I've heard that one-half of the students at elite schools want to go into private equity or hedge funds. They want to keep up with their age cohorts at Goldman. This can't possibly end well in terms of meeting these expectations.
The average result has to be the average result. By definition, everybody can't beat the market. As I always say, the iron rule of life is that only 20% of the people can be in the top fifth. That's just the way it is.
Once you start doing something bad, then it's easy to take the next step -- and in the end, you're a moral sewer.
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. Nobody's that smart.
It would be easier to screw up American Express than Coke or Gillette, but it's an immensely strong business.
For some odd reason, I had an early and extreme multidisciplinary cast of mind. I couldn't stand reaching for a small idea in my own discipline when there was a big idea right over the fence in somebody else's discipline. So I just grabbed in all directions for the big ideas that would really work.
All man's desired geometric progressions, if a high rate of growth is chosen, at last come to grief on a finite earth. And the social system for man on earth is fair enough, eventually, that almost all massive cheating ends in disgrace.
I think we have some special talents. That being said, I think it's dangerous to rely on special talents -- it's better to own lots of monopolistic businesses with unregulated prices. But that's not the world today. We have made money exercising our talents and will continue to do so.
Kellogg's and Campbell's moats have also shrunk due to the increased buying power of supermarkets and companies like Wal-Mart. The muscle power of Wal-Mart and Costco has increased dramatically.
I bet Richard Fuld doesn't have an ounce of contrition. It's just megalomania. When it's like that, you need rules to prevent catastrophe. When banks are borrowing the government's credit rating, you need rules to prevent stupid things.
Opportunity cost is a huge filter in life. If you've got two suitors who are really eager to have you and one is way the hell better than the other, you do not have to spend much time with the other. And that's the way we filter out buying opportunities.
A lot of share-buying, not bargain-seeking, is designed to prop stock prices up. Thirty to 40 years ago, it was very profitable to look at companies that were aggressively buying their own shares. They were motivated simply to buy below what it was worth.
Over many decades, our usual practice is that if something we like goes down, we buy more and more. Sometimes something happens, you realize you're wrong, and you get out. But if you develop correct confidence in your judgment, buy more and take advantage of stock prices.
We bought a doomed textile mill Berkshire Hathaway and a California S and L Savings and Loan; Wesco just before a calamity. Both were bought at a discount to liquidation value.
There are a lot of things in life way more important than money. All that said, some people do get confused. I play golf with a man who says, What good is health? You can't buy money with it.
It's in the nature of stock markets to go way down from time to time. There's no system to avoid bad markets. You can't do it unless you try to time the market, which is a seriously dumb thing to do. Conservative investing with steady savings without expecting miracles is the way to go.
Why should it be easy to do something that, if done well, two or three times, will make your family rich for life?
If we mix only a moderate minority share of turds with the raisins each year, probably no one will recognize what will ultimately become a very large collection of turds.
The idea of caring is that someone is making money faster than you are is one of the deadly sins. Envy is a really stupid sin because it's the only one you could never possibly have any fun at. There's a lot of pain and no fun. Why would you want to get on that trolley?
Everybody engaged in complex work needs colleagues. Just the discipline of having to put your thoughts in order with somebody else is a very useful thing.
You've got to have models in your head and you've got to array you experience -- both vicarious and direct -- onto this latticework of mental models.
I think you'll make more money in the end with good ethics than bad. Even though there are some people who do very well, like Marc Rich-who plainly has never had any decent ethics, or seldom anyway. But in the end, Warren Buffett has done better than Marc Rich-in money-not just in reputation.
We both (Charlie Munger and 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.
Spend each day trying to be a little wiser than you were when you woke up. Day by day, and at the end of the day-if you live long enough-like most people, you will get out of life what you deserve.
I think the main figure that matters to all of us, including people in the media, is: How does GDP per capita grow? And those figures have been very good. There is a huge flux both up and down, so it isn't like we're all static in status. What's important is that pie grows.
When you locate a bargain, you must ask, 'Why me, God? Why am I the only one who could find this bargain?'
The more hard lessons you can learn vicariously rather than through your own hard experience, the better.
The game is to keep learning, and I don't think people are going to keep learning who don't like the learning process.
In business we often find that the winning system goes almost ridiculously far in maximizing and or minimizing one or a few variables -- like the discount warehouses of Costco.
It would be one of the most irritating experiences in the world to do a lot of work to uncover a fraud and then at have it go from X to 3X and at h the crooks happily partying with your money while you're meeting margin calls. Why would you want to go within hailing distance of that?
An investment decision in the common stock of a company frequently involves a whole lot of factors interacting ... the one thing that causes the most trouble is when you combine a bunch of these together, you get this lollapalooza effect.
We have never had the will to enforce the immigration laws. What you see is what you'll continue to get.
The world of derivatives is full of holes that very few people are really aware of. It's like hydrogen and oxygen sitting on the corner waiting for a little flame.
The interesting thing is the field is so big -- it's enormous. One thing a modern civilization needs is energy.
There has never been a master plan. Anyone who wanted to do it, we fired because it takes on a life of its own and doesn't cover new reality. We want people taking into account new information.
Being short and seeing a promoter take the stock up is very irritating. It's not worth it to have that much irritation in your life.
The theory of modern education is that you need a general education before you specialize. And I think to some extent, before you're going to be a great stock picker, you need some general education.
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.
The game of investing is one of making better predictions about the future than other people. How are you going to do that? One way is to limit your tries to areas of competence. If you try to predict the future of everything, you attempt too much.
Who would want one's children growing up buying things like bitcoin? I hope to God my family doesn't buy it. It's noxious poison.
We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.
We get these questions a lot from the enterprising young. It's a very intelligent question: You look at some old guy who's rich and you ask, 'How can I become like you, except faster?'
In Gillette's case, they keep surfing along new technology which is fairly simple by the standards of microchips. But it's hard for competitors to do. So they've been able to stay constantly near the edge of improvements in shaving.
You must force yourself to consider opposing arguments. Especially when they challenge your best loved ideas.
It takes almost no capital to open a new See's candy store. We're drowning in capital of our own that has almost no cost. It would be crazy to franchise stores like some capital-starved pancake house. We like owning our own stores as a matter of quality control.
I find it quite useful to think of a free-market economy -- or partly free market economy -- as sort of the equivalent of an ecosystem. Just as animals flourish in niches, people who specialize in some narrow niche can do very well.
Since those don't hit financial reports, the opportunities you had but didn't accept, most people don't bother thinking about them very much. At least that is a mistake we don't make. We rub our own noses in our mistakes in blowing opportunities, as we just did.
Cicero's words also increased my personal satisfaction by supporting my long-standing rejection of a conventional point of view.
The cost of being a publicly traded stock has gone way, way up. It doesn't make sense for a little company to be public anymore. A lot of little companies are going private to be rid of these burdensome requirements.
With so much money riding on reported numbers, human nature is to manipulate them. And with so many doing it, you get Serpico effects, where everyone rationalizes that it's okay because everyone else is doing it. It is always thus.
We're emphasizing the knowable by predicting how certain people and companies will swim against the current. We're not predicting the fluctuation in the current.
Common stock investors can make money by predicting the outcomes of practice evolution. You can't derive this by fundamental analysis -- you must think biologically.
The quality of the medical care delivered, including the pharmaceutical industry, has improved a lot. I don't think it's crazy for a rich country like the USto spend 15% of GDP on healthcare, and if it rose to 16-17%, it's not a big worry.
It's human nature to extrapolate the recent past into the future, but it's terrible that managements go along with this.
There is the sheer amount of Franklin's wisdom. And the talent. Franklin played four instruments. He was the nation's leading scientist and inventor, plus a leading author, statesman, and philanthropist. There has never been anyone like him.
Most people early achieve and later intensify a tendency to process new and disconfirming information so that any original conclusion remains intact. They become people of whom Philip Wylie observed: You couldn't 't squeeze a dime between what they already know and what they will never learn.
If any successes has come to me, it came because I insisted on thinking things through. That's all I was capable of doing in life, was thinking pretty hard about trying to get the right answer, and then acting on it. I never learned to do anything else.
Quoting Demosthenes, 'For what each man wishes, that he also believes to be true.' I would rather make money playing a piano in a whorehouse than arguing that no cost is incurred when employees are paid in stock options instead of cash. I am not kidding.
You have to have a temperament to grab ideas and do sensible things. Most people don't grab the right ideas or don't know what to do with them.
I try to get rid of people who always confidently answer questions about which they don't have any real knowledge.
Of course the self-serving bias is something you want to get out of yourself. Thinking that what's good for you is good for the wider civilization and rationalizing all these ridiculous conclusions based on this subconscious tendency to serve one's self is a terribly inaccurate way to think.
I got at a very early age, the idea that the safest way to try and get what you want, is to try and deserve what you want.
It's such a simple idea, it's the golden rule so to speak. You want to deliver to the world what you would buy if you were on the other end.
We may well have a competitive advantage buying decent businesses at decent prices. But they won't be fabulous businesses and fabulous prices. There's too much competition and money out there, with many buyout specialists.
Alternatives to gold and currency and to make a big speculative vehicle -- I never considered for one second having anything to do with it. I detested it the minute it had been raised.
I know just enough about thermodynamics to understand that if it takes too much fossil-fuel energy to create ethanol, that's a very stupid way to solve an energy problem.
I think track records are very important. If you start early trying to have a perfect one in some simple thing like honesty, you're well on your way to success in this world.
Look at this generation, with all of its electronic devices and multitasking. I will confidently predict less success than Warren, who just focused on reading.
Why would you want to invest with a guy whose thought process says, If a second layer of fees is good, then let's add a third layer.
I think time and time again, in reality, psychological notions and economic notions interplay, and the man who doesn't understand both is a damned fool.
Whenever you think something or some person is ruining your life, it's you. A victimization mentality is so debilitating.
Using volatility as a measure of risk is nuts. Risk to us is 1) the risk of permanent loss of capital, or 2) the risk of inadequate return.
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 -- at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out.
I will say this: I know no wise person who doesn't read a lot. I suspect that you can read on the computer now and get a lot of benefit out of it, but I doubt that it'll work as well as reading print worked for me.
Part of that, I think, is being able to tune out folly, as distinguished from recognizing wisdom. You've got whole categories of things you just bat away so your brain isn't cluttered with them. That way, you're better able to pick up a few sensible things to do.
I think people who multitask pay a huge price. They think they're being extra productive, and I think when you multitask so much you don't have time to think about anything deeply, you are giving the world an advantage you shouldn't do, and practically everybody is drifting into that mistake.
What's the best way to get a good spouse? The best single way is to deserve a good spouse because a good spouse is by definition not nuts.
My idea of a good place to shop is Costco -- it has these heavily marbled fillet steaks. The idea of eating some wheat thing and washing it down with carrot juice has never appealed to me.
I believe that we are at or near the apex of a great civilization... In 50-100 years, if we're a poor third to some countries in Asia, I wouldn't be surprised. If I had to bet, the part of the world that will do best will be Asia.
The way to win is to work, work, work, work and hope to have a few insights And you're probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It's just that simple.
Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.
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.
You need to have a passionate interest in why things are happening. That cast of mind, kept over long periods, gradually improves your ability to focus on reality. If you don't have the cast of mind, you're destined for failure even if you have a high I.Q.
It's 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.
Ben Franklin and Samuel Johnson, he credits their wisdom for his success. They were both utterly brilliant men. And powerful communicators. Both have helped me all the way through life. Their lessons are easy to assimilate.
The first chance you have to avoid a loss from a foolish loan is by refusing to make it; there is no second chance.
I remember the $0.05 hamburger and a $0.40-per-hour minimum wage, so I've seen a tremendous amount of inflation in my lifetime. Did it ruin the investment climate? I think not.
If you're glued together right and honorable, you will succeed. Get in there and get rid of stupidities and avoid bad people. Try teaching that to your grandchildren. The best way is by example. Fix yourself.
You have to realize the truth of biologist Julian Huxley's idea that 'Life is just one damn relatedness after another' So you must have the models, and you must see the relatedness and the effects from the relatedness.
Warren is one of the best learning machines on this earth. The turtles who outrun the hares are learning machines. If you stop learning in this world, the world rushes right by you.
I think liberal art faculties at major universities have views that are not very sound, at least on public policy issues -- they may know a lot of French however.
Derivative trading with mark-to-market accounting degenerates into mark-to-model. Two firms make a big derivative trade and the accountants on both sides show a large profit from the same trade.
I would argue that a majority of the horrors we face would not have happened if the accounting profession developed and enforced better accounting.
Accounting is a big subject and there are huge forces in play. The entire momentum of existing thinking and existing custom is in a direction that allows terrible follies to happen, and the terrible follies have terrible consequences.
Proper accounting is like engineering. You need a margin of safety. Thank God we don't design bridges and airplanes the way we do accounting.
Well, the questioner came from Singapore, which has perhaps the best economic record in the history of developing an economy. And therefore he referred to 15 percent per annum as modest. It's not modest, it's arrogant.
I think gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939, but civilized people don't buy gold, they invest in productive businesses.
The first rule is that you can't really know anything if you just remember isolated facts and try and bang 'em back. If the facts don't hang together on a latticework of theory, you don't have them in a usable form.
Spend each day trying to be a little wiser than you were when you woke up.
Spend each day trying to be a little wiser than you were when you woke up. Day by day, and at the end of the day-if you live long enough-like most people, you will get out of life what you deserve.
My whole system of life is keeping at it. The task of life is not to see clearly in the distance but to do the task at hand.
No matter how hard you try, there is always some guy or girl who achieves more. My attitude is, so what? Does any of us need to be at the very top of the whole world? It's ridiculous.
Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.
Whenever you think that some situation or some person is ruining your life, it's actually you who are ruining your life. It's such a simple idea. Feeling like a victim is a disastrous way to make go through life.
Don't drift into self-pity because it doesn't solve any problems. Generally speaking, envy, resentment, revenge and self-pity are disastrous modes of thoughts.
Part 1. Life will have terrible blows, horrible blows, unfair blows, doesn't matter. And some people recover and others don't.
There is no better teacher than history in determining the future. There are answers worth billions of dollars in a $30 history book.
The difference between a good business and a bad business is that good businesses throw up one easy decision after another. The bad businesses throw up painful decisions time after time.
Like Warren, I had a considerable passion to get rich, not because I wanted Ferraris -- I wanted the independence. I desperately wanted it.
If you're going to live a long time, you have to keep learning. What you formerly knew is not enough. If you don't adapt, you're like a one-legged man in an ass-kicking contest.
Remember that reputation and integrity are your most valuable assets -- and can be lost in a heartbeat.
If all you needed to do is to figure out what company is better than others, everyone would make a lot of money. But that is not the case. They keep raising the prices to the point when the odds change.
I'm used to people with very high IQs knowing how to recognize reality, but there's a huge human tendency where it may be instructive to think that whatever you're doing to succeed is all right.
I'm proud to be associated with the value system at Berkshire Hathaway; I think you'll make more money in the end with good ethics than bad.
Gold is a great thing to sew into your garments if you're a Jewish family in Vienna in 1939, but I think civilized people don't buy gold, they invest in productive businesses.
I believe Costco does more for civilization than the Rockefeller Foundation. I think it's a better place. You get a bunch of very intelligent people sitting around trying to do good, I immediately get kind of suspicious and squirm in my seat.
There's danger in just shoveling out money to people who say, 'My life is a little harder than it used to be.' At a certain place you've got to say to the people, 'Suck it in and cope, buddy. Suck it in and cope.'
A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it.
Everyone has the idea of owning good companies. The problem is that they have high prices in relations to assets and earnings, and that takes all of the fun out of the game.
People are trying to be smart -- all I am trying to do is not to be idiotic, but it's harder than most people think.
Quotes by Charlie Munger are featured in: