16 ideas from Charlie Munger's last interview
Charlie Munger died 1 month before he turned 100. I listened to his last interview this week. Here are 16 useful ideas I took away from his two hour conversation.
Figuring out what you are naturally good at
“I was naturally arrogant. I recognized early that I was in the top 1%, better than ordinary people but I was not a prodigy. So I played the hand I was dealt. I was very young. I was correcting the course in my head because I realized the professor was doing it wrong.”
“I chose mathematics in grade school because I could get an A without doing any work.”
“I was an unusual child. I was curious. And I saw what was happening during the great depression. It was clobbering my family everywhere.”
“I got to play against competitors who were dumb so I had an unfair advantage.”
“Know your circle of competencies - stay away from things you aren’t good at.”
”I’m very good at recognizing unfair advantages”
Don’t blindly follow authority. Make up your own mind.
“My latin teacher was a big fan of Sigmund Freud. I read the readings of Sigmund Freud and realized he was a lunatic. So I decided not to learn the teachings of Sigmund from my latin teacher.”
“I thought Graham was wrong. And the real money was in the really great companies which carries you up and up and up and up.”
“BYD Investment - we could see that John Wu worked 70 hours a week and that he was a genius. So we invested when BYD was fairly small. When he wanted to get into auto we tried to talk him out of it. He paid no attention to us. And he went on to create incredible profits. It’s amazing what he’s done. “
Copy others ideas
“Lawn Fuller completely changed my life as a contracts law professor. I got the ideas of mental models from him. Even though he didn’t explicitly teach it.”
What worked in the past may not work today
”I saw some people get rich by holding a few good things. It’s so much harder to get rich now. What Ben Graham taught was to find a few good things and stay with them. But a long time for him was a few years not decades. He did that 40-50 years. And his investors did very well with him as did he. After he became famous everyone tried to do the same thing. It becomes competitive. The low hanging fruit has gone away. It doesn’t work as well but at his time it was the best thing.”
“I don’t think Sequoia will win in the future the way they did. It’s too hard. Everyone thinks they can copy the method and get the results. They will get lousy results. Not John Wooden results.”
Avoid mistakes
“We were a little less crazy and a little less stupid than most. And we got a little longer time to run than most.”
“We wised up over time. We understood more of the bad things that could happen. And we avoided them even more when we were old than when we were young. And it all worked.”
“My game in life was to avoid all the standard ways of failing. I’ve avoided alot because I’m so cautious.”
“Avoid crazy people at all costs. It’s way more common than you think.”
Focus your effort on the best players
“You win by focusing your efforts on the best players. And the more you play, the better you get. But you don’t get the effect just by practicing. Concentrate all your playing time in your best players. That’s what Berkshire did. Back the best players like the legendary basketball coach John Wooden did. Build your support team around your superstars.”
Luck will play its part
“When Warren and I started I didn’t expect to get to 100 million never mind 100 billion. It was an amazing occurrence.”
“All the great records are partly work, luck, talent.”
“What is the lesson of Elon Musk? Someone who has a ridiculous amount of money almost always has a element of luck in it. He’s been quite lucky in what he’s picked to double down on. And then he’s used leverage so much that he’s doubled down right to the edge of extinction. Maybe two or three times. How many people can go to the edge of extinction without stepping into it? He’s done it three times. Maybe has 6 more in him, I don’t know. I put Elon musk in a file. I never bet against him and I never bet with him. My life works better if I treat the world as if he doesn’t exist.”
No bad decision should be able to kill you
“Everyone has bad days. I’ve had bad trades. People learn more from their mistakes sometimes. Just do not live your life in a fashion that a bad day can kill you. The great home run hitters do not swing at every pitch. They wait for one that they can really handle. That’s what great stock pickers do too.”
Bet big when you see an unfair opportunity
“Lever up when you’re sure you’re right. Life is only going to give you a few such changes.”
“Being sure you’re right is what makes it hard. That’s why you don’t get it very often.”
“Buffet’s whole record is focused on a few huge successes.”
Have a too hard pile
“If it’s something I can’t fix I put it here in the “too hard” pile and move on. I don’t worry about it.”
Capitalism is the best system
“I like inequality a lot more than I like poverty.”
“You need capitalism plus someone who creates a sound currency to enable a medium of exchange. When you have those two things, now you and I can use a simple system of exchanging watches for medallions. We both want to do it. It’s something we can do. There is nothing else that will do that except capitalism. And do it automatically.”
Reading is the only way to get better
“Reading is the only way people can get smart. Even reading fiction, which includes a good deal of the Bible, Shakespeare, great novels. People are good at painting pictures and telling stories. People learn better with stories. It works.”
Figure out what works and do it. Figure out what does not work and avoid it.
“That’s what Lee Kuan Yew did to build Singapore”
“Both rules are correct. You have to get it right or as close to right.”
There are 3 rules to happiness
“Have low expectations”
“Have a sense of humor”
“Surround yourself with the love of friends and family”
Soldier through when the inevitable struggles come
“Everybody struggles. That’s the iron rule of life. Most lives have some tough stretches.”
“If you soldier through you can get through almost anything. And it’s the only option. You can’t bring back the dead or cure the dying child. Somehow you shoulder through. You can cry but you can’t quit. I cried all the time when my first child died but I knew I couldn’t change fate.”
“Change comes with life. Adapt to it.”
Don’t upgrade to lavish
“Whatever you are, wealth and age would make it more so.”
“Warren and I have lived in the same house for decades where our friends have gotten richer and built better houses. But I stayed because I didn’t want to spoil the children.”
Summary of the 16 useful ideas from Charlie Munger
Figure out what you are naturally good at
Don’t blindly follow authority. Make up your own mind.
Copy others ideas
What worked in the past may not work today
Avoid mistakes
Focus your effort on the best players
Luck will play its part
No bad decision should be able to kill you
Bet big when you see an unfair opportunity
Have a too hard pile
Capitalism is the best system
Reading is the only way to get better
Figure out what works and do it. Figure out what does not work and avoid it.
There are 3 rules to happiness
Soldier through when the inevitable struggles come
Don’t upgrade to lavish
That’s all for this week. See you next Sunday.
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