I sent my book “Anyone Can Be Rich!” to a hundred people.
Q2 2020 hedge fund letters, conferences and more
Only one wrote back:
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy Read More
P.S. If anything, you underestimate Charlie.”
His partner, Charlie Munger, of course.
I thought Warren Buffett might have been kidding.
Charlie Munger is quoted and praised throughout the book.
But time has taught me Warren Buffett was serious.
And he was right!
He usually is.
As much as I learned from Charlie Munger before I wrote my book, I’m always learning more.
10 Lessons Learned From Charlie Munger
Here are ten great things I learned from Charlie Munger:
1. Invert, Always Invert!
The wisdom of mathematician, Carl Jacobi.
If you have an insoluble problem, turn it upside down, run it forward and backward, until the answer spills out before you.
Take the State Lottery.
It exploits the poor.
How could the State Lottery help the poor?
Make it involuntary.
Cut the prizes to reasonable amounts.
Make everyone a winner, but only if aged or ill.
And turn the State Lottery into…
The only government program everyone loves.
2. Repeat What Works: The Fundamental Algorithm!
The wisdom of Lee Kuan Yew.
Learn from Nature, the greatest success ever…
Evolution just repeats what works over billions of years.
Every living thing in the world is evolved and proven.
If your brilliant idea fails.
Toss it out.
Just like evolution does.
As Dorothy Fields wrote, to music by Jerome Kern:
“Pick yourself up.
Dust yourself off.
And start all over again.”
3. Be A Learning Machine
“Go to bed smarter than you woke up.”
Brains and IQ can give you a head start in life.
But experience, learning, persistence, honesty, self-criticism and hard work beat intelligence much of the time.
Albert Einstein said he was not more intelligent than other people.
He just thought about problems longer.
4. Great Opportunities Are Rare: Seize Them and Bet Heavily!
Charlie warns there are but few great opportunities in life.
When they appear, seize them and bet heavily.
Don’t just nibble, like a frightened rabbit.
I saw Amazon.
I saw Costco.
I nibbled at both like Charlie’s rabbit.
Oh, if I had bitten hard, deep and never let go…
Like my dog would have done!
5. Never Ignore the Power of Incentives
As we innocently watch the world go by we easily forget that everyone we encounter has their reasons and their incentives.
They are not merely players upon a stage.
Surgeons are paid to perform surgery.
Lawyers bill every hour.
Brokers live on commissions.
Self-interest is king, or we would not all be here.
As Adam Smith wrote:
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.”
In short: “It’s the economy, stupid.”
“If you would persuade, appeal to interest, not to reason.”---Benjamin Franklin
6. "It's All So Simple!"
Complex problems often have simple solutions.
As Einstein said, the highest level of intelligence, beyond genius, is “simple.”
E=mc2 is simple.
“White Christmas,” which Irving Berlin rightly called the greatest song ever written—he should know, he wrote it---is breathtakingly simple.
Once heard, never forgotten.
Could you find a spare word in “Over the Rainbow”?
Why is the bossa nova so infectious?
It’s simply the beat of your heart!
Evolution is a simple concept but it is the key to life.
Compound interest is a simple concept but it is the key to wealth.
“Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things.”—-Charles T. Munger
7. "How could it be otherwise?"
Charlie’s oft-heard refrain when cursed realities conspire to disappoint us.
Charlie knows well that reality never disappoints us.
We disappoint ourselves.
Hope is not a strategy.
“Experience is what you get when you don’t get what you wanted.”---Randy Pausch
8. "Tell Them Why!"
Children ask “why?” until parents reach the end of their rope and cry, “Because I said so!”
Then kids shut up.
But we grow up and continue to want to know why.
And we perform way better if we know why.
When the Department of War needed training films to educate the troops in World War II they recruited Frank Capra—shortly to direct “It’s a Wonderful Life”---to create a film series:
“Why We Fight”
If you want someone to do something,
Do it right and do it well,
Tell ‘em why!
9. "Envy is the only sin you can never have fun doing!"
Charlie has a shopping list of complaints about envy and jealousy.
And Charlie agrees with Warren Buffett that, “It’s not greed that drives the world but envy.”
Psychiatry and psychology are stunningly silent on envy and jealousy, though these sins are powerful enough to appear at least twice in the Ten Commandments.
Envy and jealousy promote FOMO:
Fear Of Missing Out.
Like doubling down on lottery tickets because a coworker won.
Or buying a stock because a neighbor profited.
“Someone will always be getting rich faster than you. This is not a tragedy.”---Charles T. Munger
10. "Life will have terrible blows in it…"
“Life will have terrible blows in it, horrible blows, unfair blows. It doesn’t matter. And some people recover and others don’t. And there I think the attitude of Epictetus is the best.
He thought that every missed chance in life was an opportunity to behave well.
Every missed chance in life was an opportunity to learn something and that your duty was not to be submerged in self-pity.
But instead to utilize the terrible blow in constructive fashion.
That is a very good idea.”---Charles T. Munger
Charlie teaches us to rebound from failure and disappointment and, as Dorothy Fields wrote in “Pick Yourself Up”:
“Don’t lose your confidence if you slip
Be grateful for a pleasant trip
And pick yourself up
Dust yourself off
And start all over again.”
If you have never heard this wonderful song, let Nat King Cole and George Shearing render it imperishable at https://www.youtube.com/watch?v=QqC5YtutWAU
Finally, Charlie recognizes that if you eschew self-pity you gain advantage over every competitor who does not!
If I have whetted your appetite for more wisdom from Charlie Munger - beyond the interviews, addresses and quotations available on the web - then order Poor Charlie’s Almanac: The Wit and Wisdom of Charles T. Munger, edited and annotated by his friend, Peter D. Kaufman, and lavishly illustrated in color.
It is the best sixty dollars you will ever spend.
As if Charlie were not already generous enough with his teachings, all proceeds go to charity.