Even the best investors make mistakes. What separates the successful from the unsuccessful is how they learn from them.
“Charlie Munger always reminded us that forgetting your mistakes is a terrible error if you’re trying to improve your thinking,” said Josefino Gomez, a Registered Financial Planner (RFP), in an interview with Financial Adviser PH. “The goal is not to eliminate mistakes—they’re inevitable—but to reduce their frequency and magnitude.”
Why Admitting Mistakes Matters
According to Gomez, investors often fall into the trap of ignoring or rationalizing errors. “If you can’t explain why you lost money on a stock, then the business was probably too complex for you,” he explained. “And if you don’t understand what went wrong, you’ll likely repeat the same mistake.”
The antidote? Stay within your circle of competence. Invest in businesses you truly understand—where your knowledge and experience give you an edge. That way, when losses happen, you can analyze them, learn, and improve.
The Power of Multidisciplinary Thinking
Munger famously argued that wisdom comes from combining insights across fields. For investors, this means creating a toolkit of mental models—frameworks from psychology, history, economics, and more—that help explain the world.
“Think of it as having different checklists for different companies,” Gomez said. “The same way a pilot has a checklist for takeoff and another for landing, investors need multiple frameworks depending on the industry or situation.”
This multidisciplinary mindset helps investors avoid blind spots. For example:
- Psychology helps explain market bubbles and crowd behavior.
- Mathematics sharpens risk analysis and probabilities.
- History shows how cycles repeat and crises echo the past.
“The challenge isn’t the lack of available knowledge,” Gomez added. “It’s how to put these models together into a clear, orderly latticework for decision-making.”
Becoming a Learning Machine
People who rise in life, Gomez emphasized, are not always the smartest or most hardworking—but they are learning machines. “They become a little wiser every day,” he said. “That cumulative learning compounds just like money does.”
Practical ways to adopt this mindset include:
- Reviewing past decisions regularly. Write down what you expected and compare it to the outcome.
- Seeking mentors. Learn from people who’ve faced similar challenges before.
- Reading across disciplines. Wisdom is borrowed, not reinvented.
- Fixing mistakes quickly. The faster you correct an error, the smaller the damage and the quicker the recovery.
Wisdom Beyond Knowledge
In the end, Gomez pointed out that worldly wisdom goes beyond simply accumulating facts. “Knowledge alone is not enough. You also need judgment, experience, and common sense—which, ironically, isn’t so common,” he said.
For investors, that means building a framework where mistakes become lessons, where different disciplines strengthen decisions, and where wisdom is practiced daily.
The Bottom Line
No one avoids mistakes, not even the greatest investors. But by embracing a multidisciplinary approach, learning continuously, and having the humility to admit errors, investors can steadily sharpen their judgment.
“Worldly wisdom isn’t about being perfect,” Gomez concluded. “It’s about becoming wiser every day—and that’s what leads to better decisions, in investing and in life.”
