Yesterday marked the 100th birthday celebration of Charlie Munger, an exceptional teacher, legendary investor, and sage whom I deeply admire for his unparalleled wisdom.
While Warren Buffett is synonymous with Berkshire Hathaway, it’s crucial not to overlook Munger, the often unsung hero completing the dynamic duo. Buffett leads, but Munger’s brilliance plays a significant role in Berkshire Hathaway’s success.
Buffett holds Munger in high regard, praising his “best thirty-second mind in the world” and unique ability to grasp concepts faster than others can finish a sentence. Bill Gates extols Munger as the most expansive thinker he’s encountered, and Mohnish Pabrai asserts Munger’s intelligence surpasses Buffett’s.
Munger’s distinction lies not only in inherent brilliance but in a lifelong commitment to acquiring wisdom. Across his 80+ years, Munger honed his intellect through reading, curiosity, observation, and self-reflection.
In the investing world, many seek to understand how Munger became one of the greatest investors in the world, gaining a profound appreciation for his vast reservoir of wisdom.
As we celebrate his 100th birthday, let’s not just acknowledge the milestone but also reflect on the enduring legacy of a man who stood alongside giants and became one himself.
Adopting Munger’s principles provides a roadmap for a more enriched life. As we celebrate his centennial wisdom, here are 10 valuable life lessons to undoubtedly add value to your life.
1. Take simplicity seriously
“Take a simple idea and take it seriously.” — Charlie Munger
Invest wisely in exceptional businesses at reasonable prices. Amidst the financial industry’s complexity, opt for ethical businesses and exercise patience.
Unlock better performance through simplicity.
Munger aptly noted, “Simplicity has a way of improving performance, enabling us to better understand what we are doing.”
2. Little wiser everyday
“Spend each day trying to be a little wiser than you were when you woke up.” — Charlie Munger
Charlie Munger was known for his voracious reading habits and delved into science and history books late into the night. His household manager compared his obsession with a book to a dog devouring a bone, revealing Munger’s ability to finish a book in just two days.
In the pursuit of knowledge, Munger emphasizes the wealth of solutions and insights left by brilliant minds in well-organized books, articles, and platforms like YouTube.
Munger famously said “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.”
According to Munger, success lies in being a perpetual learner, steadily accumulating wisdom each day. It’s not always about being the smartest or the most diligent, but about consistently growing in knowledge — a practice that proves invaluable, especially in facing long-term challenges.
3. Work for the right people
“You particularly want to avoid working directly under somebody you don’t admire and don’t want to be like. It’s dangerous.” — Charlie Munger
When seeking employment, consider whether your potential manager is someone you can learn from and admire. Your workplace should be a platform for mentorship, shaping you into the professional you aspire to become.
During job interviews, ask yourself these questions:
- Can I learn from this manager?
- Is this someone that I respect?
- Is this someone I want to emulate in the next 3–5 years?
If the answer is negative to any of these, then move on. Remember, while the company is searching for a new team member, you are seeking your next mentor.
4. Collect mental models
“I’ve long believed that a certain system, which almost any intelligent person can learn, works way better than the systems most people use. What you need is a latticework of mental models in your head. And, with that system, things gradually get to fit together in a way that enhances cognition.” — Charlie Munger
Munger is quite well-known for what he calls “mental models”, which are essentially frameworks we can use to simplify our highly complex world and simplify it to something much more manageable and understandable.
Instead of making a stand-alone assessment of a company’s financial information, Charlie conducts a comprehensive analysis of the internal workings of a business and the ecosystem in which the business operates.
Munger’s mental models draw inspiration from diverse disciplines such as history, psychology, mathematics, engineering, biology, physics, statistics, economics, and more.
According to Munger, embracing a multidisciplinary approach and studying various subjects is essential for gaining a better understanding of the intricate world we inhabit.
In regards to mental models, Charlie Munger stated:
“You must know the big ideas in the big disciplines and use them routinely — all of them, not just a few. Most people are trained in one model, economics for example, and try to solve problems in one way. You know the old saying: To the man with a hammer, everything looks like a nail. This is a dumb way of handling problems. You need a different checklist and different mental models for different companies…You have to derive it yourself to ingrain it in your head for the rest of your life.”
5. Strive for a win-win solutions
“When you borrow a man’s car, always return it with a tank of gas.” — Charlie Munger
In 1997, Berkshire Hathaway acquired Dairy Queen for $585 million in stocks, known for its delicious frozen dairy products.
The acquisition, seen as a win-win solution, not only added value but also removed Dairy Queen from the volatile stock market. Freed from Wall Street’s short-term pressures, management could focus on long-term goals, prioritizing customer satisfaction, introducing innovative products, and fostering a thriving work environment.
This positive impact extended beyond the company, bringing prosperity to Warren Buffet and Charlie Munger, the visionaries behind Berkshire Hathaway. A mutually beneficial relationship flourished, benefiting Dairy Queen’s customers, management, and Berkshire Hathaway shareholders.
In the pursuit of optimal outcomes, recognize that securing a favourable deal doesn’t have to harm others. Advocate for win-win solutions where everyone involved stands to gain.
6. Help others know more
“The best thing a human being can do is to help another human being know more.” — Charlie Munger
Charlie Munger, even at the age of 99, lived with a strong sense of purpose until his last moments. His unwavering commitment was fueled by both an insatiable curiosity and a profound desire to contribute to humanity.
Regularly interacting with CEOs, entrepreneurs, venture capitalists, scientists, and government officials, Munger enthusiastically shared his wealth of experience and expertise.
His motivation? A genuine dedication to assisting others in their quest for knowledge. I deeply resonate with this philosophy, driving my current pursuits in writing and podcasting.
7. Circle of competence
“Confucius said that real knowledge is knowing the extent of one’s ignorance…knowing what you don’t know is more useful than being brilliant.” — Charlie Munger
Charlie Munger and Warren Buffett embraced a practical approach known as the “too-hard pile” in their investment strategy, marking deals beyond their understanding as mental discards. Munger’s straightforward principle guided him to exclusively consider companies within his circle of competence.
Despite Berkshire Hathaway’s substantial investment in Apple, Munger and Buffett approached the vast world of technology cautiously. Munger openly acknowledged their lack of expertise in the high-tech sector, admitting a significant disadvantage in comprehending sustainable development and intricate software details, such as those related to computer chips.
Consequently, they chose to operate within the confines of their clearly defined circle of competence.
Munger stated, “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.”
This quote encapsulates a guiding principle that advocates prioritizing sound decision-making over the pursuit of brilliance, underscoring the enduring value of humility in the face of uncertainty.
8. Be wary of the financial industry
“Fortune tellers or astrologers who are dragging money out of their client’s accounts.” -Charlie Munger
Munger is especially colourful when comes to calling the financial industry. He has been known to call stock brokerages that encourage risk investing as gambler parlours, investing managers are nothing more than fortune tellers or astrologers who are dragging money out of their client’s accounts, and compare meme stock traders to heroin addicts, and most recently bitcoin to rat poison.
Charlie Munger stated, “I think the people who are professional traders that go into trading cryptocurrencies, it’s just disgusting. It’s like somebody else is trading turds and you decide, “I can’t be left out”.”
Regardless of your stance on Munger’s colourful statements, it’s evident that the financial industry harbours misaligned incentives.
9. Big money is in waiting
“The big money is not in the buying or the selling, but in the waiting.” — Charlie Munger
In investing, simplicity reigns supreme, and Charlie Munger advocates for patience as the key to financial success. Rather than focusing on constant transactions, Munger emphasizes the art of waiting as the source of significant wealth.
Munger advises a strategic approach to buying excellent businesses at fair prices. The essence lies in understanding that enduring wealth arises from patience, challenging the misconception that continuous buying and selling activities define intelligent investing.
The common belief that high activity signifies investing intelligence is debunked by Munger’s wisdom. Exceptional investors often excel by selecting solid companies and holding onto them patiently over time.
Contrary to the misconception, individuals with seemingly high IQs may falter as investors due to impatience, poor temperaments, and the misconception that activity equates to performance.
Munger’s message is clear — substantial wealth in investing is achieved through waiting, not constant buying and selling.
As Charlie Munger puts it, “If you have a personality of delaying gratification, you are already on the road to success and happiness.”
10. Key to happiness = low expectations
“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.” — Charlie Munger
Charlie Munger suggests that maintaining low expectations is essential for a happy and content life. Unrealistic expectations lead to perpetual misery, fostering constant disappointment and dissatisfaction. This doesn’t mean abandoning ambitious goals but emphasizes the importance of resilience in the face of unmet expectations.
Avoid tying your entire identity to a single goal; instead, remain flexible. Occasionally lowering the bar allows you to find satisfaction in the journey and provides the opportunity to eventually reach your original goal. In essence, the key lies in balancing ambition with adaptability.
…
If you like reading articles like this one, consider becoming a Medium member for unlimited access to all stories. I also write on health, wellness, decision-making, and happiness.
Subscribe to receive email notifications for new articles, and if you’d like to support my work, subscribe to my newsletter and podcast.
—
This post was previously published on medium.com.
***
From The Good Men Project on Medium
What Does Being in Love and Loving Someone Really Mean? | My 9-Year-Old Accidentally Explained Why His Mom Divorced Me | The One Thing Men Want More Than Sex | The Internal Struggle Men Battle in Silence |
***
Join The Good Men Project as a Premium Member today.
All Premium Members get to view The Good Men Project with NO ADS.
A $50 annual membership gives you an all access pass. You can be a part of every call, group, class and community.
A $25 annual membership gives you access to one class, one Social Interest group and our online communities.
A $12 annual membership gives you access to our Friday calls with the publisher, our online community.
Register New Account
Need more info? A complete list of benefits is here.
—–
Photo credit: Christina @ wocintechchat.com on Unsplash