RIP Charlie Munger
Unpacking Investing and Life Lessons from the Legend
The investing world lost a legend on Tuesday.
Charlie Munger, Vice Chairman of Berkshire Hathaway, passed away at 99 years old, just 34 days before his 100th birthday.
Warren Buffett is a widely recognized name, even for those outside the finance world. On the other hand, Charlie Munger, though less familiar, is someone you should definitely know.
As Buffett said in his statement, “Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation.”
Here are a few takeaways from Charlie’s life that will make you a better investor and a better person:
Be a lifelong learner: Charlie once said, “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.”
Charlie was always looking to learn, primarily from reading biographies. His saying was “wisdom is prevention”. By constantly evolving and adapting you become a survivor, someone who can flourish in any environment. Charlie started his career as an attorney and encouraged people to read from a broad range of subjects to bring different perspectives.
Buy Quality: Charlie was instrumental in changing Buffett’s mindset around buying cheap, troubled companies that were worth more than their current share price. The idea was to buy these cheap stocks and sell them for a quick profit. Munger told Buffett, “Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.”
This led to them buying Coca-Cola, Apple, American Express, Costco; some of Berkshire’s best investments, all thanks to Charlie’s mindset. This idea of focusing on quality goes well beyond investing. The $8 - $10 tee shirt from TJ Max is a great deal until you wear it once, it goes through the wash, and you can’t wear it again. Buy nice things that last even if it comes at a higher price.
Strive for quality relationships as well. I’d rather have a handful of really strong relationships rather than hundreds of fake ones.
Develop an Ability to Stick Around: Jason Zweig wrote a great piece of Charlie here. This story is wild,
It’s 1931, and a boy and girl, both about seven years old, are playing on a swing set on N. 41st St. in Omaha. A stray dog appears and, without warning, charges. The children try to fight the dog off. Somehow, the boy is unscathed, but the dog bites the girl.
She contracts rabies and, not long after, dies. The boy lives.
His name? Charles Thomas Munger.
Charlie went on to say,
That damn dog wasn’t 3 inches from me,” he said. “All my life I’ve wondered: Why did it bite her instead of me? It was sheer luck that I lived and she died.
The records of people and companies that are outliers are always a mix of a reasonable amount of intelligence, hard work and a lot of luck.
Charlie attributes his success on his ability to stick around, to be patient, while also recognizing that luck plays a role.
“The big money is not in the buying and selling, but in the waiting,” Munger once said. He added he liked the word “assiduity” because “it means sit down on your ass until you do it.”
Be Humble: Charlie stressed that your reputation and integrity are your most valuable assets — and can be lost in a heartbeat. We need to be reliable. No matter how smart you are, these basic attributes can separate the average from the greats. Charlie was also very humble (even though he was quoted once saying, “I think the people that oppose my position are idiots. And so I don’t think there is a rational argument against my position.”) Like Buffett, he took a salary of just $100,000 annually for more than 25 years and believed that the rich should exercise self restraint in their lifestyles. He lived in the same house for over 60 years, even though he was worth more than $2 billion.
Problems Are Inevitable: Charlie embraced challenges as he saw them as inevitable. Self pity was never the answer. He almost died when he was 7 and then went on to lose a child at age 9 due to cancer. But he didn’t let this stop him, he continued to battle through the tough times because he knew they would end.
Charlie cautioned against excessive planning and the need to control every aspect of your life. Instead, he suggested you focus on a few important things and surrender to the rest, allow yourself to flow and embrace the present moment.
Some of his best quotes:
"Every time you hear EBITDA, just substitute it with bullshit."
“There is no better teacher than history in determining the future... There are answers worth billions of dollars in $30 history book.”
“Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group…then to hell with them.”
“We’ve had enough good sense when something is working very well to keep doing it. I’d say we’re demonstrating what might be called the fundamental algorithm of life — repeat what works.”
“If something is too hard, we move on to something else. What could be more simple than that?”
“The best thing a human being can do is to help another human being know more.”
RIP Charlie