Subscribe to BCA Journal Know More

Occam’s Razor

Now that I am a ‘temping’ as a stopgap Editor for this month, I thought I could write something I have been following for months and enjoying listening to! Budgets are a passé this month as we already had a VOA. Books and Videos and Podcasts I am finding with each passing day have the best ROI over a long period of time as they compound so well. Some 25-odd years ago, you paid lacs of rupees to get information, or to learn live from the smartest / wisest people alive. You travelled far. Say what information a fancy international advisor had is today available freely (if not free) on the internet for a fraction of the cost. In other words, one can learn something that is priceless with about ₹1000 of data!

In November 2023, we lost Charlie Munger, one of the smartest men (super investor) alive, just weeks before he would have turned a hundred. For his age, he had the advantage of being through many more years than most people alive. He was also at a vantage point where most people aren’t – being a top investor in US markets. However, his greatest knack was: seeing what most people didn’t, in a way one needs to see at that point of time and capture and articulate it so brilliantly.

If you haven’t heard of him, read on. If you haven’t heard him, you must. If you have, you should hear him again and read up on him! Just as music is to aficionados of music, so is the light of wisdom to seekers of it. What a way he communicated — a combination of intellectual honesty (churn of learning from experience), with a flow of precise witty directness that penetrates a worthy listener.

In one video, Charlie speaks about ‘tricks’ he learned early in his life. When someone of that stature shares his ninety-plus years of being alive during the most amazing times in human history, one just listens without even blinking their eyes.

I like it when he talks of simple, basic things! In one video, he talks about ‘common sense’. And he calls it – “when a man can operate over a broad range of human territory without making many boners … and that is a very important thing to be good at and the question is how to get it”. We all see how uncommon (common) sense is. Charlie says how he saw someone who was really good at something and he thought he would never be as good as that person. And then he saw all these ‘follies’ out there everywhere. And he thought to himself: “… I suddenly realised (if) I just avoid all the follies, I can get the advantage without having to be really good at anything”. This is a classic Charlie Munger idea which he calls turning something around backwards to find something worthwhile. It is like saying can you stop being stupid, if you can’t be wise; can we stop doing something at least, if we cannot do what should be done?

At another point, he speaks about being a ‘collector of ideas’. “I loved big ideas that had a lot of instructive powers and I didn’t mind when they were in somebody else’s territory.. and I used them to solve problems and do self-education…”. At one point, he says he is a collector of inanities because there are so many of them all around. For all other collections, one needs to put in so much effort. Whereas, collection of inanities and cataloguing them in one’s head, he says has been a wonderful thing. He speaks about interplay of some of these ideas and how the process of synthesis worked in areas other than where the ideas came from.

In his own words, he talks about Occam’s Razor (read more online for this tool for understanding the world) and how things should be made as simple as possible, but not simpler (attributed to Einstein). This is evident from all that Charlie has talked about. How to reduce ideas to irreducible basic elements which are simple and few. Further, he explains how to look at a result that is a lollapalooza. He calls for looking at the ‘confluence of multiple causes’, multiple forces operating in the same direction. He says how with all this he could see more clearly than most experts in that field saw. This is perhaps a key knack to have when investing money apart from everything else in life.

About a specific social science problem, he asks whether we can fix this problem? And, he answers, “Yes.” Then asks whether it is likely to happen? He says, “No.” And this is so true — so many things have absolutely common sense answers that they can be fixed. But when you ask if they are likely to get fixed, the answer is a clear ‘NO’. From a study I did recently on the Ease of Doing KYC, bankers take self-attested PAN cards every two years for KYC, where PAN never changes, and for the existence of customers, they already take a signed form. Now, if you ask the same question – whether this can be fixed by stopping to take self-attested PAN from a biometrically covered nation – the answer is ‘YES’. But if you ask whether this will stop soon, the answer is ‘NO’.

His business partner Buffett says: “Charlie marches to the beat of his own music, and it is music like virtually no one else is listening to.” A good observable generalisation that Charlie points out: “the standard human condition is stupidity … it suffers from mis-cognition”. At another time, he said: “It’s remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” He stretched it further when he said “If people weren’t so often wrong, we wouldn’t be so rich.”

I leave you with my favourite ones:

For its potent obviousness: “The best way to get what you want in life is to deserve what you want”.

For its sarcasm coming from an investor: “The derivative accounting in America is a sewer, is an insult to sewage”.

For its self-deprecating humour: Buffet: Charlie is big on lowering expectations. Charlie: “That’s the way I got married, my wife lowered her expectations”.

About fraudulent accounting: “It’s like what they do in Italy when they have trouble sending mails and they pile up and irritate postal employees, they just throw away a few carloads”.

About Understanding (by Samuel Johnson): “I can give you an argument, but I cannot give you an understanding”.

About Investing in Gold: “I think civilized people don’t buy gold, they invest in productive businesses (unless you were a Jewish family in Vienna in 1939)”.

I won’t mention but I know that you know the type of people this quote is talking about: “When they are talking they are lying and when they are quiet they are stealing”.

Show More

Thank You!

With Best Regards,

CA Raman Jokhakar, Co-Chairman