5 Bites of Wisdom from Charlie Munger
What I learned from Charlie Munger
The internet is aflame this week with tributes to the great Charlie Munger. I consider Charlie to be one of my mentors. No, I never spoke with him. But I’ve followed his thinking about business and life for the last decade.
There’s no rule that says your mentors must be living and have a quarterly lunch with you. The brilliance of media enables you to choose mentors from anywhere in history. Simply find their thoughts in print or pixel and use them to guide your actions.
Charlie was like your cranky old grandpa who unapolagetically told it like it is. I recall my wife walking into the room whilst I watched an hour long interview with Charlie on YouTube. I believe the sound that came from her mouth was “Nerd Alert”.
In this week’s post I’d like to share five important lessons that I learned from Charlie.
The best way to get a good spouse is to deserve a good spouse.
The lesson here isn’t about how to find a good husband or wife. It’s that, on average, you get what you deserve. If you want good relationships, work at it. If you want professional success, work at it. If you want good health, work at it. Too many people want things but don’t do the work.
Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Slug it out one inch at a time, day by day. At the end of the day - if you live long enough - most people get what they deserve.
Again we see a theme of ‘you get what you deserve’. Charlie and Warren were also known for their patience. They would ‘sit on their asses’, reading and ‘doing nothing’ until great investment opportunities came along. This principle also touches on the power of compounding interest in your behaviour. If you get just a little better everyday - exercising, reading, thinking, writing, doing, it’s almost imperceptible. But after a year, two years, five years, you see massive results.
Show me the incentive and I’ll show you the outcome.
Incentives are the most powerful forces of human nature. All human behaviour can be explained by incentives. If you lead a team in business, I urge you to inspect the incentive structure for your team to ensure it aligns with the outcomes you want.
It’s 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 strongest swimmers who drown’.
Why do the strongest swimmers drown? Because they are the ones with the bravado to engage in risky behaviour. In markets, Charlie knew that every ten years or so, there would be excessive greed resulting in asset bubbles. If he could think long-term and avoid foolish behaviour, he knew he would do well. In the internet bubble of 2000, Charlie and Warren were heavily criticised for missing out on the mania. But they knew that the bubble would pop and there would be wonderful investment opportunities (not least because Charlie lost 50% of his portfolio in a previous bubble). Charlie was equally critical of crypto and meme stock mania. All proven right. Think long-term, and avoid stupid behaviour.
In my whole life, I have known no wise people who didn’t read all the time - none, zero. You’d be amazed at how much Warren [Buffett] reads - and how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.
We are not born with wisdom. We must acquire it. We won’t get it on instagram, X, or CNN. If we want wisdom there is only one way - seek out the greatest minds of human species. The inner workings of those minds are in the books that document them. Unfortunately, people seem less compelled to read books these days, driven mostly by the powerful incentives of the internet. For those willing to stop scrolling and start turning the page, this is a tremendous opportunity.
These are merely five of the literal hundreds of wisdom bites from Charlie. If you want to go deeper with Charlie and his brilliant mind, I urge you to pick up The Tao of Charlie Munger which documents Charlie’s wisdom in an easy and consumable book.
Rest easy Charlie. Thanks for the lessons.