Munger on Multidisciplinary Thinking, Part 1

In April 1998, Charlie Munger, the legendary investor and Vice Chairman of Berkshire Hathaway, delivered a speech at the fiftieth reunion of the Harvard Law School Class of 1948. Titled: The Need for More Multidisciplinary Skills from Professionals: Educational Implications, the speech looks at why investors and professionals need more multidisciplinary skills.

In the speech, he talks about how complicated real-world problems cannot be solved using the tools and knowledge from a single profession. Therefore, good professionals and investors need to understand and assimilate a broad range of ideas from different disciplines and use them to solve problems.

He breaks down the speech into five pertinent questions:

• Do broadscale professionals need more multidisciplinary skill?
• Was our education sufficiently multidisciplinary?
• In elite broadscale soft science, what is the essential nature of practicable best-form multidisciplinary education?
• In the last fifty years, how far has elite academia progressed toward attainable best-form multidisciplinarity?
• What educational practices would make progress faster?

Each week, we’ll examine one question and the lessons from it. We start with the question around multidisciplinary skill.

Do broadscale professionals need more multidisciplinary skill?

Munger's answer is an unequivocal yes. His argument is relatively simple: the problems we encounter in the real world don't distinguish between academic or professional disciplines. But, the way we are educated to tackle those problems often does.

A business problem may involve economics, psychology, incentives and competition all at once. And an investment decision may require an understanding of accounting, probability, human behaviour and the competitive environment. Looking at such a problem exclusively through the lens of one discipline can leave important pieces of the puzzle out.

• The “man-with-a-hammer” tendency: One of Munger's most memorable concepts is what he calls the “man-with-a-hammer tendency.” His point is that when someone has only one tool, they are likely to see every problem as something that can be solved with that tool. A lawyer may approach a problem primarily as a legal problem. An economist may see it through the framework of economics. A financial professional may instinctively look for a financial explanation. The problem is not expertise itself, but when expertise becomes the only lens through which a person sees the world. For an investor, the more tools they have, the less likely they will force-fit every investment decision into the same analytical framework.
• Real-world problems don't fit neatly into disciplines: Munger's second point is that the world itself is multidisciplinary. Academic subjects may be separated into economics, psychology, mathematics, law, biology and other fields. But real-world events don't arrive labelled by subject.  An investment decision, for example, can involve several forces operating simultaneously: a company's pricing power may have an economic explanation, its customers' behaviour may have a psychological one. Munger compares this to playing bridge: you cannot understand what is happening simply by counting the trumps while ignoring everything else. In the same way, a professional who relies exclusively on one discipline may be technically competent but still miss the larger picture.
• Incentives can distort professional judgement: Multidisciplinary thinking is also a defence against what Munger calls “incentive-caused bias.” His argument is that professionals can unconsciously move towards conclusions that are favourable to themselves — and then convince themselves that those conclusions are also in the best interests of their clients or society. For example, a fund manager may have reasons to prefer a more complicated strategy. For investors, understanding incentives means asking a simple but important question: who benefits if this conclusion is accepted? 
• You don't need to master every discipline: There is an important distinction in Munger's argument. He isn't suggesting that every professional should become an expert in everything. Instead, he advocates understanding the big ideas from different disciplines and being able to use them when necessary.

The heart of the lesson

According to Munger, the world is too complicated for most important decisions to be reduced to a single discipline. The objective is to build a “latticework of mental models,” or a collection of useful ideas that can be assimilated and used together when solving a problem. The best professionals are not the ones who know the most about one subject, but those who know enough about several subjects and their intersectionality. The solution isn't to abandon specialisation, but to go beyond and add breadth to expertise.