Value Investing

25 Pages of the Best Value Investing Quotes (PAGE WILL LOAD SLOWLY)

consequences.”

http://72.14.203.104/search?q=cache:eO7qYBw3X78J:www.fool.com/news/commentary/2004/commentary040604wt.htm+%22Charlie+munger%22+transcript&hl=en&gl=us&ct=clnk&cd=1
Economies of Scale

“On the subject of economies of scale, I find chain stores quite interesting. Just think about it. The concept of a chain store was a fascinating invention. You get this huge purchasing power — which means that you have lower merchandise costs. You get a whole bunch of little laboratories out there in which you can conduct experiments. And you get specialization. If one little guy is trying to buy across 27 different merchandise categories influenced by traveling salesmen, he’s going to make a lot of dumb decisions. But if your buying is done in headquarters for a huge bunch of stores, you can get very bright people that know a lot about refrigerators and so forth to do the buying. The reverse is demonstrated by the little store where one guy is doing all the buying. It’s like the old story about the little store with salt all over its walls. And a stranger comes in and says to the store owner, ‘You must sell a lot of salt.’ And he replies, ‘No, I don’t. But you should see the guy that sells me salt.’ So there are huge purchasing advantages….”  1995 lecture at the  University of Southern California entitled “A Lesson on Elementary, Worldly Wisdom as it Relates to Investment Management & Business.”  Outstanding Investors Digest.   http://www.fool.com/boringport/1999/boringport991020.htm?ref=yhoolnk

“in terms of which businesses succeed and which businesses fail, advantages of scale are ungodly important. …  In some businesses, the very nature of things is to sort of cascade toward the overwhelming dominance of one firm. And these advantages of scale are so great, for example, that when Jack Welch came into General Electric, he just said, “To hell with it. We’re either going to be # 1 or #2 in every field we’re in or we’re going to be out.”  http://ycombinator.com/munger.html

Economy

“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. ” http://www.fool.com/news/commentary/2006/commentary06052706.htm
 

Education

“I get flack for saying [when I visit a college and give a speech], “This is a nice college, but the really great educator is McDonald’s.” They hate me for saying this and think I’m a slimy creature. But McDonald’s hires people with bad work habits, trains them, and teaches them to come to work on time and have good work habits. I think a lot of what goes on there is better than at Harvard.”  http://www.tilsonfunds.com/wscmtg05notes.pdf

“You could argue that [the decline of public schools] is one of the major disasters in our lifetimes. We took one of the greatest successes in the history of the earth and turned it into one of the greatest disasters in the history of the earth.” http://www.fool.com/news/foth/2001/foth010508.htm

“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.” http://www.thinkfn.com/en/content/view/52/?id=124

 

“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. “http://www.tilsonfunds.com/brkmtg04notes.doc

 

“To finish first you have to first finish. Don’t get in a position where you go back to go. What’s interesting is that some guy whose grandfather was a lawyer and a judge—hurriedly going to Harvard Law with a wave of veterans—I was willing to go into so many different businesses. I was constantly going right into the other fellow’s business and doing better than the other fellow did. The reason it was possible? Self-education— developing mental discipline, big ideas that really work.” http://media.wiley.com/product_data/excerpt/32/04712447/0471244732-1.pdf#search=%22munger%20you%20know%20the%20cliche%20that%20opposites%20attract%22

Efficient Market Theory

 

“We don’t believe that markets are totally efficient and we don’t believe that widespread diversification will yield a good result.  We believe almost all good investments will involve relatively low diversification. Maybe 2% of people will come into our corner of the tent and the rest of the 98% will believe what they’ve been told.”    http://www.tilsonfunds.com/wscmtg04notes.doc

 

“Berkshire’s whole record has been achieved without paying one ounce of attention to the efficient market theory in its hard form. And not one ounce of attention to the  descendants of that idea, which came out of academic economics and went into corporate finance and morphed into such obscenities as the capital asset pricing model, which we also paid no attention to. I think you’d have to believe in the tooth fairy to believe that you could easily outperform the market by seven-percentage points per annum just by investing in high volatility stocks.”  http://www.tilsonfunds.com/MungerUCSBspeech.pdf

“I think it is roughly right that the market is efficient, which makes it very hard to beat merely by being an intelligent investor. But I don’t think it’s totally efficient at all. And the difference between being totally efficient and somewhat efficient leaves an enormous opportunity for people like us to get these unusual records. It’s efficient enough, so it’s hard to have a great investment record. But it’s by no means impossible. Nor is it something that only a very few people can do. The top three or four percent of the investment management world will do fine.”  http://www.kiplinger.com/personalfinance/features/archives/2005/11/munger2.html

“I have a name for people who went to the extreme efficient market theory—which is “bonkers”. It was an intellectually consistent theory that enabled them to do pretty mathematics. So I understand its seductiveness to people with large mathematical gifts. It just had a difficulty in that the fundamental assumption did not tie properly to reality.”  http://ycombinator.com/munger.html

“The possibility that stock value in aggregate can become irrationally high is contrary to the hard-form “efficient market” theory that many of you once learned as gospel from your mistaken professors of yore. Your mistaken professors were too much influenced by “rational man” models of human behavior from economics and too little by “foolish man” models from psychology and real-world experience.”  http://www.tilsonfunds.com/Mungerwritings2001.pdf#search=%22%20%22charlie%20Munger%22%20Outstanding%20investor%20digest%22

“Efficient market theory [is]  a wonderful economic doctrine that had a long vogue in spite of the experience of Berkshire Hathaway. In fact one of the economists who won — he shared a Nobel Prize — and as he looked at Berkshire Hathaway year after year, which people would throw in his face as saying maybe the market isn’t quite as efficient as you think, he said, “Well, it’s a two-sigma event.” And then he said we were a three-sigma event. And then he said we were a four-sigma event. And he finally got up to six sigmas — better to add a sigma than change a theory, just because the evidence comes in differently. [Laughter] And, of course, when this share of a Nobel Prize went into money management himself, he sank like a stone.” http://www.loschmanagement.