process
Invert, always invert
The rule
To solve a hard problem, turn it around. Instead of asking how to win, ask how you would surely fail. Then just avoid that.
Where it flips
Pure avoiding can freeze you into never acting at all. Inversion is meant to remove the obvious ways to lose, not to become an excuse to sit out every choice forever.
Munger, borrowing from the mathematician Jacobi, says many problems are best solved backwards. Describe exactly how you would ruin yourself, then do not do those things. In markets, stop asking 'what trade makes me rich'. Start asking 'what reliably wrecks beginners': a careless order in a thin stock, no stop, leaning too hard on a slow indicator, betting too big on one trade. Avoiding the known ways to lose is easier and stronger than finding a secret way to win. A short list of failure traps is worth more to a beginner than any list of setups.
A worked example
Instead of hunting the perfect entry, a beginner lists how people blow up: market orders in thin stocks, skipping stops, doubling down on losers. Then he simply refuses to do them. Avoiding those alone beats most people. [illustrative]
How to spot it
- ·you keep a list of failure traps, not just setups
- ·you ask 'how would this ruin me?' first
- ·you deliberately avoid known blunders (bad orders, no stop)
Charlie Munger · Poor Charlie's Almanack