As we begin 2017, I thought it would be a great time to reflect on some of the principles, teachings, and quotes of Charlie Munger, investment legend, vice chairman of Berkshire Hathaway and Warren Buffett’s right-hand man. I went through some of my past notes based on different articles, speeches, and quotes to put together this piece.
We will sprinkle some more Munger wisdom throughout the year, because I think there is so much he has shared over his life that can benefit all of us. Sign up for our rocketMBA Digest below if you don’t want to miss a part!
1. Do what you think is right, even if it is unpopular
“If your new behavior gives you a little temporary unpopularity with your peer group…then to hell with them.”
2. Learn from the mistakes of others
“Learning from other people’s mistakes is a much more pleasant way to learn from mistakes.”
3. In every decision, consider the opportunity cost
“The right way to make decisions in practical life is based on your opportunity cost. When you get married, you have to choose the best [spouse] you can find that will have you. The rest of life is the same damn way.”
4. Avoid envy and don’t compare yourself to others
“Envy is the great driver. One investment bank can’t stand some other investment bank being bigger and better. Even though the guy is making $5M a year, he can’t stand it. It’s envy.”; “Missing out on some opportunity never bothers us. What’s wrong with someone getting a little richer than you? It’s crazy to worry about this?”
5. Focus on your circle of competence
“There are a lot of things we pass on. We have three baskets: in, out, and too tough. We have to have a special insight, or we’ll put it in the ‘too tough’ basket. All of you have to look for a special area of competency and focus on that.”
6. Avoid self pity
“Mozart is a good example of a life ruined by nuttiness. His achievement wasn’t diminished – he may well have had the best innate musical talent ever – but from that start, he was pretty miserable. He overspent his income his entire life – that will make you miserable. He was consumed with envy and jealousy of other people who were treated better than he felt they deserved, and he was filled with self-pity. Nothing could be stupider. Even if your child is dying of cancer, it’s not okay to feel self-pity. In general, it’s totally nonproductive to get the idea that the world is unfair…As for revenge, it’s totally insane.”
7. Avoid multi-tasking
“Look at this generation, with all of its electronic devices and multi-tasking. I will confidently predict less success than Warren [Buffett], who just focused on reading. If you want wisdom, you’ll get it sitting on your ass. That’s the way it comes.”
8. Be patient, but when good opportunities arise, be aggressive
“How did [our good results] happen? If you took the top 15 decisions out, we’d have a pretty average record. It wasn’t hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor. With all that vigor, you only made a decision every two years. We do more deals now, but it happened with relatively few decisions and staying the course for decades and holding our fire until something came along worth doing.”; “Most people are too fretful, they worry too much. Success means being very patient, but aggressive when it’s time.”
9. Focus on treating your current customers/clients well first
“Never abuse current clients by trying to get new ones. Think how this would work with matrimony – if you ignore your current wife while you pursue another one. The old attitudes will work fine. If you live long enough and act well, and have some intelligence, you’ll do fine.”
10. Consider opposing viewpoints, and be willing to change your mind
“The ability to destroy your ideas rapidly instead of slowly when the occasion is right is one of the most valuable things. You have to work hard on it. Ask yourself what are the arguments on the other side. It’s bad to have an opinion you’re proud of if you can’t state the arguments for the other side better than your opponents. This is a great mental discipline.”
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