Remembering Charlie Munger
Memorable quotes from a great business mind
By 1 Jan 2024, Charles Thomas Munger (1924-2023), better known as Charlie Munger, passed away at age 99.9 on 28 Nov 2023.
Charlie Munger was famous for his influence and instrumental role in Berkshire Hathaway. From 1965 to 2022, the investment company produced an average 19.8% annual return, while the Fortune 500 made a 9.9% average return. He was a critical business partner in helping Warren Buffet become one of the wealthiest people.
Munger was a respected investor, businessman, lawyer, architect, philanthropist, and many other roles. I like him as a philosopher who had many great principles and advice that were worth learning.
There are plenty of books and resources capturing his advice and biography. I like to remember him as one of the greatest business minds of our time, but referring to some of his quotes.
Continuous Learning
Charlie Munger advocates the acquisition of worldly wisdom with a multidisciplinary approach. He is an avid reader and an incredible lifelong learner. He believes it is more helpful to possess “T-Shape” competency, having broad general knowledge over a wide range of topics, and being an expert in one or few specific disciplines. This enables one not to be limited to the default cognitive logic but to have a wider variety of thinking models.
[image credit: Tao of Charlie Munger Book Summary]
“You’re not going to get very far in life based on what you already know. You’re going to advance in life by what you’re going to learn.” - Charlie Munger
“Knowing what you don’t know is more valuable than being brilliant.” – Charlie Munger
Don’t be the smartest one in the room
Be humble and acknowledge the existence of our blind spots and cognitive biases
“Acknowledging what you don’t know is the dawning of wisdom.” - Charlie Munger
“I don’t know how to get smarter without reading a lot.” - Charlie Munger
“Learn from other people’s mistakes.” - Charlie Munger
“The best thing a human can do is to help another human being know more.” Charlie Munger
“Those who keep learning will keep rising in life.” - Charlie Munger
“I constantly see people rise in life who are not the smartest, but they are learning machines. They go to bed every night a litter 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
“I think that a life properly lived is just learn, learn, learn all the time.” - Charlie Munger
“Nothing has served me better in my long life than continuous learning.” - Charlie Munger
Mental Models
Mental models are not a new concept, but Charlie Munger popularized them with his latticework of mental models.
[image credit: Bing Image Creator]
Inversion
Solving problems backward because many issues can’t be solved forward. Think of what you don’t want. If actions lead to a result you do not wish to, then avoid those activities.
For example, “I want to become 10kg leaner.” Think about what you can do to gain 10kg: eat ultra-processed foods, live a sedentary lifestyle, sleep at 3 a.m. for 4 hours, etc. Now, don’t do those things; eat unprocessed foods, live a more active lifestyle, and have good-quality sleep.
“Invert, always invert: turn a situation or problem upside down. Look at it backward.” - Charlie Munger
Stay inside your circle of competence
Stick to investing in the companies within the circle of competence
“We have three baskets for investing: yes, no, and too tough to understand.” - Charlie Munger
Occam’s Razor
A problem-solving principle that uses the simplest forms or elements uses the first principles. When troubled by a few potential solutions or explanations, choose the hypothesis with the fewest assumptions (simplest components). The simple solutions tend to be the best.
Everything should be made as simple as possible, but no simpler. Avoid the unknowable and unimportant.
“We have a passion for keeping things simple.” - Charlie Munger
“Simplicity has a way of improving performance by enabling us to better understand what we are doing.” - Charlie Munger
“Take a simple idea and take it seriously.” - Charlie Munger
Opportunity Cost
Evaluate each opportunity and not tie down your resources into those low-return opportunities and run out of capital when the better opportunity presents itself. Allocate your resources carefully and effectively.
Integrity
Charlie Munger is a well-respected and trusted person because of his integrity.
“If you have integrity and act honorably, you will succeed. Eliminate foolishness and avoid negative influences. Teach your grandchildren by setting a positive example. Fix yourself.” - Charlie Munger
Take ownership of the problem and make ourselves accountable for what is within our control. Lead by example and walk the talk.
“Remember that reputation and integrity are your most valuable assets - and can be lost in a heartbeat.” - Charlie Munger
“It’s not greed that drives the world, but envy.” - Charlie Munger
Fortune and Personal Mastery
Charlie Munger’s greatest wealth was not because he was a billionaire. Forbes estimated Munger’s wealth to be $2.2 billion, while his good friend and business partner Warren Buffett’s was $107 billion. I believe that with Munger’s wits, he could accumulate more incredible monetary wealth if he wanted to, but he knew what was ‘enough’ and pursued a different life path. He donated a significant portion of his wealth earlier in his career to philanthropy. Of course, many other factors resulted in the compounding effect of his wealth having a lower trajectory, but that wasn’t the point if we measure one’s wealth beyond money.
“To get what you want, you have to deserve what you want. The world is not yet a crazy enough place to reward a whole bunch of undeserving people.” - Charlie Munger
The true value of a business is equal to its investment worth. The same applies to individuals. We have to make ourselves valuable and worthy (deserve) of whatever (wealth, fame, power, love) we want. Contribute with our smiles, our kindness, and our works that the market values, giving more than taking.
“Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a log of things.” - Charlie Munger
Two options for you to choose from:
(1) you receive $1000/day every day for the next 30 days, or
(2) you get $0.01 on day 1; and receive double the amount every day for the next 30 days
The magic of compound interest gives the following:
(1) $1000 x 30 = $30,000
(2) $5,370,000
most of us cannot tolerate delayed gratification, hence it is normal to opt for option (1) instead of the slow compounding growth option (2). The compounding effect applies to personal improvement, looking for overnight transformation instead of a 1% improvement daily.
“The big money is not in the buying and selling but in the waiting.” - Charlie Munger
This reminds us to use SWT to analyse our Strengths and Weaknesses, and know the Trends. Busyness does not equal profits.
“I succeeded because I have a long attention span.” - Charlie Munger
“Opportunity comes to the prepared mind.” - Charlie Munger
Have delayed gratification and a long-term perspective. Do not distract yourself with shortcuts and gains. Sharpen your saws by waiting for the bigger opportunity that is 10X instead of many 0.01x activities.
“Always take the high road. It’s far less crowded.” - Charlie Munger
It is alright to be unpopular when we go against the crowd. This is why 1% of successful people are doing the opposite of 99% of what others won’t do.
“Mimicking the herd invites regression to the mean (mere average performance).” - Charlie Munger
Recommended books to know more about Charlie Munger
Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger
On Success by Charles T. Munger
The Tao of Charlie Munger by David Clark
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“I have nothing to add.” - Charlie Munger