Charlie Munger, one of the world’s savviest investors, recommends mathematical inversion as an all-around problem-solver in life and finance. It’s Charlie’s not-so-secret process that turns problems into solutions — a keen skill for the Vice Chairman of Berkshire Hathaway.
Inversion takes a problem, flips it upside down, and runs it forwards and backwards until the solution spills out in front of you. As Charlie’s partner, Warren Buffett, said, it’s “like singing country western songs backward. That way you can get your house back, your auto back, your wife back, and so forth.” Inversion turns bad things into good things.
For a real life example, take the State Lottery. It’s unquestionably the worst government program ever, bringing unfounded hope and endless disappointment to our poorest citizens, even if the profits end up in State coffers. How could we turn the State Lottery from the worst government program to the best?
Invert it. First, make it involuntary and assign everyone a number, rich or poor. Reduce the prize money to reasonable amounts. Delay the drawing until every player is old or sick. Make every player a winner, not just one lucky soul who might well be destroyed by the windfall. What you get: Social Security, the government program hardly anyone hates.