Blog

 

The Thinking Tool That Warren Buffett Uses to Avoid Failure

8 May 2020

 1-min  Read

WARREN BUFFETT’S SECRET TO SUCCESS REVEALED!

 

We’ve all heard about him, we probably even know how to spell his name without looking it up. He is none other than Warren Buffett. He is a successful business tycoon, investor, and brilliant public speaker, and also runs Berkshire Hathaway which owns around 60 giant companies around the world. Of course, he is also a billionaire who consistently features on the pages of Forbes, as one of the wealthiest men alive! But let us admit, Buffett is also known to be extremely smart, which brings me to the conclusion, who wouldn’t want to learn his secret of success?

Warren Buffett once actually revealed a simple skill that enables him to make wise decisions and avoid stupidity altogether. You might think he was joking, but there is actually a simple philosophy that ideally enables one to do so. It is called inversion.

Avoid stupidity instead of seeking success.

Inversion is a method of thinking in which you consider the opposite of what you want, or thinking about what you want to achieve in reverse. We do this so we can prevent ourselves from doing things that can lead to mistakes. The famous Charlie Munger, the business partner of Warren Buffett and Vice-Chairman of Berkshire Hathaway, is famous for his quote “All I want to know is where I’m going to die, so I’ll never go there.”, which is clearly inspired from the theory of inversion.

Inversion originally stemmed from a German mathematician named Carl Jacobi. He was particularly known for his ability to solve hard problems by following a strategy of man muss immer umkehren which loosely translates to “invert, always invert.” While Jacobi used inversion to solve math problems, Warren Buffett and Charlie Munger use it to make other decisions in investing, business, etc.

Inversion basically propagates solving problems by avoiding stupidity, instead of trying to be brilliant and successful. Avoiding stupidity translates to making better decisions and evading blunders, which will ultimately lead you to success in whatever you pursue.

How can we practically apply inversion?

No problem can be solved by looking at it one way. Buffett and Munger believed that it was in the nature of things that hard problems are best solved only when we look at them backward. Therefore, we need to look at problems forward and backward.

For example, say you want to begin a new business. Ideally, you think in a forward direction. You would come up with all the plans that will ensure your business is the best and runs smoothly to make profits. The next step in inversion is to also think backward. Make a list of the things that could sabotage your business, and then stay away from them as you progress. Simple, right?

You could apply the theory of inversion in making financial decisions too by asking yourself, ”How can I destroy my personal wealth?” Then list out everything that will make you miserable and ensure you stay away from those. It’s as simple as that.

Inversion is, thus, one of the most powerful mental models we can adopt to make our lives easier and investing decisions not as hard as it sounds!

Save & Invest Your Spare Change!

More in Roundups

6 Steps on How to Invest in Share Market

5 Mar 2020

 5-mins Read

3- Side Hustles to earn over Rs. 35,000 Per Month

11 Mar 2020

 3-mins Read

What are Index funds: Benefits, Differences and More

11 Mar 2020

 5-mins Read

How to Invest in Bharat Bond ETF?

11 Mar 2020

 3-mins Read