Lessons From Charlie Munger

Charlie Munger, vice chairman of Berkshire Hathaway, right-hand man of Warren Buffett, and legendary investor, passed away a couple of weeks ago at the age of 99, just a few weeks shy of his 100th birthday.

While Warren Buffett is the more famous of the two longtime friends and business partners, they were both equally instrumental in transforming Berkshire Hathaway from a small textile mill into the $785 billion juggernaut of a company we know today.

In fact, Buffett credits Munger with changing his investment philosophy to what it is today. Prior to meeting Munger, who was trained as a lawyer, Buffett would focus almost exclusively on investing in distressed businesses. But Charlie convinced Warren to change his strategy from buying “a fair company at a wonderful price” to buying “a wonderful company at a fair price.”

I would say that strategy has worked out well for them. Not only have they grown their company to astronomical heights, but they’ve also amassed billions in personal wealth. And they’ve had a great time along the way.

When speaking of their partnership, Munger said, “It’s almost hilarious. It’s been so much fun.”

On another occasion, Warren Buffett gave Munger high praise saying, “Charlie has given me the ultimate gift that a person can give to somebody else. I’ve lived a better life because of Charlie.”

In addition to being a successful businessman and investor, Charlie Munger is also a great quote. Speaking of his friend, Warren Buffet once said:

“Charlie and I think pretty much alike. But what it takes me a page to explain, he sums up in a sentence. His version, moreover, is always more clearly reasoned and also more artfully — some might add bluntly — stated.”

Here’s one such quote from Munger:

“I believe in the discipline of mastering the best that other people have figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.”

This quote is resonant with me because much of what I try to do with this newsletter is share other smart people’s ideas and insights. We can learn so much from those around us and especially from those with years of experience who came before us. The best advice is often timeless.

Economic environments and financial markets are always changing, investment trends come and go, new tax laws get passed, and yet through all of it, good financial advice remains relatively unchanged.

With that in mind, here are a few lessons and quotes from the late, great investor Charlie Munger.

“I have three basic rules for career success. Meeting all three is nearly impossible, but you should try anyway:

1. Don’t sell anything you wouldn’t buy yourself.
2. Don’t work for anyone you don’t respect and admire.
3. Work only with people you enjoy.

I have been incredibly fortunate in my life: with Warren, I had all three.”

When asked if he and Buffet could replicate Berkshire Hathaway’s success if both were starting out in their 30s today, he responded:

The answer to that is no, we wouldn’t. We had… everybody that had unusually good results… almost everything has three things: They’re very intelligent, they worked very hard, and they were very lucky. It takes all three to get them on this list of the super successful. How can you arrange to have just […] good luck? The answer is you can start early and keep trying for a long time, and maybe you’ll get one or two.

“We [Warren and I] both 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. So Warren and I do more reading and thinking and less doing than most people in business.”

“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.”

Charlie Munger was a big fan and investor in Costco. Once he was asked why there are no good speeches or interviews of Costco founder Jim Sinegal to read. Munger replied, “He was too busy working.”

A couple of years ago Munger was asked what’s his secret to living a happy life. At the age of 98, Munger replied,

“The first rule of a happy life is low expectations. If you have unrealistic expectations you’re going to be miserable your whole life. You want to have reasonable expectations and take life’s results good and bad as they happen with a certain amount of stoicism.”

“I’ve never had any luck changing anyone’s mind in my whole life.”

“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success.”

“If you think your IQ is 160 but it’s 150, you’re a disaster. It’s much better to have a 130 IQ and think it’s 120.”

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”

“Our ideas are so simple that people keep asking us for mysteries when all we have are the most elementary ideas.”

“The big money is not in the buying or the selling, but in the waiting.”

“I am personally skeptical of some of the hype that has gone into artificial intelligence. I think old-fashioned intelligence works pretty well.”

“The world is not driven by greed. It’s driven by envy.”

“The idea of caring that someone is making money faster [than you are] is one of the deadly sins. Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley?”

“Remember that reputation and integrity are your most valuable assets—and can be lost in a heartbeat.”

“I did not intend to get rich. I just wanted to get independent.”

Thanks for reading!