Charlie Munger on investing, life, stock markets and more

“Wisdom acquisition is a moral duty. It’s not something you do just to advance in life.”

“Spend each day trying to be a little wiser than you were when you woke up. Day by day, and at the end of the day-if you live long enough-like most people, you will get out of life what you deserve.”

“To get what you want, you have to deserve what you want. The world is not yet a crazy enough place to reward a whole bunch of undeserving people.”

“We both (Charlie Munger and Warren Buffett) insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think.”

“There is no better teacher than history in determining the future... There are answers worth billions of dollars in 30$ history book.”

“Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group…then to hell with them.”

Also Read: Charlie Munger's common sense approach to investing

“Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.”

“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.”

“You have to keep learning if you want to become a great investor. When the world changes, you must change.”

Investing

“A great business at a fair price is superior to a fair business at a great price.”

“It takes character to sit with all that cash and to do nothing. I didn't get top where I am by going after mediocre opportunities.”

“We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.”

“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotions under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success.”

“We have three baskets for investing: yes, no, and too tough to understand.”

“Mimicking the herd invites regression to the mean (merely average performance).”

“I think that every time you see the word EBITDA, you should substitute the words "bullshit earnings.”

"You don’t have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time.”

“Like Warren, I had a considerable passion to get rich, not because I wanted Ferraris—I wanted the independence. I desperately wanted it.”

Also Read: When Charlie Munger said his fans are ‘mostly nerds in China or India’

“It’s waiting that helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”

“I think part of the popularity of Berkshire Hathaway is that we look like people who have found a trick. It’s not brilliance. It’s just avoiding stupidity.”

"One of the inane things [that gets] taught in modern university education is that a vast diversification is absolutely mandatory in investing in common stocks. That is an insane idea. It's not that easy to have a vast plethora of good opportunities that are easily identified. And if you've only got three, I'd rather it be my best ideas instead of my worst. And now, some people can't tell their best ideas from their worst, and in the act of deciding an investment already is good, they get to think it's better than it is. I think we make fewer mistakes like that than other people. And that is a blessing to us."

“There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice.”

“I find it much easier to find four or five investments where I have a pretty reasonable chance of being right that they're way above average. I think it's much easier to find five than it is to find 100. I think the people who argue for all this diversification — by the way, I call it ‘deworsification’ — which I copied from somebody — and I'm way more comfortable owning two or three stocks which I think I know something about and where I think I have an advantage.”

“If you’re going to invest in stocks for the long term or real estate, of course there are going to be periods when there’s a lot of agony and other periods when there’s a boom. And I think you just have to learn to live through them. As Kipling said, treat those two imposters just the same. You have to deal with daylight and night. Does that bother you very much? No. Sometimes it’s night and sometimes it’s daylight. Sometimes it’s a boom. Sometimes it’s a bust. I believe in doing as well as you can and keep going as long as they let you.”

Also Read: Raamdeo Agrawal explains Charlie Munger’s compounding strategy, and why only a few get it

"I think that the modern investor, to get ahead, almost has to get in a few stocks that are way above average. They try and have a few Apples and Googles or so on, just to keep up, because they know that a significant percentage of all the gains that come to all the common stockholders combined is going to come from a few of these supercompetitors."

“There are huge advantages for an individual to get into a position where you make a few great investments and just sit on your ass: You are paying less to brokers. You are listening to less nonsense. And if it works, the governmental tax system gives you an extra 1, 2 or 3 percentage points per annum compounded.”

“Our experience tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing some simple and logical thing, will often dramatically improve the financial results of that lifetime.”

“We’re partial to putting out large amounts of money where we won’t have to make another decision. If you buy something because it’s undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. That’s hard. But if you buy a few great companies, then you can sit on your ass. That’s a good thing.”

“The world is full of foolish gamblers and they will not do as well as the patient investors.”

“Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things.”

Success

“Almost everybody that has an unusually good result has three things: They’re very intelligent, they worked very hard, and they were very lucky. It takes all three to get them on this list of the super successful. How can you arrange to have two or three episodes of good luck? The answer is you can start early and keep trying a long time, and maybe you’ll get one or two.”

“It is occasionally possible for a tortoise, content to assimilate proven insights of his best predecessors, to outrun hares that seek originality or don’t wish to be left out of some crowd folly that ignores the best work of the past. This happens as the tortoise stumbles on some particularly effective way to apply the best previous work, or simply avoids standard calamities. We try more to profit from always remembering the obvious than from grasping the esoteric. 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.”

“You’ll do better if you have passion for something in which you have aptitude. If Warren had gone into ballet, no one would have heard of him.”

“I think track records are very important. If you start early trying to have a perfect one in some simple thing like honesty, you’re well on you way to success in this world.”

“Someone will always be getting richer faster than you. This is not a tragedy.”

Life

“I think life is a whole series of opportunity costs. You know, you got to marry the best person who is convenient to find who will have you. Investment is much the same sort of a process.”

"Another thing, of course, is life will have terrible blows, horrible blows, unfair blows. 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 mischance in life was an opportunity to behave well. Every mischance in life was an opportunity to learn something and your duty was not to be submerged in self-pity, but to utilize the terrible blow in a constructive fashion. That is a very good idea."

Also Read: Charlie Munger influenced three generations of Damanis, says Ramesh Damani

“You don’t have a lot of envy, you don’t have a lot of resentment, you don’t overspend your income, you stay cheerful in spite of your troubles, you deal with reliable people and you do what you’re supposed to do. All these simple rules work so well to make your life better.”

"With everything boomed up so high and interest rates so low, what's going to happen is the millennial generation is going to have a hell of a time getting rich compared to our generation. The difference between the rich and the poor in the generation that's rising is going to be a lot less."

“What do you want to avoid? Such an easy answer: sloth and unreliability. If you’re unreliable, it doesn’t matter what your virtues are. You’re going to crater immediately. Doing what you have faithfully engaged to do should be an automatic part of your conduct. You want to avoid sloth and unreliability.”

Stock Market

"I think value investors are going to have a harder time now that there’s so many of them competing for a diminished bunch of opportunities. So my advice to value investors is to get used to making less." — 2023 Berkshire Hathaway Annual Meeting

"There is so much money now in the hands of so many smart people all trying to outsmart one another. It’s a radically different world from the world we started in."

“Invest in a business any fool can run, because someday a fool will. If it won’t stand a little mismanagement, it’s not much of a business. We’re not looking for mismanagement, even if we can withstand it.”

"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."

"I love everything about Costco. I'm a total addict, and I'm never going to sell a share."

“When any guy offers you a chance to earn lots of money without risk, don’t listen to the rest of his sentence. Follow this, and you’ll save yourself a lot of misery.”

On meme stocks: “What we're getting is wretched excess and danger for the country. A lot of people like a drunken brawl, and so far those are the people that are winning, and a lot of people are making money out of our brawl.”

New technologies

"The electric vehicle is coming big time, and that’s a very interesting development. At the moment, it's imposing huge capital costs and huge risks, and I don't like huge capital costs and huge risks."

"I am personally skeptical of some of the hype that has gone into artificial intelligence. I think old-fashioned intelligence works pretty well."

On Big Tech regulation: "I would not break them up. They've got their little niches. Microsoft maybe has a nice niche, but it doesn't own the Earth. I like these high-tech companies. I think capitalism should expect to get a few big winners by accident."

“We now have computer algorithms trading with other computers. And people buying stocks who know nothing, being advised by people who know even less. It’s an incredibly crazy situation ... All this activity makes it easier for us.”

"We are going to miss these newspapers terribly. Each newspaper... was an independent bastion of power. The economic position was so impregnable … and the ethos of a journalist was to try to tell it like it is. And they really were a branch of the government — they called them the Fourth Estate, meaning the fourth branch of the government. It arose by accident. Now about 95% of [newspapers are] going to disappear and go away forever. And what do we get in substitute? We get a bunch of people who attract an audience because they’re crazy ....”

Mental Models

“We’ve had enough good sense when something is working very well to keep doing it. I’d say we’re demonstrating what might be called the fundamental algorithm of life — repeat what works.”

“I spent a lifetime trying to avoid my own mental biases. A.) I rub my own nose into my own mistakes. B.) I try and keep it simple and fundamental as much as I can. And, I like the engineering concept of a margin of safety. I’m a very blocking and tackling kind of thinker. I just try to avoid being stupid. I have a way of handling a lot of problems — I put them in what I call my ‘too hard pile,’ and just leave them there. I’m not trying to succeed in my ‘too hard pile.’”

Invert, always invert: Charlie Munger's mental models that helped build his ‘30-second mind’

“Generally speaking, envy, resentment, and self-pity are disastrous modes of thoughts. Self-pity gets fairly close to paranoia, and paranoia is one of the very hardest things to reverse.”

“Invert, always invert: Turn a situation or problem upside down. Look at it backward.”

Cryptocurrencies

"A cryptocurrency is not a currency, not a commodity, and not a security. Instead, it’s a gambling contract with a nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity."

"I am not proud of my country for allowing this crap — well, I call it crypto shit. It's worthless, it's crazy, it's not good, it'll do nothing but harm, it's antisocial to allow it."

"I think the people that oppose my position are idiots. And so I don’t think there is a rational argument against my position."

"When you’re dealing with something as awful as crypto shit, it's just unspeakable. I’m ashamed of my country that so many people believe in this kind of crap and the government allows it to exist."

"I'm proud of the fact that I avoided it. It's like some venereal disease. I just regard it as beneath contempt. Some people think it's modernity, and they welcome a currency that's so useful in extortions and kidnappings [and] tax evasion."

"When you have your own retirement account and your friendly adviser suggests you put all the money into bitcoin, just say no."

"I hate the bitcoin success and I don’t welcome a currency that’s useful to kidnappers and extortionists, and so forth. Nor do I like just shuffling out a few extra billions and billions and billions of dollars to somebody who just invented a new financial product out of thin air. So, I think I should say modestly that I think the whole damn development is disgusting and contrary to the interests of civilization."

Miscellaneous

“If you don’t get this elementary, but mildly unnatural, mathematics of elementary probability into your repertoire, then you go through a long life like a one-legged man in an ass-kicking contest.”

“All I want to know is where I'm going to die so I'll never go there.”

“Always take the high road, it’s far less crowded.”

“What are the secret of success?- one word answer : rational.”

“I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.”

“People calculate too much and think too little.”

“Remember that reputation and integrity are your most valuable assets—and can be lost in a heartbeat.”

“The best armour of old age is a well-spent life preceding it.”

“The great algorithm to remember in dealing with this tendency is simple: an idea or a fact is not worth more merely because it’s easily available to you.”

“Those of us who have been fortunate have a duty to give back. Whether one gives a lot as one goes along as I do, or a little and then a lot (when one dies) as Warren does, is a matter of personal preference.”

“Man’s imperfect, limited-capacity brain easily drifts into working with what’s easily available to it. The brain can’t use what it can’t remember or when it’s blocked from recognizing because it’s heavily influenced by one or more psychological tendencies bearing strongly on it … the deep structure of the human mind requires that the way to full scope competency of virtually any kind is to learn it all to fluency—like it or not.”

‘A titan of business’: Tributes to Charlie Munger from Warren Buffett, Tim Cook and others

“It's the work on your desk. Do well with what you already have and more will come in.”

“Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley?”

“The iron rule of nature is: you get what you reward for. If you want ants to come, you put sugar on the floor.”

“If something is too hard, we move on to something else. What could be simpler than that?”

“Opportunity cost is a huge filter in life. If you’ve got two suitors who are really eager to have you and one is way the hell better than the other, you do not have to spend much time with the other. And that’s the way we filter out buying opportunities.”

“I’m not entitled to have an opinion unless I can state the arguments against my position better than the people who are in opposition. I think that I am qualified to speak only when I’ve reached that state.”

“What makes capitalism work is the fact that if you’re an able-bodied young person, if you refuse to work, you suffer a fair amount of agony, and because of that agony, the whole economic system works ... You take away that hardship and say, ‘You can stay home and get more than if you come in to work,’ that’s quite disruptive to an economic system like ours. The next time we do this, I don’t think we ought to be so liberal.”

“Usually, I don’t use formal projections. I don’t let people do them for me because I don’t like throwing up on the desk, but I see them made in a very foolish way all the time, and many people believe in them, no matter how foolish they are. It’s an effective sales technique in America to put a foolish projection on a desk."

“There are two kinds of businesses: The first earns twelve percent, and you can take the profits out at the end of the year. The second earns twelve percent, but all the excess cash must be reinvested – there’s never any cash. It reminds me of the guy who sells construction equipment – he looks at his used machines, taken in as customers bought new ones, and says “There’s all of my profit, rusting in the yard.” We hate that kind of business.”

“Creative Accounting is an absolute curse to a civilization. One could argue that double-entry bookkeeping was one of history’s great advances. Using accounting for fraud and folly is a disgrace. In a democracy, it often takes a scandal to trigger reform. Enron was the most obvious example of a business culture gone wrong in a long, long time.”

“Everywhere there is a large commission, there is a high probability of a rip-off.”

“Today, it seems to be regarded as the duty of CEOs to make the stock go up. This leads to all sorts of foolish behavior. We want to tell it like it is.”

“Remember that reputation and integrity are your most valuable assets – and can be lost in a heartbeat.”

“.. the most famous composer in the world but was utterly miserable most of the time, and of the reasons was because he always overspent his income. This was Mozart. If Mozart couldn't get by with this kind of asinine conduct, I don't think you should try.”

“Ninety-nine percent of the troubles that threaten our civilization come from too optimistic, therefore we should have a system where the accounting is a way more conservative.”

“Capitalism without failure is like religion without hell.”

“Is there such a thing as a cheerful pessimist? That's what I am.”