Some of My Favourite Charlie Munger Quotes
RIP Charlie Munger
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I'm currently writing this article 3 hours into a 1.5-hour flight from Melbourne to Sydney (edit: I ended up sitting in the plane for 6.5 hours and missed seeing Post Malone live in Sydney 😭😭😭 ). This morning I woke up and groggily scrolled through my X feed to quickly find out that one of the biggest inspirations in my life, Mr. Charlie Munger, had passed away.
Some people like to idolise and worship people and follow 100% of everything that person does. In my case, I don't tend to idolise that many people. No one's perfect, and I like to pick and choose what to follow and what to ignore. I could probably count the people I truly idolise on one hand, and Charlie was one of them.
I was introduced to Charlie and his lessons when I was 13. I'd just played a stock market simulator game, as part of my Year 8 commerce elective class. It was my first foray into investing, and it was honestly love at first sight. I didn't really know what I was doing, or what to think, but digging into the metrics, figuring out what consensus meant, and understanding the psychology behind the markets spoke to me like nothing else.
Whilst my memory is a little fuzzy, I think it was my Dad who introduced me to Warren and Charlie. My dad was the one who really nurtured and taught me the fundamentals of investing and he was a fan of Warren.
In any case, one of the first investing books I read was Poor Charlie's Almanack (by far my favourite non-fiction book, and one that I've read multiple times over). And to be honest, the first time I read it, I didn't really understand what I was reading, but it was clear that Charlie was a top 0.00001% human, in wit, intellectual curiosity and mental clarity.
As a testament to him, I wanted to compile a list of my favourite Munger quotes and provide my commentary on them. Here goes.
I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up, and boy, does that help, particularly when you have a long run ahead of you. Develop into a lifelong self-learner through voracious reading. Cultivate curiosity and strive to become a little wiser every day.
This is something I strive to do on a daily basis - I try to have a wide information diet, and typically either read things that are topical today or have stood the test of time.
I think speed is overestimated. I had a roommate at Caltech who had a very distinguished mind, and I could do problems faster than he could, but he never made a mistake, and I did.
So, I wouldn’t be too discouraged if you have to go a little slower. What the hell difference does it make?
This learning took a long time to internalise. When I was studying and even in my early career, I was very much like Charlie. I’d aim to finish things quickly, without much care or regard for the quality of work that I was producing. I still fall into that trap sometimes, and I need to be conscious of this all the time.
a. Show me the incentive, and I will show you the outcome.
b. Never, ever, think about something else when you should be thinking about the power of incentives.
c. Well, I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes but I get some surprise that pushes my limit a little farther.
This is by far the most important lesson that I’ve learnt from Charlie. I first heard the line when I was in high school and it didn’t mean anything to me at the time.
When I got into crypto back in 2016/17, this line again kept cropping up and I thought I knew what it meant, but realistically I had no clue.
Now in 2023, I finally understand the last line of the third quote (bolded). The last bull run in crypto, VC and equity markets was led by incentives on steroids. It was entirely shocking and surprising to see talented and brilliant individuals led astray due to jacked-up short-term incentives.
On Value Investing
Warren: There's no other kind of investment than a value investment. Value relates to getting a lot for the expectable flow of cash in the future, in terms of what you're laying out today.
While I am cheating a little here, by including a quote from Warren, Charlie undoubtedly inspired Warren disproportionately and so can have credit for this thinking.
This particular quote comes from a transcript (source) where the two talk about their investment in BYD.
Whilst Warren and Charlie have largely stayed away from technology investing, they have made a handful of incredible investments including BYD and Apple. A lot of people think VC is very much a growth investing game.
In my view, that couldn’t be further from the case for early-stage VC. Valuation discipline is paramount, but more importantly, it’s about spotting a non-consensus opportunity through deep thinking and profound judgement.
On the Power Law
What everybody has learned is that everybody needs some significant participation in the 12 companies that do better than everybody else. You need two or three of them, at least.
The power law is a very real phenomenon and has led to a large bulk of Charlie and Warren’s success.
From a venture perspective, it isn’t sufficient to just be a small shareholder in the best companies. You need to own a significant chunk of them to really achieve something extraordinary.
It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying: ‘It’s the strong swimmers who drown
One of my favourite memes is the midwit meme. Here’s one that I made for a previous article.
It’s too easy to overthink things. You need to know when it’s important to complicate things, and when you should choose the path that is most obvious.
On Doing Nothing
There are huge mathematical advantages to doing nothing
The biggest mistakes both personal and financial in my life have been doing things that I knew not to do but still did anyway. Still learning this lesson the hard way 😅.
a. If you want to be happy in marriage, try to improve yourself as a spouse, not change your spouse.
b. The best way to get a good spouse is to deserve a good spouse.
In the lead-up to my wedding early next year, I’ve been thinking about what the next chapter of my life will look like, given the new and added responsibilities that I’ll be taking on as a husband.
I’m incredibly lucky to have found Ananya, my beautiful fiance who puts up with a lot of the mistakes I make. She’s honestly my lucky charm and I wouldn’t be where I am today without her.
As a young investor and a young person, Charlie’s mental clarity, discipline and determination are a huge inspiration to me. It’s incredibly sad to know that there won’t be more gems coming from him in the future. He’s taught me so much already, and I’m sure I’ll continue to compound these lessons in the future.
RIP Charlie Munger.
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