A rough rule in life is that an organization foolish in one way in dealing with a complex system is all too likely to be foolish in another.

If you turn on the television, you'll find the mothers of the most obvious criminals that man could ever diagnose, and they all think their sons are innocent. That's simple psychological denial. The reality is too painful to bear, so you just distort it until it's bearable. We all do that to some extent, and it's a common psychological misjudgment that causes terrible problems.

Never, ever, think about something else when you should be thinking about the power of incentives.

To finish first you have to first finish. Don't get in a position where you go back to go. What's interesting is that some guy whose grandfather was a lawyer and a judge-hurriedly going to Harvard Law with a wave of veterans-I was willing to go into so many different businesses. I was constantly going right into the other fellow's business and doing better than the other fellow did. The reason it was possible? Self-education- developing mental discipline, big ideas that really work.

We both (Charlie Munger and Warren Buffett) insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think.

Failure to handle psychological denial is a common way for people to go broke: you have made an enormous commitment to something. You have poured effort and money in. And the more you put in, the more that the whole consistency principle makes you think, "Now it has to work. If I put in just a little more, then it will work."

If you have competence, you know the edge. It wouldnt be a competence if you didnt know where the boundaries lie. Asking whether youve passed the boundary is a question that almost answers itself.