Charlie Munger – Successful Investing Is About Being ‘Non-Idiotic’

Charlie Munger – Successful Investing Is About Being ‘Non-Idiotic’

One of the best resources for investors are the Daily Journal Corporation shareholder meetings chaired by Charlie Munger. My personal favorite is his 2015 meeting in which he discusses Darwinism, Henry Singleton, human nature, and what he learned from Einstein. But there’s also a wonderful insight into how he was able to see that investing in good companies was a better strategy than the Graham and Buffett’s ‘cigar-butt’ style companies. He also provides a great explanation on why he side-stepped business school so that he wouldn’t be ‘polluted by the craziness’.

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Here’s an excerpt from that meeting:

Question to Munger: Financial economists in recent years have rediscovered that highly profitable high quality companies are better investments than other companies. They tried to figure out where this idea came from. Then it takes them back to Buffett and then Buffett points to Munger. But this is an insight you seem to have had in the 50’s or maybe the early 60’s before you were even an attorney. You weren’t even Charlie Munger. How did you find this idea.

Munger: Well everybody with any chance at all knows that some companies are better than others. What makes it difficult is they sell at higher prices in relation to assets and earnings and so forth. That takes the fun out of the game. If all you had to do was figure out which companies were better than others, any idiot could make a lot of money. But they keep raising the prices to the fact where the odds change and I always knew that.

They were teaching my colleagues that the market was so efficient that nobody can beat it. But I knew people that beat the para-mutual system in Omaha. I know more about horses than other people. I knew it was bullshit… when I was very young. So I never went near a business school so I didn’t get polluted by the craziness. Never believed it either!

I had a gift for recognizing twaddle and there’s nothing remarkable about it. I don’t have any wonderful insights that other people don’t have. I just slightly more consistently than others have avoided idiocy. Other people are trying to be smarter. All I’m trying to be is non-idiotic. I find that’s all you have to do to get ahead in life is to be non-idiotic and live a long time. It’s harder to be non-idiotic than most people think.

You can listen to the full meeting here:

Article by Johnny Hopkins, The Acquirer's Multiple

The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates. It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization. The Acquirer’s Multiple® is calculated as follows: Enterprise Value / Operating Earnings* It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT. Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations. Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up. Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC. He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law. Articles written for Seeking Alpha are provided by the team of analysts at, home of The Acquirer's Multiple Deep Value Stock Screener. All metrics use trailing twelve month or most recent quarter data. * The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”
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