You are hereBook Summary of 'Outliers' recommended by Charlie Munger

Book Summary of 'Outliers' recommended by Charlie Munger

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By Srikorada - Posted on 17 May 2009

This is a very well written book that tried to explain the classic confusion among the society "What makes people successful?". Is it really the DNA or Luck or a combination of factors that we never really had the time to analyze.
When Charlie Munger recommened this to his audience in 2009 Wesco meeting, I walked out with a determination to read it ASAP, not just skim it but read it cover to cover. I can say that it was time well spent. But then the question is; How do we apply what we learnt here in this book to our lives and ofcourse to our Investing careers. Briefly about the organization of the book: It has Nine chapters with an Epilogue at the end describing the Author's family tree and it's transformation and how his family members were presented with the opportunities that enabled him to be an Outlier. The book makes two distinctions; Opportunity, Legacy. He explains the factors of success through these two lenses. The notes at the end of the book summarize where the Author sourced his information from, and additional reading materials for reference. If you are interested you can read the studies that were presented in the book.
Highlights of the book: This book brings forth a thorough analysis of all the factors of Success and explains the Lollapalooza effect that can rocket a human being into the orbits of success. We all know that Bill Gates is highly successful and changed the world with his Vision. But no one ever explained what were the factors that lead to the extreme success of Bill gates. We also know that Asian Americans are good at math and have high success rate in the colleges, but again no one tried to analyze why? He also explained the pitfalls in long summer vacation in American educational system and how tweaking that approach and having kids spend more time in school can prove immensely helpful and gives them a real chance at entering the college. All the explanations to the above theories were well laid out and supported with statistical research. What the book teaches us? Matthew effect: "For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath." In plain english you can find the explanation for this in Wikipedia. Here it is "The Matthew effect in sociology is the phenomenon that "the rich get richer and the poor get poorer". Those who possess power and economic or social capital can leverage those resources to gain more power or capital. The Matthew effect results in a power law distribution of resources" He explains this concept with the cut off dates for Canadian Hockey (Jan 1st) and some academic institutions.
When you finally look at the results of star atheletes, their birth dates are always crowded around the cut off dates and full term qualified candidates. For e.g. A player who completed 10 years on Jan 1st(cut off date) is physically and mentally more mature than some one who is born in Aug and is qualified for the game. He has proven this concept with some good statistics behind. It was really amazing to discover that.
He also carries forward that concept to the academic competitions where students gain an unknown advantage over others by virtue of their birth dates. 10000 hr Rule: Every one stands a chance to succeed if they are willing to work hard for that. A person stands a better chance of succcess when they find out early what they are after, and put in the 10000 hrs to perfect the trade. No body can ever achieve excellence with out practicing a complex task for long hours and real hard. As Warren Buffett famously said "any thing more than IQ 120 is not necessary" to be a better investor, while it is true, the success directly depends on the amount of practice that is put into the profession. He illustrates this theory with Hockey players, Olympic athletes, NBA players, Bill Gates, Warren Buffett, Beatles, and numerous others who put in long hours starting at the very young age. He calls it the 10000 hr rule. And he also mentions that it takes 10 yrs to put that time in. Hockey players who start intense practice at 6 years of age and Bill Gate's obsession with programming at an early age give them an immense cumulative advantage. If you listened to Charlie Munger talk about Warren, we hear the mental database of Buffett because he has been reading since 8 years. IQ and Cultural Legacy, and it is possible to shed your Legacy and work with change: He argues that IQ may not determine the success of a person where as the Practical Intelligence is really important in the real life success. He cites extensive research and statistic examples by Lewis Terman and Annette Lareau to prove that high IQ does not really mean high success.
At some point of life, practical intelligence takes over which depends on the family circumstances and the books one reads and the society he grows up with. He also illustrates that a student raised in a middle class family with additional summer programs and enahancement activities has a better chance to succeed and live a good life. He also explains the effects of cultural legacy on one's success. He laid out the story of Korean Airlines unusually high crash rate in 1990's due to it's hierarchical culture which prevented a proper communication in the cockpit between the Captain and the First officers. This was really an eye opening story. And once they changed the training methods and communication protocol, Korean Airlines went on to become one of the safest airlines to fly. Asian Amerincans and Math and Rice Paddies in China: He attributes the above average math skills of Asians to their cultural habits of hard work and not giving up on the problems. He also mentioned that in the International Olympiad for Mathematics, the Asian counties rule the top of the charts. Singapore, China, Japan, Korea, Hong Kong all excel at Math due to their cultural background of hard work and their method of math learning with seemingly easier numbering system which requires only 1/3 of western Math's memory requirements. China's rice paddies require meticulous analysis and execution and that can be directly attributed to the Asian American students' success in MIT, Harvard and other institutions. But he also cites a study which concludes that the Overall IQ does not show any advantage for Asian Americans. And it is the practice that matters.
Knowledge is Power Program(KIPP): This is one of the best take aways from the book. KIPP is a social initiative started by David Levin and Michael Feinberg in TX and NY. They started schools for underpriveleged kids with long hours and extra attention which proved that it is the practice and hardwork that matters. These kids from KIPP Schools have all of them entering into college irrespective of their Color, Social background, Economic status. Well, that was it. I wanted to keep it really short. Your best bet is to read the book. Here I tried to describe the KEY take aways from the book.
Some of the books suggested by the Author:
The Number Sense: How the Mind Creates Mathematics
Genius Explained
The Happiest Man
Normal Accidents
Culture's consequences

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