Charlie Munger: What is Expertise?

Charlie Munger is an investor and a very successful one . Indeed, he is one of the most successful investors in the world. A billionaire. So what is his secret? Well, he has and uses certain expertise, right? It is not just luck. So what is that expertise? The conventional wisdom is that it would be in finance. After all, investors need to make financial decisions — whether to buy or sell ownership interests in companies. So he no doubt would have to have high level financial analytical skills. It seems obvious!

It may seem obvious, but it is not how Charlie Munger himself sees his expertise. No doubt he knows enough about finance that enables him to read financial documents, but that is not the expertise that he credits for his success. Instead, Charlie Munger says that his expertise is in building models that allow him to anticipate human behavior in others. He has built around 100 of these models over the years that apply in different types of situations. And according to Charlie — a source with some credibility — they work.

He is called an “expert generalist”. A person who can use expertise form various fields as needed in order to understand more deeply what is going on in a given situation than “generalists” (people without expertise) and “experts” (people who try to solve problems from the vantage point of only one area of expertise).

This is a new type of expertise, and learning what it means and how to use it is worth practice.


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