Tom Matthews
One of the most valuable mental models championed by Charlie Munger, the vice chairman of Berkshire Hathaway, and his legendary business partner, Warren Buffett, is the concept of inversion. Munger often says, “Invert, always invert.”
This simple yet powerful approach can profoundly impact how we think, solve problems, and make decisions. But what does it really mean to think in reverse, and why is it so powerful?
What is inversion?
Inversion is a problem-solving technique that involves flipping a problem or question on its head. Instead of asking, “How do I achieve success?” an inversion approach would be, “What could cause me to fail?”. By understanding what not to do, we often find clarity on what we should be doing. The idea is that solving a problem backward can often be more insightful than tackling it head-on.
This technique has roots in mathematics and is often used by experts to solve complex problems. Munger has adapted this concept to decision-making and investing, and it can be applied across numerous aspects of life and business.
Why inversion works?
- Reduces bias and blind spots: humans are naturally inclined to think in a forward direction — focusing on achieving goals or outcomes. However, this often leads to cognitive biases and blind spots. By looking at the opposite — what could go wrong — inversion helps in identifying potential pitfalls that we might otherwise overlook
- Clarifies goals and priorities: when we think about what to avoid, it sharpens our focus on what’s truly important. For example, instead of asking how to become wealthy, ask what habits or behaviours lead to poverty. The answers often provide a more direct path to achieving the opposite outcome
- Simplicity in decision-making: inversion allows for a simplified approach to problem-solving. Instead of getting caught in the complexities of a situation, asking what to avoid often leads to clearer, more straightforward decisions. For Munger and Buffett, this means avoiding businesses they don’t understand or situations where the risk is hard to quantify
- Promotes preventive thinking: a proactive mindset is invaluable in both business and life. By thinking about what could go wrong, you are more likely to take preventive steps, mitigating risks before they materialise. This is a core principle for both Munger and Buffett, who focus on managing downside risks as much as they do on finding opportunities.
Practical applications of inversion
Inversion isn’t just a tool for investing; it can be applied to various fields and situations. Here are a few practical examples:
- Business strategy: instead of asking how to grow a company, ask what could cause the company to decline or fail. This could be anything from a poor customer experience to high employee turnover. By identifying these factors, businesses can address them pre-emptively
- Personal development: instead of setting goals like “How can I be more productive?” invert the question to “What makes me unproductive?”. By eliminating distractions, reducing multitasking, and managing time better, productivity will naturally improve
- Health and wellness: instead of asking, “How can I be healthy?” ask, “What habits of mine are unhealthy?”. By identifying detrimental habits such as poor diet, lack of exercise, or insufficient sleep, you create a clearer path to well-being
- Leadership: rather than asking, “How do I become a great leader?” ask, “What behaviours do poor leaders exhibit?”. By inverting the question, you can avoid traits like micromanagement, poor communication, and lack of empathy, which leads to better leadership.
How to implement inversion in your thinking?
- Identify the problem or goal: start by clearly defining what you want to solve or achieve
- Invert the problem: flip it on its head. Instead of focusing on how to get there, ask what would prevent you from reaching that goal
- Analyse the inverted problem: identify the obstacles, mistakes, or missteps that could occur. This helps in creating a comprehensive list of what not to do
- Develop strategies to avoid these pitfalls: once you know what to avoid, you can create a strategy that minimises risks and enhances the likelihood of success
- Test and iterate: continually test your strategies and decisions against the inverted problem. This will keep your decision-making process robust and adaptive.
Conclusion
Inversion is a tool of immense power in decision-making, investing, and life in general. Charlie Munger and Warren Buffett have used this mental model to great effect, and it has contributed to their reputation as two of the most successful investors in history.
By embracing the power of inversion, you can simplify your decision-making process, reduce risk, and create more resilient strategies in both business and personal endeavours. As Munger wisely advises, “Invert, always invert.” It’s a straightforward yet profound way to ensure you’re always thinking clearly and effectively.
Are you ready to start inverting your thinking? The results might surprise you.
