Charlie Munger's 3 Categories of Investment: In, Out & Too Tough Investment Wisdom

143. Never Fear, Charlie Is Here: 13 Investment Strategies or Pointers You Can Treasure

This Book Will Make You Rich (in Wisdom) : Charlie Munger For All Seasons

  1. 1. Super Investment: Invest $1000 and get back $100,000 per year. (Patience and acumen needed.)
  2. 2. Valuation Itineration: We take into account a whole lot of factors. It’s a multi-factor thing and there’s a trade-off between factors, and it’s just like a bridge hand. You have to think of a lot of different things at once. There’s never going to be a formula that will make you rich just by going through some numerical process. If that were true, every mathematical nerd that gets A’s in algebra would be rich. That’s not the way it works. You’ve got to be comfortable thinking about a lot of different things at once, and correctly thinking about a lot of different things at once.
  3. Error Reduction in Investing & What’s Haircut To Do With It: Our schedules are not that crowded. We look like academics more than we do like businessmen. So our system has been to sift life for a few opportunities and seize a few of them. Warren’s sitting on top of an empire, and you go to his schedule sometimes and there’s a haircut!
  4. Single-Tasking: And that brings me to the subject of multitasking. All of you people have got very good at multi-tasking, and that would be fine if you were the chief nurse in a hospital, but as an investor, I think you’re on the wrong road. Multitasking will not give you the highest quality of thought that man is capable of doing. Juggling two or three balls at once where people come at you on their schedule, not yours, is not an ideal thinking environment.
  5. Rationality: Well start working at it young and keep doing it until you’re as old as I am. That’s a very good idea, and it’s a lot of fun. Particularly if you’re good at it. I can hardly think of anything that’s more fun.
  6. Auto industry: It’s brutally competitive an industry.
  7. Beware Obscure Ponzi Scheme: Well, my attitude is that I have a circle of competence. And that does not include correctly predicting which new companies in Silicon Valley, or dependent on Silicon Valley, are going to succeed. So I tend to avoid the subject entirely. I’ve paved my way in other passions. However I will comment on one thing: manipulated finance. As these venture capitalists, who are part of the finance industry, the constructive ones. These are the people who make their living more honourable than the rest of the people in finance because they’re actually allocating capital to new businesses. So the venture capitalists are useful members of finance. But they don’t escape their share of sin. What they’ve gotten in the habit of doing is creating these rounds of financing. And each new one is at a higher value. But they just sneak a little clause in saying that nobody who previously bought into the venture gets anything until the new guys are preferred. Well that is sort of like a Ponzi scheme. It’s a disgusting, tricky, dishonourable thing to do. Particularly since it’s obscured. And of course it’s being deliberately obscured. So even our most reputable part of finance has dirty sleazy activities creeping in. Large amounts of easy money cause regrettable human behavior. That’s Munger’s rule.
  8. Fundamental investing Will Never Be Irrelevant: I don’t think that fundamental value investing will ever be irrelevant because of course to succeed in investing you have to buy things for less than they’re worth instead of more than they’re worth.
  9. Never Fear, Charlie Is Here: Well generally I’ve avoided circumstances which automatically cause people fear… And so I don’t seek out fear to get thrills. I don’t even seek out the appearance of fear when it’s really safe. Generally I’m not a big lover of danger or even the appearance of danger. So that’s not my thing. I don’t think I’ve felt much fear for a long time. I’ve just lived a long time. I had fears when I was younger, but they gradually melted away.
  10. Good Kind Of Wealth: I think we have a lot of undeserved wealth that causes a lot of envy.
  11. Stock market Vs Gambling: It’s very bad for all of us that we have this huge overdevelopment of finance. And yet, it’s pretty hard to do anything about it. We have a vast gambling culture and people have made it respectable.
  12. Morality and Honesty – Trite Is Good: Well my advice is always so trite. The good behaviour, being dependable, and morality. It makes your life easier. It makes it work better. You don’t have to remember your lies, which gets complicated if you keep lying all of the time. In fact, it gets so complicated that you’re sure to fall off and you’ll be recognised as a liar. So, I think all the old-fashioned morality works. The old-fashioned discipline works. The old-fashioned good behaviour and a little generosity. We all know people who have people come to their funeral just to make sure they’re dead. You don’t want to be in that crowd. You want to live your life so that some people will actually miss you when you’re gone.
  13. Marriage – The Best Practical Alternative: Well, I think different folks can live in different ways, but I think all the evidence is that marriage is the best practical alternative for most people. And the statistics show it. They live longer. When you measure happiness, physiologically and so forth. Considering how difficult the world is, it’s your best chance for most people. And of course it should be valued. That’s one of the things I like about the Asian cultures: the Confucian idea that the family is really important. It’s a very sound idea. If we ever lost the family values, we’d have one hell of a lousy civilization.
  14. Bonus Points: Sense of Accomplishment: Well, my family life has been more important to me than wealth or prominence. On the other hand, I hated poverty and obscurity. I tried to get out of them and it has given me some satisfaction that I came a long way from where I’ve started. I think most people who’ve come a long way from where they’ve started feel pretty good about it. I think most of the people who’ve finally sat atop of Everest, even though they’ll only stay there for 15 seconds… And so, I think that’s good. Cicero use to say that ‘one way to be happy in old age is to remember a lot of achievements in your past’. Now some people say that’s too damn self-centered and you should be thinking about God or something, but I agree with Cicero. It’s okay to live that kind of a life if you’re kind of pleased with it when you’re old and look back.

13 pieces of wisdom from Charlie Munger

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