Learning Machines - and how to be one

As a young lawyer Charlie Munger was paid $20 per hour. One day he thought to himself, ‘who’s my most valuable client?’ He concluded that it was himself. As a result, he ‘sold’ to himself one hour of every day to read. Munger said, ‘I’ve always wanted to improve myself, even if it reduces my income in any given year’.

So Munger did just that. He began a learning journey that continues to this day. Today, in his nineties he says, ‘Nothing has served me better in my long life, than continuous learning’.

So, what is a learning machine? One of the greatest skills in life, is to be a good learner. This is someone who can pick up a new idea or skill, learn it to mastery and then use it for the rest of their lives. A learning machine is someone who rises each day to learn something new through reading, studying, or listening to wise people.

Reading, reading, reading

Reading is one of the greatest ways to learn, and a great way to become a little wiser.

Charlie Munger said, ‘In my whole life, I have known no wise people who didn’t read all the time – none, zero. You’d be amazed at how much Warren reads and how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out’.

On a daily basis Buffett keeps his diary free so that he is able to spend most of his day reading and thinking in his office. He reads around 500 pages each day including five daily business newspapers. Buffett said, ‘This is how knowledge builds up, it’s like compound interest’.

Long term results

The reading and continuous learning of Buffett and Munger has delivered incredible long-term results. One of the reasons for this is that it has enabled them to adapt, as new ideas and technologies have come along. For example, Berkshire Hathaway now owns around 6% of Apple.

In a commencement speech to USC Law School in 2007, Charlie Munger said, ‘The skill that got Berkshire through one decade, would not have sufficed to get us through the next decade. Without Warren Buffett being a learning machine, the record would have been absolutely impossible’.

The learning process

We can learn much from reading, studying, and listening to wise people, but we can also learn an incredible amount by doing, and gaining the experience that comes from that. We can learn through our successes, and also through our failures.

Learning is one of the greatest habits one can learn. Munger said, ‘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 habit help, particularly when you have a long run ahead of you’.

How to be a learning machine

There are a number of ways for investors to become learning machines. Here are five:

1. Read every day. There is no shortage of great investment books to read.
2. Set some learning goals. Think through what you would like to learn over the coming year and draw up a plan. Then make a start.
3. Learn the big ideas. There are many ideas in disciplines such as psychology that apply to investing. It pays to know these ideas, so that when the time arises, we can avoid these psychological traps.
4. Practice. Whenever we learn a new idea or skill, we should practice it until it becomes fluent.
5. Learn the right lessons. When we make a mistake, we should think through the situation carefully, to try to understand exactly what went wrong. If we don’t, there’s a chance it might happen again.