Mungerisms • Charlie Munger Bot
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Quotes by Charlie Munger from his talks and book (Poor Charlie's Almanack) • Bot (Follow for more)
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Avoid dealing with people of questionable character.
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"I read everything: annual reports, l0K's, 10Qt's, biographies, histories, five newspapers a day. On airplanes I read the instructions on the backs of the seats. Reading is key. Reading has made me rich over time."
- Buffett
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If you buy something because it's undervalued then you have to think about selling it when it approaches your calculation of its intrinsic value.
That's hard.
But if you buy a few great companies, then you can sit on your ass.
That's a good thing.
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"The very first step towards success in any occupation is to become interested in it."
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Someone will always be getting richer faster than you.
This is not a tragedy.
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What should a young person look for in a career?
"I have three basic rules. Meeting all three is nearly impossible, but you should try anyway:
-Don't sell anything you wouldn't buy yourself
-Don't work for anyone you don't respect and admire
-Work only with people you enjoy"
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The hedge fund known as "Long-Term Capital Management" recently collapsed through overconfidence in its highly leveraged methods, despite IQ's of its principals that must have averaged 160.
Smart, hardworking people aren't exempted from professional disasters from overconfidence
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[On Alcohol]
While susceptibility varies, addiction can happen to any of us through a subtle process where the bonds of degradation are too light to be felt until they are too strong to be broken.
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A mindset described by Nobel laureate Richard Feynman as follows:
"The first principle is that you must not fool yourself, and you're the easiest person to fool."
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One of the greatest economists of the world is a substantial shareholder in Berkshire from the early days.
His textbook always taught that the market was perfectly efficient and nobody could beat it.
But his own money went into Berkshire and made him wealthy.
He hedged his bet
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The game is to keep learning, and I don't think people are going to keep learning who don't like the learning process.
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More important than the will to win is the will to prepare.
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Avoid evil, particularly if they're attractive members of the opposite sex.
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You have to figure out where you've got an edge.
And you've got to play within your own circle of competence.
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Einstein said that his successful theories came from "Curiosity, concentration, perseverance, and self-criticism."
And by self criticism, he meant the testing and destruction of his own well-loved ideas.
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We read a lot.
I don't know anyone who's wise who doesn’t read a lot.
But that's not enough: You have to have a temperament to grab ideas and do sensible things.
Most people don't grab the right ideas or don't know what to do with them.
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If you rise in life, you have to behave in a certain way.
You can go to a strip club if you're a beer-swilling sand shoveler, but if you're the bishop of Boston, you shouldn't go.
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If you don't keep learning, other people will pass you by.
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"The very first step towards success in any occupation is to become interested in it."
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People are heavily influenced by what other people think and what other people do.
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The best way to avoid envy, recognized by Aristotle, is to plainly deserve the success we get.
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Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things.
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Avoid big mistakes.
Shun permanent capital loss.
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Einstein said that his successful theories came from "Curiosity, concentration, perseverance, and self-criticism."
And by self criticism, he meant the testing and destruction of his own well-loved ideas.
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Indexing can't work well forever if almost everybody turns to it.
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A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.
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No less a figure than Einstein said that one of the four causes of his achievement was self-criticism, ranking right up there alongside curiosity, concentration, and perseverance.
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When you borrow a man's car, you always return it with a full tank of gas.
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You need to have a passionate interest in why things are happening.
That cast of mind, kept over long periods, gradually improves your ability to focus on reality.
If you don't have the cast of mind, you're destined for failure even if you have a high I.Q.
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I have been associated for many years with a man legendary for good judgement, and it never ceases to amaze me to see how much territory can be grasped if one merely masters and consistently uses all the obvious and the easily learned principles.
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Spend each day trying to be a little wiser than you were when you woke up.
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I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle
I asked him, "My God, they're purple and green. Do fish really take these lures?"
And he said, "Mister, I don't sell to fish"
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When you don't know and you don't have any special competence, don't be afraid to say so.
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A mindset described by Nobel laureate Richard Feynman as follows:
"The first principle is that you must not fool yourself, and you're the easiest person to fool."
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Heavy ideology is one of the most extreme distorters of human cognition.
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Be a business analyst, not a market, macroeconomic, or security analyst.
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Avoid dealing with people of questionable character.
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I think track records are very important.
If you start early trying to have a perfect one in some simple thing like honesty, you're well on your way to success in this world.
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There are huge advantages for the early birds.
And when you're an early bird, there's a model that I call "surfing" -
when a surfer gets up and catches the wave and just stays there, he can go a long, long time.
But if he gets off the wave, he becomes mired in shallows.
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Be a business analyst, not a market, macroeconomic, or security analyst.
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Pride in a job well done is vastly constructive.
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And the wise ones bet heavily when the world offers them that opportunity [of a mispriced bet].
They bet big when they have the odds.
And the rest of the time, they don't.
It's just that simple.
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Avoid evil, particularly if they're attractive members of the opposite sex.
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If losses are going to make you miserable - and some losses are inevitable - you might be wise to utilize a very conservative pattern of investment and saving all your life.
So you have to adapt your strategy to your own nature and your own talents.
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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?
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Don't "fall in love" with an investment - be situation-dependent and opportunity-driven.
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You must have the confidence to override people with more credentials than you whose cognition is impaired by [obvious] incentive-caused bias.
But there are also cases where you have to recognize that you have no wisdom to add - and that your best course is to trust some expert.
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I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle
I asked him, "My God, they're purple and green. Do fish really take these lures?"
And he said, "Mister, I don't sell to fish"
0
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Failure to handle psychological denial is a common way for people to go broke.
You've made an enormous commitment to something.
You've poured effort and money in.
And the more you put in, the more you think,
"Now it has to work. if I put in just little more, then it'll work"
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In engineering, people have a big margin of safety.
But in the financial world, people don't give a damn about safety.
They let it balloon and balloon and balloon.
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Good ideas are rare - when the odds are greatly in your favor, bet (allocate) heavily.
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There's no way that you can live an adequate life without [making] many mistakes.
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Remember that reputation and integrity are your most valuable assets - and can be lost in a heartbeat.
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It is usually best to simplify problems by deciding big "no-brainer" questions first.
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Someone will always be getting richer faster than you.
This is not a tragedy.
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To me, it's obvious that the winner has to bet very selectively.
It's been obvious to me since very early in life.
I don't know why it's not obvious to very many other people.
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Often, we've made extra money from doing the right thing.
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When people get bad news, they hate the messenger.
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Both Warren and I, in the makeup of our personalities and in our ethical systems, believe being an effective teacher is a high calling.
Properly done, if teaching isn't the highest calling of man, it is near it.
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Once you get into debt, it's hell to get out.
Don't let credit card debt carry over.
You can't get ahead paying eighteen percent.
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Part of what you must learn is how to handle mistakes and new facts that change the odds.
Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much-loved hand.
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I had a roommate in college who was and is severely dyslexic but he is perhaps the most reliable man I have ever known.
He has had a wonderful Life so far, outstanding wife and children, chief executive of a multibillion dollar corporation.
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Our experience tends to confirm a long-held notion that being prepared, on a few occasions in a a lifetime, to act promptly in scale, in doing some simple and logical thinking, will often dramatically improve the financial results of that lifetime.
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First there's mathematics.
Obviously, you've got to be able to handle numbers and quantities - basic arithmetic.
And the great useful model, after compound interest, is the elementary math of permutations and combinations.
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I believe in the discipline of mastering the best that other people have ever figured out.
I don't believe in just sitting down and trying to dream it all up yourself.
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"I read everything: annual reports, l0K's, 10Qt's, biographies, histories, five newspapers a day. On airplanes I read the instructions on the backs of the seats. Reading is key. Reading has made me rich over time."
- Buffett
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When you don't know and you don't have any special competence, don't be afraid to say so.
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If you wait for the big opportunity & have the courage and vigor to grasp it firmly when it arrives, how many do you need?
For example, take the top ten business investments Berkshire Hathaway's ever made
We would be very rich if we'd never done anything else - in two lifetimes
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I'm right, and you're smart, and sooner or later you'll see that I'm right.
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People don't think about the consequences of the consequences.
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The only way to win is to work, work, work, work, and hope to have a few insights.
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25
When people get bad news, they hate the messenger.
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As Jesse Livermore said, 'The big money is not in the buying and selling...but in the waiting'.
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Mimicking the herd invites regression to the mean.
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Acknowledging what you don't know is the dawning of wisdom.
0
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This simple idea may appear too obvious to be useful, but there is an old two-part rule that often works wonders in business, science, and elsewhere:
(1) Take a simple, basic idea and
(2) take it very seriously.
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25
In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time - none, zero.
You'd be amazed at how much Warren reads - and at how much I read.
My children laugh at me. They think I'm a book with a couple of legs sticking out.
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More important than the will to win is the will to prepare.
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[On "ingesting chemicals"]
The four closest friends of my youth were highly intelligent, ethical, humorous types, favored in person and background.
Two are long dead, with alcohol a contributing factor, and a third is a living alcoholic - if you call that living.
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The only way to win is to work, work, work, work, and hope to have a few insights.
0
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Human beings are psychologically predisposed to commit fraud when available incentives overwhelm structural checks and balances.
"If you want to change behaviors, you have to change incentives."
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People who could never win a chess tournament or a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence -
which results partly from what they were born with and partly from what they slowly develop through work.
0
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Mimicking the herd invites regression to the mean.
0
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"A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventuality die, and a new generation grows up that is familiar with it"
- Max Planck
0
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25
Life and its various passages can be hard, brutally hard
The three things I have found helpful in coping with its challenges are:
- Have low expectations
- Have a sense of humor
- Surround yourself with the love of friends and family
Above all, live with change and adapt to it
0
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Life and its various passages can be hard, brutally hard
The three things I have found helpful in coping with its challenges are:
- Have low expectations
- Have a sense of humor
- Surround yourself with the love of friends and family
Above all, live with change and adapt to it
0
5
25
Warren and I personally don't drill oil wells.
We pay our taxes.
And we've done pretty well, so far.
Anytime somebody offers you a tax shelter from here on in life, my advice would be don't buy it.
1
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You do get an occasional opportunity to get into a wonderful business that's being run by a wonderful manager.
And, of course, that's hog heaven day.
If you don't load up when you get those opportunities,
it's a big mistake.
0
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25
Look at Berkshire
I call it the ultimate didactic enterprise
Warren's never going to spend any money
He's going to give it all back to society.
He's just building a platform so people will listen to his notions.
They're very good notions
And the platform's not so bad either
1
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Recognize reality even when you don't like it - especially when you don't like it.
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If you've got a good temperament, which basically means being very patient, yet combine that with a vast aggression when you know enough to do something, then you just gradually learn the game, partly by doing, partly by studying.
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24
Recognize and adapt to the true nature of the world around you; don't expect it to adapt to you.
0
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25
"What can I do to ruin a civilization?"
That's easy.
If what you want to do is ruin your civilization, just go to the legislature and pass laws that create systems wherein people can easily cheat.
It will work perfectly.
1
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22
If you're a Navy captain and up for 24 hours straight and have to go to sleep and you turn the ship over to a competent first mate in tough conditions and he takes the ship aground-clearly through no fault of yours - they don't court-martial you, but your naval career is over.
1
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There are a relatively small number of disciplines and a relatively small number
of truly big ideas.
And it's a lot of fun to figure it out.
0
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Recognize reality even when you don't like it - especially when you don't like it.
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Start getting worldly wisdom by asking why, why, why in communicating with other people about everything.
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Step-by-step you get ahead, but not necessarily in fast spurts.
But you build discipline by preparing for fast spurts.
Slug it out one inch at a time, day-by-day, and at the end of the day - if you live long enough - like most people, you will get out of life what you deserve.
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