net present value that results over a lifetime. It is akin to buying a dollar for less than one cent. 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.
Time is a resource that becomes increasingly scarce for everyone with each passing second. Learn to value your time highly. Buffett avoids long daily commutes to work for this very reason. No matter how much money you have, you can’t buy more time. We each have only twenty-four hours available to us every day. Time is the currency of life that appreciates in value the more it’s spent. Minimize your commute time to work and outsource all of the noncore time-consuming menial tasks to free up valuable time for self-development. The extra money spent on these small luxuries will pinch initially, but over time, you will realize that it was well worth it. In the long term, the daily investment in learning something new and improving yourself goes a long way. So, the best investment of time is to invest in personal development. I hope the time you are investing in reading this book today yields positive results for the rest of your life. After having successfully achieved financial freedom through my passionate pursuit of lifelong learning, I can happily say that I am a better investor because I am a lifelong learner, and I am a better lifelong learner because I am an investor.
It seems fitting to end this chapter with the golden words of wisdom from two of the greatest learners and thinkers to have ever lived.
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
Those who keep learning, will keep rising in life.
—Charlie Munger
The body is limited in ways that the mind is not. In fact, by the time most people are forty years old, their bodies begin to deteriorate. But the amount of growth and development that the mind can sustain has no limit.
Reading keeps our mind alive and growing. That’s why we should inculcate a healthy reading habit. Reading is also meditative and calming.
Books are truly life changing, particularly once you’ve developed the habit of reading every day while watching your every thought. The neuronal connections that compound through the effort will make you an entirely new person after a few years.
Warren Buffett and Charlie Munger estimate that they spend 80 percent of their day reading or thinking about what they have read.
Therein lies the secret to becoming smarter.
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.
When someone asked Jim Rogers what was the best advice he ever got, he said it was the advice he received from an old man in an airplane: read everything.
All successful investors have a common habit. They just love to read all the time.
As Munger says, “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time—none, zero. You’d be amazed at how much Warren reads—at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”1
Vicarious Learning
The reading of all good books is like a conversation with the finest minds of past centuries.
—René Descartes
There is no better teacher than history in determining the future…. There are answers worth billions of dollars in a $30 history book.
—Bill Gross
Throughout the course of humanity, we have been recording knowledge in books. That means there’s not a lot that’s new; it’s just recycled historical knowledge. Odds are that no matter what you’re working on, somewhere, someone who is smarter than you has probably thought about your problem and put it into a book. Munger says:
I am a biography nut myself. And I think when you’re trying to teach the great concepts that work, it helps to tie them into the lives and personalities of the people who developed them. I think you learn economics better if you make Adam Smith your friend. That sounds funny, making friends among the eminent dead, but if you go through life making friends with the eminent dead who had the right ideas, I think it will work better in life and work better in education. It’s way better than just being given the basic concepts.2
Making friends with the eminent dead and the great thinkers of the past is a highly rewarding exercise. Morgan Housel writes:
Everything’s been done before. The scenes change but the behaviors and outcomes don’t. Historian Niall Ferguson’s plug for his profession is that “The dead outnumber the living 14 to 1, and we ignore the accumulated experience of such a huge majority of mankind at our peril.” The biggest lesson from the 100 billion people who are no longer alive is that they tried everything we’re trying. The details were different, but they tried to outwit entrenched competition. They swung from optimism to pessimism at the worst times. They battled unsuccessfully against reversion to the mean. They learned that popular things seem safe because so many people are involved, but they’re most dangerous because they’re most competitive. Same stuff that guides today, and will guide tomorrow. History is abused when specific events are used as a guide to the future. It’s way more useful as a benchmark for how people react to risk and incentives, which is pretty stable over time.3
The more you read, the more you build your mental repertoire. Incrementally, the knowledge you add to your stockpile will grow over time as it combines with everything new you put in there. This is compounding in action, and it works with knowledge in much the same way as it does with interest. Eventually, when faced with new, challenging, or ambiguous situations, you will be able to draw on this dynamic inner repository, or what Munger refers to as a “latticework of mental models.”4 (Mental models are an explanation of how things work, what variables matter in a given situation, and how they interact with one another. Mental models are how we make sense of the world.) You will then respond as someone whose instincts and judgment have been honed by the experiences of others, rather than just your own. You will start to see that nothing is truly new, that incredible challenges can and have been overcome, and that there are fundamental truths about how the world works.
So, learn from others. Figure out where you are going and find out who has been there before. Knowledge comes from experience, but it doesn’t have to be your experience.
Creating Time to Read, Learn, and Think
Warren and I do more reading and thinking and less doing than most people in business. We do that because we like that kind of a life. But we’ve turned that quirk into a positive outcome for ourselves. We both insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think.
—Charlie Munger
The rich invest in time, the poor invest in money.
—Warren Buffett
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