Charlie Munger is an advocate of using interdisciplinary discipline in solving problems. As an example, in solving a business problem one must not simply be restricted using business or economic concepts and solutions. But must also take into consideration psychology, biology, sociology, and any other disciplines. Restricting to one’s discipline, would be like, according to him, a one legged person in an ass kicking contest.
The following puzzling questions are adapted from lectures by Mr. Charlie Munger. Try to answer them.
1. An activity in the US, with one-on-one contests, and a national championship. The same person won the championship on two occasions about 65 years apart. Name the activity.
2. A new furniture and appliance store in a strange city opened up selling at a rate of more than $500 million a year (Before that the largest furniture and appliance store was selling $350 million a year). From the day it opened up, 3200 spaces in the parking lot were full. In short it’s hugely successful. What explains the runaway success of this new furniture and appliance store which is outselling everything else in the world? (You can state as much as you want.)
3.’You own a small casino in Las Vegas. It has fifty standard slot machines. Identical in appearance, theyâ€™re identical in the function. They have exactly the same payout ratios. The things that cause the payouts are exactly the same. They occur in the same percentages. But thereâ€™s one machine in this group of slot machines that, no matter where you put it among the fifty, in fairly short order, when you go to the machines at the end of the day, there will be 25% more winnings from this one machine than from any other machine. What is different about that heavy winning machine? Why do you think more people play it? ‘
4.’Thereâ€™s a tire store chain in the Northwest, which has slowly succeeded over 50 years, the Les Schwab tire store chain. It just ground ahead. It started competing with the stores that were owned by the big tire companies that made all the tires, the Goodyears and so forth. And, of course, the manufacturers favored their own stores. Their â€œtied storesâ€ had a big cost advantage. Later, Les Schwab rose in competition with the huge price discounters like Costco and Samâ€™s Club and before that Sears Roebuck and so forth. And yet here is Schwab now, with hundreds of millions of dollars in sales. And hereâ€™s Les Schwab in his 80s, with no education, having done the whole thing. How did he do it?’
5. The heart and soul of the integrity of a delivery system is that all the packages have to be shifted rapidly in one central location each night. And the system has no integrity if the whole shift canâ€™t be done fast. And Federal Express had one hell of a time getting the thing to work. And they tried moral suasion, they tried everything in the world (including increasing hourly pay), and finally somebody got the right solution. What do you think was his solution?
6.Early in the history of Xerox, Joe Wilson, who was then in the government, had to go back to Xerox because he couldnâ€™t understand how their better, new machine was selling so poorly in relation to their older and inferior machine. Why?
Answers will be released next week. If you can’t wait for the answers. You can search for the speeches and read the whole thing.
About the contributor:
The writer is a financial planner, investor, speaker and a self confessed cheapaholic. (Cheapaholic- a term he invented to mean someone who is addicted to being very cheap). Send in your questions. He will try to answer any questions you might have, preferably on finance and money matters. Although he does not object to questions on love and relationships, he never had one and due to his extreme cheapness, will probably never have one (In case youâ€™ll send it mistakenly, he promised to forward it to HeaRty).
Disclaimer: Advice posted in this portion is merely opinions and views of the writer. It does not constitute formal advice. The writer will not be responsible for any of your gains or losses. If symptoms persist, contact your trusted financial planner.