The legendary investor Charlie Munger turns 98 on January 1, 2022. Over 40 years he has compounded at an incredible rate of 19.65% and served as vice-chairman of Berkshire Hathaway since 1978. We present his views on some of the most important aspect of investing as well as on life matters.
On Bear Market
“It’s in the nature of stock markets to go way down from time to time.”
On Accounting Tricks
“I would argue that a majority of the horrors we face would not have happened if the accounting profession developed and enforced better accounting.”
On The Failure of Businesses
“Over the very long term, history shows that the chances of any business surviving in a manner agreeable to a company’s owners are slim at best.”
On Buying Great Businesses
“A great business at a fair price is superior to a fair business at a great price.”
On Temperament
“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments.”
On Waiting
“The big money is not in buying or selling, but in the waiting.”
On Thinking Different
“Mimicking the herd invites regression to the mean.”
On Infrequent Opportunities
“Our game is to recognize a big idea when it comes along when one doesn’t come along very often.”
On Patience
“It takes character to sit with all that cash and to do nothing. I didn’t get to the top where I am by going after mediocre opportunities.”
On “Bucketing” Your Investments
“We have three baskets for investing: yes, no, and too tough to understand.”
On Emotional Strength
“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.”
On Derivatives
“The world of derivatives is full of holes that very few people are really aware of.”
On Bargain Hunting
“When you locate a bargain, you must ask, ‘Why me, God? Why am I the only one who could find this bargain?’”
On Patience Vs Smarts
“I did not succeed in life by intelligence. I succeeded because I have a long attention span.”
On EBITDA
“I think that, every time you see the word EBITDA, you should substitute the words “bullshit earnings.”
On Fast Money
“The desire to get rich fast is pretty dangerous”
On Efficient Free Markets
“Capitalism without failure is like religion without hell.”
On Diversification
“This worshipping at the altar of diversification, I think that is really crazy”
On Investing Vs Running a Business
“Understanding how to be a good investor makes you a better business manager and vice versa.”
On Herd Behavior
“Crowd folly, the tendency of humans, under some circumstances, to resemble lemmings, explains much foolish thinking of brilliant men and much foolish behavior.”
On Bad Corporate Management
“In the corporate world, if you have analysts, due diligence, and no horse sense, you’ve just described hell.”
On Value Investing
“You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.”
On Taking Losses
“You need patience, discipline, and agility to take losses and adversity without going crazy.”
On Cash and Opportunity
“The way to get rich is to keep $10m in your checking account in case a good deal comes along”
On Sit-On-Your-Ass Investing
“There are huge advantages for an individual to get into a position where you make a few great investments and just sit on your ass”
LIFE MATTERS
On Planning
“Opportunity comes to the prepared mind.”
On Learning after School
“You are not going to get very far in life based on what you already know. You’re going to advance in life by what you learn after you leave here.”
On Inverting the Dumb
“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 intelligent.”
On Living Frugally
“Live within your income and save so you can invest. Learn what you need to learn.”
On Trust
“We just try to operate in a seamless web of deserved trust and be careful of whom we trust.”
On Small Steps
“Strive to become a little wiser every day.”
On Reading
“In my whole life, I have known no wise people…who didn’t read all the time – none, zero.”
On Odds
“Life, in part, is like a poker game wherein you have to learn to quit sometimes when holding a much-loved hand.”
On Passion Vs IQ
“I would argue that passion is more important than brainpower.”
On Handling Life
“Assume life will be really tough, and then ask if you can handle it. If the answer is yes, you’ve won.”
On Deserving
“To get what you want, you have to deserve what you want. That world is not yet a crazy enough place to reward a whole bunch of people.”
On Theory V Practice
“I try to get rid of people who confidently answer questions about which they don’t have any real knowledge.”
On Repute
“Remember that reputation and integrity are your most valuable assets and can be lost in a heartbeat.”
On Taking Responsibility
“Own your work and compound credibility.”
On Rationality
“What is the secret of success? One word – rational”
On Wise Behavior
“Acquire worldly wisdom and adjust your behavior accordingly.”
On Checklists
“No wise pilot, no matter how great his talent and experience, fails to use a checklist.”
On Decisiveness
“Most people are too fretful, they worry too much. Success means being very patient, but aggressive when it’s time.”
On Creating Good Incentives
“The iron rule of nature is: You get what you reward for. If you want ants to come, you put sugar on the floor.”
On Focus
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.”
On Winning In Life
“The game of life is the game of everlasting learning. At least it is if you want to win.”
On Politics
“There’s a tendency to think that our present politicians are much worse than we had in the past. But we tend to forget how awful our politicians were in the past.”
On Being the Bigger Person
“Always take the high road, it’s far less crowded.”
On Perfection
“There is no way you can live an adequate life without making mistakes.”
On Understanding When NOT To Do Something
“If something is too hard, we move on to something else. What could be more simpler than that?”
On Learning from The Past
“Forgetting your mistakes is a terrible error if you’re trying to improve your cognition. Reality doesn’t remind you. Why not celebrate stupidities in both categories?”
On Being Open Minded
“You must force yourself to consider opposing arguments. Especially when they challenge your best-loved ideas.”
On Thinking
“We both (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.”
On Kicking the Can down The Road
“If you jump out the window at the 42nd floor and you’re still doing fine as you pass the 27th floor, that doesn’t mean you don’t have a serious problem.”
On Learning from The Greats
“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.”
On Responsibility
“An example of a really responsible system is the system the Romans used when they built an arch. The guy who created the arch stood under it as the scaffolding was removed. It’s like packing your own parachute.”
On Philanthropy
“Those of us who have been fortunate have a duty to give back. Whether one gives a lot as one goes along as I do, or a little and then a lot (when one dies) as Warren does, is a matter of personal preference.”
