In his own words: What PPFAS Mutual Fund’s Rajeev Thakkar learnt from Charlie Munger

One of the phrases that Munger would often repeat was, “To a man with a hammer, every problem looks like a nail.”

The passing away of Charlie Munger has surprised most of us. While he was surely at an advanced age, people were looking forward to him turning 100 on January 1, 2024. To use a cricket analogy, it is like your favourite batsman getting out on 99.

While Charlie Munger was one of the all-time investing greats along with Warren Buffett, it would be a mistake to look at him purely through the investing lens. Learnings from Munger apply to various facets of human life.

Here are a few things that I learnt from him.

A polymath

One of the phrases that Munger would often repeat was, “To a man with a hammer, every problem looks like a nail.”

He was a big proponent of learning the most important ideas from various fields and transferring those ideas across disciplines. He read from fields as diverse as finance, psychology, biology, evolution, physics, architecture, law, history and so on. He called the synthesis of ideas from various fields as the Latticework of Mental Models.

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

Original thinking

Munger’s study of various fields was not idle reading. He was known to use his architecture studies to actually build structures that he designed. Some of these ideas were interesting and useful, like keeping the size of women’s restrooms bigger than men’s to avoid the long queues one sees at airports and other places.

Other ideas got a lot of pushback, like creating a dorm in a university without windows. Whether one agreed with him or not, his ideas were original and not constrained by the prevailing consensus or dogma. Munger was always a person who went by first principles thinking.

Strength in the face of adversity

Munger faced many setbacks in his life. He lost his child at an early age. He had a painful divorce. He lost the function of one of his eyes and so on.

His motto was, “Never feel sorry for yourself”. His belief, which was born out of evidence, was that people who consistently showed up and did not do stupid things had a huge advantage over the majority. It did not require brilliance. Just the ability to persevere at things.

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

The Importance of inverted thinking

Munger often emphasised the importance of “inverted thinking”, a process of approaching problems from the opposite perspective.

He believed that this technique could reveal hidden flaws and vulnerabilities that might otherwise go unnoticed. By considering the potential for negative outcomes, individuals could make more informed and risk-averse decisions. One of his favourite quotes was, “Tell me where I am going to die and I will never go there.”

Patience

When it came to investing, Munger always said, “The big money is not in buying and selling but in waiting.” He would wait for a long time to deploy money into investments, and once invested, he would hold on for a very long time for the investments to deliver results to their full potential.

Psychology and the power of incentives

Munger was a great believer in the power of incentives. Persuasion and talk can go only so far.

He used to cite the example of Federal Express, where once they changed the method of payment to staff from an hourly rate to a per-shift rate, delays in sorting of parcels went away as there was no incentive to work longer hours. He used to say, “Show me the incentives and I will tell you the behaviour.”

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

Emphasis on rational thinking

Munger frequently said that the easiest person to fool was yourself. Many times, we let emotions get in the way of rational thinking. Our actions are driven by factors other than cold logic. Munger believed in looking at the world the way it was rather than through rose-tinted glasses.

A frank and blunt man

In a world where people are guarded in what they say, where there are euphemisms thrown around and people are politically correct, Charlie Munger was like a breath of fresh air. We never had to second guess what he was saying. He said what he meant and if that displeased a few people, so be it.

Appreciation of different approaches and cultures

Most people inherently like their own culture and approach over others. Munger, despite being an American, would look at other societies and cultures and see what approach was the best. He was a big admirer of late Singapore Prime Minister Lee Kuan Yew and thought that some of the practices in Singapore were worth emulating in the United States.

Charlie Munger was generous with his time for interviews, speeches and writing. While Munger may not be among us today, he leaves behind a lifetime’s worth of communication in various forms to help us not only in the area of investing but also to navigate the world that we live in.