Quotes by Charlie Munger
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Wikipedia Summary for Charlie Munger
Charles Thomas Munger (born January 1, 1924) is an American billionaire investor, businessman, and former real estate attorney. He is vice chairman of Berkshire Hathaway, the conglomerate controlled by Warren Buffett; Buffett has described Munger as his closest partner and right-hand man. Munger served as chairman of Wesco Financial Corporation from 1984 through 2011. He is also chairman of the Daily Journal Corporation, based in Los Angeles, California, and a director of Costco Wholesale Corporation.
It is totally unproductive to think the world has been unfair to you. Every tough stretch is an opportunity.
If you're unhappy with what you've had over the last 50 years, you have an unfortunate misappraisal of life. It's as good as it gets, and it's very likely to get worse.
I've got some advice for the young: If you've got anything you really want to do, don't wait until you're 93.
The safest way to try to get what you want is to try to deserve what you want. It's such a simple idea. It's the golden rule. You want to deliver to the world what you would buy if you were on the other end.
Where you have complexity, by nature you can have fraud and mistakes...This will always be true of financial companies, including ones that run by governments. If you want accurate numbers from financial companies, you're in the wrong world.
All intelligent investing is value investing acquiring more than you are paying for. You must value the business in order to value the stock.
For one of the most successful business strategies is to be a contrarian investor-- to go in the opposite direction -- to buy when others are selling.
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 after you leave here.
I'm a great admirer of the Trump change of mind about China and making an ally out of China instead of screaming about their trade.
If you have competence, you pretty much know its boundaries already. To ask the question (of whether you are past the boundary) is to answer it.
The iron rule of nature is: you get what you reward for.
If you want ants to come, you put sugar on the floor.
There's no way that you can live an adequate life without many mistakes. In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke.
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.
Early Charlie Munger is a horrible career model for the young, because not enough was delivered to civilization in return for what was wrested from capitalism. And other similar career models are even worse.
It's amazing how intelligent it is just to spend some time sitting. A lot of people are way too active.
Clever derivatives broke dozens of companies. It killed them. Bankrupt. We don't need these kinds of innovation in finance. It's OK to be boring in finance. What we want is innovation in widgets.
The idea of excessive diversification is madness. Wide diversification, which necessarily includes investment in mediocre businesses, only guarantees ordinary results.
We don't train executives, we find them. If a mountain stands up like Everest, you don't have to be a genius to figure out that it's a high mountain.
They made a mistake. And it was an easy mistake to make. I don't regard setting incentives aggressively as a mistake. I think the mistake was, when the bad news came, they didn't recognize it directly. I don't think that impairs the future of Wells Fargo. They'll be better for it.
Wells Fargo had a glitch -- the truth of the matter is they made a business judgement that was wrong. I don't think anything is fundamentally wrong.
Economics profession, they've been -- they've been confident in various formulas, but economics is not physics. The same formula that works in one decade doesn't work in the next. Economics is a difficult subject.
I always like it when someone attractive to me agrees with me, so I have fond memories of Phil Fisher. The idea that it was hard to find good investments, so concentrate in a few, seems to me to be an obviously good idea. But 98% of the investment world doesn't think this way.
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.
It's waiting that helps you as an investor, and a lot of people just can't stand to wait. If you didn't get the deferred-gratification gene, you've got to work very hard to overcome that.
I think it is undeniably true that the human brain must work in models. The trick is to have your brain work better than the other person's brain because it understands the most fundamental models- ones that will do most work per unit.
A lot of opportunities in life tend to last a short while, due to some temporary inefficiency... For each of us, really good investment opportunities aren't going to come along too often and won't last too long, so you've got to be ready to act and have a prepared mind.
I think corporate managers should learn to be better investors because it would make them better managers.
Anytime anybody offers you anything with a big commission and a 200-page prospectus, don't buy it. Occasionally, you'll be wrong if you adopt Munger's Rule. However, over a lifetime, you'll be a long way ahead -- and you will miss a lot of unhappy experiences.
I'm not entitled to have an opinion unless I can state the arguments against my position better than the people who are in opposition. I think that I am qualified to speak only when I've reached that state.
When I run into a paradox I think either I'm a total horse's ass to have gotten to this point, or I'm fruitfully near the edge of my discipline. It adds excitement to life to wonder which it is.
Our success has come from the lack of oversight we've provided, and our success will continue to be from a lack of oversight. But if you're going to provide minimal oversight, you have to buy carefully. It's a different model from GE's. GE's works -- it's just very different from ours.
That's the last thing on Earth you should think about... There's just a whole lot of things that aren't going to work for you. Figure out what they are and avoid them like the plague. And one of them is bitcoin... It is total insanity.
For many of our shareholders, our stock is all they own, and we're acutely aware of that. Our culture of conservatism runs pretty deep.
You'll better understand the evil when top audit firms started selling fraudulent tax shelters when I tell you that one told me that they're better than the others because they only sold the schemes to their top-20 clients, so no-one would notice.
When it gets into these spikes, with shortages and uproar and so forth, people go bananas, but that's capitalism.
You have a real asset-price bubble in places like parts of California and the suburbs of Washington, D.C.
I love when I think we're taking territory -- if it makes sense in the long term, we just don't give a damn what it looks like in the short term. After all, we're running a cult, not a normal company.
The total amount paid out in dividends is roughly equal to the amount lost in trading and investment advice, so net dividends to shareholders are zero. This is a very peculiar way to run a republic.
Here's one truth that perhaps your typical investment counselor would disagree with: if you're comfortably rich and someone else is getting richer faster than you by, for example, investing in risky stocks, so what?! Someone will always be getting richer faster than you. This is not a tragedy.
Part of having uncommon sense is being able to tune out folly, as opposed to recognizing wisdom. If you bat away many things, you don't clutter yourself.
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.
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 when they got up. And, boy, does that habit help, particularly when you have a long run ahead of you.
If people tell you what you really don't want to hear what's unpleasant-there's an almost automatic reaction of antipathy. You have to train yourself out of it.
The SEC does way more good than harm -- the last thing I would do is get rid of the SEC...if accounting were thoroughly fixed, a lot of other sins would go away. We're paying a huge price for deterioration of accounting.
Rationality is not just something you do so that you can make more money, it is a binding principle. Rationality is a really good idea. You must avoid the nonsense that is conventional in one's own time. It requires developing systems of thought that improve your batting average over time.
Fixable but unfixed bad performance is bad character and tends to create more of itself, causing more damage to the excuse giver with each tolerated instance.
It's very useful to have a good grasp of all the big ideas in hard and soft science. A, it gives perspective. B, it gives a way for you to organize and file away experience in your head, so to speak.
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 easily learned principles.
It took us months of buying all the Coke stock we could to accumulate $1 billion worth -- equal to 7% of the company. It's very hard to accumulate major positions.
Fancy computers are engaging in legalized front-running. The profits are clearly coming from the rest of us -- our college endowments and our pensions. Why is this legal? What the hell is the government thinking? It's like letting rats into a restaurant.
The normal expectancy of the average investor -- for example, the pension funds of ATandT or IBM -- is 6% for a long time.
Without numerical fluency, in the part of life most of us inhibit, you are like a one-legged man in an ass-kicking contest.
If you want good behavior, don't pay on a commission basis. Our judges aren't paid so much a case. We keep them pretty well isolated with a fixed salary. Judges in this whole thing have come out pretty well -- there have been relatively few scandals.
While no real money came down, my family gave me a good education and a marvelous example of how people should behave, and in the end that was more valuable than money. Being surrounded by the right values from the beginning is an immense treasure. Warrenhad that. It even has a financial advantage.
Wrigley is a great business, but that doesn't solve the problem. Buying great businesses at advantageous prices is very tough.
If all you succeed in doing in life is getting rich by buying little pieces of paper, it's a failed life. Life is more than being shrewd in wealth accumulation.
The whole concept of dividing it up into 'value' and 'growth' strikes me as twaddle. It's convenient for a bunch of pension fund consultants to get fees prattling about and a way for one advisor to distinguish himself from another. But, to me, all intelligent investing is value investing.
So, economics should emulate physics' basic ethos, but its search for precision in physics-like formulas is almost always wrong in economics.
In the LBO field there is a buried covariance with marketable equities, toward disaster in generally bad business conditions, and competition is now extremely intense.
I have a black belt in chutzpah. I was born with it. Some people, like some of the women I know, have a black belt in spending. They were born with that. But what they gave me was a black belt in chutzpah.
A board member should be perfectly willing to leave at any time and willing to make the tough calls.
I think the foundation at Berkshire Buffett's stake in Berkshirewill pass to the Buffett Foundation upon his death will be a plus because there will be a continuation of the culture. We'd still take in fine businesses run by people who love them.
The number one idea is to view a stock as an ownership of the business and to judge the staying quality of the business in terms of its competitive advantage. Look for more value in terms of discounted future cash-flow than you are paying for. Move only when you have an advantage.
Well in the history of the See's Candy Company they always say, I never did it before, and I'm never going to do it again. And we cashier them. It would be evil not to, because terrible behavior spreads.
You need a different checklist and different mental models for different companies. I can never make it easy by saying, 'Here are three things.' You have to derive it yourself to ingrain it in your head for the rest of your life.
Just avoid things like racing trains to the crossing, doing cocaine, etc. Develop good mental habits.
We have to have a special insight, or we'll put it in the 'too tough' basket. All of you have to look for a special area of competency and focus on that.
If you, like me, lived through 1973-74 or even the early 1990s... There was a waiting list to get OUT of the country club -- that's when you know things are tough. If you live long enough, you'll see it.
A rough rule in life is that an organization foolish in one way in dealing with a complex system is all too likely to be foolish in another.
I think the notion...that liquidity is this -- of tradable common stock -- is a great contributor to capitalism -- I think that is mostly twaddle... The liquidity gives us these crazy booms, which have many problems as well as virtues.
I see almost no change in the price of the composite product that flows through Costco I don't feel sorry for the people who pay $27 million for an 8,000-square-foot condo in Manhattan. So inflation comes in places.
In my life there are not that many questions I can't properly deal with using my $40 adding machine and dog-eared compound interest table.
Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things.
We've got great flexibility and a certain discipline in terms of not doing some foolish thing just to be active -- discipline in avoiding just doing any damn thing just because you can't stand inactivity.
Accounting incomes were reduced by discrepancy but the net amount paid by lawyers for lawyerly discrepancy is close to zippo. In this case, the goddess of justice was blind.
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. It's aided by false accounting.
We only want what success we can get despite encouraging others to share our general view about reality.
Even if you assume that the whole economy would work better had we never had double taxation, having the envy and resentment of the richest paying low or no taxes screams of injustice. You have to have a fair system.
Our experience tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing some simple and logical thing, will often dramatically improve the financial results of that lifetime.
The reason we avoid the word 'synergy' is because people generally claim more synergistic benefits than will come. Yes, it exists, but there are so many false promises.Berkshire is full of synergies -- we don't avoid synergies, just claims of synergies.
The ethos of not fooling yourself is one of the best you could possibly have. It's powerful because it's so rare.
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.
Mankind invented a system to cope with the fact that we are so intrinsically lousy at manipulating numbers. It's called the graph.
The stupid and dishonest accountants allowed the genie of totally inappropriate accounting to descend on derivatives books. And once this has happened -- people get status, etc. -- it's impossible to get it back into the bottle.
Darwin paid particular attention to disconfirming evidence. Objectivity maintenance routines are totally required in life if you're going to be a great thinker.
I think the idea that the hedge fund manager gets lower taxes than the taxi driver or the physics professor is insane. The legislators who leave that policy in place are derelict in their duties to be rational and fair. There are plenty of them in both political parties. It's totally outrageous.
Look at those hedge funds -- you think they can wait? They don't know how to wait! I have sat for years at a time with $10 to $12 million in treasuries or municipals, just waiting, waiting...As Jesse Livermore said, 'The big money is not in the buying and selling...but in the waiting.'
Although I am very interested in the subject of human misjudgment -- and lord knows I've created a good bit of it -- I don't think I've created my full statistical share, and I think that one of the reasons was I tried to do something about this terrible ignorance I left the Harvard Law School with.
It's a finite and very competitive world. All large aggregations of capital eventually find it hell on earth to grow and thus find a lower rate of return.
Berkshire was built on the eternal verities: basic mathematics, basic horse sense, basic fear, and basic diagnosis of human nature to make predictions regarding human behavior. We stuck to the basics with a certain amount of discipline and it has worked out quite well.
In the corporate world, if you have analysts, due diligence, and no horse sense, you've just described hell.
The definition of hell in the legal system is: endless due process and no justice; (in the corporate world) it would be: endless due diligence and no horse sense.
One could imagine a period like Japan13 years ago, however, in which indexing over time wouldn't work.
If you took our top fifteen decisions out, we'd have a pretty average record. It wasn't hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor.
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.
Like the stocks of both Berkshire and Wesco to trade within hailing distance of what we think of as intrinsic value. When it runs up, we try to talk it down. That's not at all common in Corporate America, but that's the way we act.
The basic concept of value to a private owner and being motivated when you're buying and selling securities by reference to intrinsic value instead of price momentum -- I don't think that will ever be outdated.
Those who keep learning, will keep rising in life.
If you don't keep learning, other people will pass you by. Temperament alone won't do it -- you need a lot of curiosity for a long, long time.
The name of the game is continuing to learn. Even if you're very well trained and have some natural aptitude, you still need to keep learning.
A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.
It's hard to predict what will happen with two brands in a market. Sometimes they will behave in a gentlemanly way, and sometimes they'll pound each other. I know of no way to predict whether they'll compete moderately or to the death. If you could figure it out, you could make a lot of money.
GEICO got to thinking that, because they were making a lot of money, they knew everything. And they suffered huge losses. All they had to do was to cut out all the folly and go back to the perfectly wonderful business that was lying there.
If we've been a little more successful than other people, is because we always realised that the school of life was always open, and if you were not learning more you are falling behind.
By regularly reading business newspaper and magazines I am exposed to an enormous amount of material at the micro level.. I find that what I see going on there pretty much informs me about what's happening at the macro level.
Missing out on some opportunity never bothers us. What's wrong with someone getting a little richer than you? It's crazy to worry about this.
How do you compete against a true fanatic? You can only try to build the best possible moat and continuously attempt to widen it.
One metric catches people. We prefer businesses that drown in cash. An example of a different business is construction equipment. You work hard all year and there is your profit sitting in the yard. We avoid businesses like that. We prefer those that can write us a check at the end of the year.
If you skillfully follow the multidisciplinary path, you will never wish to come back. It would be like cutting off your hands.
It's natural that you'd have more brains going into money management. There are so many huge incomes in money management and investment banking -- it's like ants to sugar. There are huge incentives for a man to take up money management as opposed to, say, physics, and it's a lot easier.
The general systems of money management today require people to pretend to do something they can't do and like something they don't. It's a terrible way to spend your life, but it's very well paid.
There are all kinds of wonderful new inventions that give you nothing as owners except the opportunity to spend a lot more money in a business that's still going to be lousy. The money still won't come to you. All of the advantages from great improvements are going to flow through to the customers.
I like people admitting they were complete stupid horses' asses. I know I'll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.
You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long, time.
After nearly making a terrible mistake not buying See's, we've made this mistake many times. We are apparently slow learners. These opportunity costs don't show up on financial statements, but have cost us many billions.
Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something. This is such a no-brainer.
What matters most: passion or competence that was born in? Berkshireis full of people who have a peculiar passion for their own business. I would argue passion is more important than brain power.
Bull markets go to people's heads. If you're a duck on a pond, and it's rising due to a downpour, you start going up in the world. But you think it's you, not the pond.
In the 1930s, there was a stretch where you could borrow more against the real estate than you could sell it for. I think that's what's going on in today's private-equity world.
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