once said, “I’ve missed more than nine thousand shots in my career. I’ve lost almost three hundred games. Twenty-six times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”

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The takeaway is that we cannot come out with a correct solution on the first attempt. Start with a probable solution (hypothesis) and continue correcting the mistakes until you arrive at the right solution. Thomas Edison was famous for using this approach for his inventions. When he said that invention is 1 percent inspiration and 99 percent perspiration, the perspiration was the process of incrementally making mistakes and learning from them to make the next attempts apt to be closer to right. When Edison was asked how he felt about his countless failed attempts at making a light bulb, he ...more

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The Internet is the best school ever created. The best peers are on the Internet. The best books are on the Internet. The best teachers are on the Internet. The tools for learning are abundant. It’s the desire to learn that’s scarce. —Naval Ravikant

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One of the best hacks in the investment field is learning to be happy doing nothing.

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We have two lives, and the second begins when we realize we have only one. —Confucius

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Mark Twain, who said, “Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.”

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Most of us miss out on life’s big prizes. The Pulitzer. The Nobel. Oscars. Tonys. Emmys. But we’re all eligible for life’s small pleasures. A pat on the back. A kiss behind the ear. A four-pound bass. A full moon. An empty parking space. A cracking fire. A great meal. A glorious sunset. Hot soup. Cold beer. Don’t fret about copping life’s grand awards. Enjoy its tiny delights. There are plenty for all of us.7

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The best things in life are not things. They are experiences. What we truly treasure in the long run comes from experiences. Engaging experiences trump material objects when it comes to deriving lasting happiness. The pleasure derived from things is transitory, but the joy that comes from experiences is enduring. Don’t chase things. Make memories. We are all on a journey. No one lives forever. Be generous to those who cross your path. Give to those who need. Touch hearts and spread happiness, hope, and optimism through your words and actions.

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All our worries and plans about the future, all of the replays in our minds of the bad things that happened in the past is all in our heads (the human mind has a tendency to create issues out of nothing when it’s idle). This worrying just distracts us from living fully right now. Let go of all that and instead focus on what you’re doing right at this moment. You cannot reconstruct the framework of your reactions unless you deconstruct everything first, which you can only do by leaving things behind. Many events in life are outside our control. So we should just let it go and continue putting ...more

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Every big decision we make in life usually involves some sort of a trade-off. At times, we have to accept small regrets to avoid large ones later. Many people spend so much time worrying about the risks of taking action that they completely overlook the risks of failing to act. Sure, if you don’t take any risk, there’s no failure associated. No pain.

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No pain? Really? Regrets will haunt you for the rest of your life. Failure hurts but passes quickly. Conversely, regret hurts forever. It’s hard to look back and face the opportunities missed because of a lack of initiative. Failure doesn’t hurt as much as witnessing how fear led us to mistrust our intuition. You only need to succeed once to unlock a new world of possibilities. Regret is in the nondoing. Many people are experts at success, but amateurs at failure.

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Will Durant put it best when he said, “We are what we repeatedly do. Excellence, then, is not an act, but a habit.”

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“Ego = 1 / Knowledge. More the knowledge lesser the ego, lesser the knowledge more the ego.” The deeper one dives into any field, the more humble one generally becomes (also known as the Dunning-Kruger effect). By demonstrating intellectual humility and acknowledging what we don’t know, we place ourselves into a beneficial position to learn more—thus, the dawning of wisdom.

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A tree that wants to touch the sky must extend its roots into the earth. The more it wants to rise upward, the more it has to grow downward. Similarly, to rise in life, we need to be down to earth and humble.

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The most fundamental attribute of financial markets is uncertainty. UNCERTAINTY. The most fundamental fact about human life and economic activity. In the real world, uncertainty is ubiquitous; on Wall Street, it is nonexistent.3

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Inspired by the German mathematician Carl Gustav Jacob Jacobi, Munger explains, Invert, always invert: Turn a situation or problem upside down. Look at it backward. What happens if all our plans go wrong? Where don’t we want to go, and how do you get there? Instead of looking for success, make a list of how to fail instead—through sloth, envy, resentment, self-pity, entitlement, all the mental habits of self-defeat. Avoid these qualities and you will succeed. Tell me where I’m going to die, that is, so I don’t go there.

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One sign of emotional intelligence is the ability to admit error. A mistake denied is a lesson not learned. Reflect deeply and objectively evaluate your performance. It is only through an honest self-assessment that an investor can discover his or her circle of competence.