Munger Quotes

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.

In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time -- none, zero. You'd be amazed at how much Warren reads--and at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out.

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.

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.

How to find a good spouse? -the best single way is to deserve a good spouse.

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.

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.

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

What are the secret of success? -one word answer :"rational

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.

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.

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

People calculate too much and think too little.

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?

Go to bed smarter than when you woke up.

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.

Buffett found it 'extraordinary' that academics studied such things. They studied what was measurable, rather than what was meaningful. 'As a friend [Charlie Munger] said, to a man with a hammer, everything looks like a nail.

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

The best armour of old age is a well spent life perfecting it.

I never allow myself to hold an opinion on anything that I don't know the other side's argument better than they do

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

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

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.

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.

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

As long as I have a book in my hand, I don’t feel like I’m wasting time.” —Charlie Munger

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

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.

In my whole life, I have known no wise people (over a board subject matter area) who didn't read all the time - none, zero. You'd be amazed how much Warren reads - and at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out.

Buffett and his partner, Charlie Munger, realized that as customers form routines around a product, they come to depend upon it and become less sensitive to price.

Warren Buffett is one of the best learning machines on this earth. The turtles which outrun the hares are learning machines. If you stop learning in this world, the world rushes right by you.

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 emotion 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: in, out, and too tough. … We have to have a special insight, or we’ll put it in the “too tough” basket.

Learning from the success and failure of others is the fastest way to get smarter and wiser without a lot of pain.

Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world

Warren talks about these discounted cash flows. I’ve never seen him do one.

We both 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. So Warren and I do more reading and thinking and less doing than most people in business.

Crowd folly, the tendency of humans, under some circumstances, to resemble lemmings, explains much foolish thinking of brilliant men and much foolish behavior.

Pain-Avoiding Psychological Denial One should recognize reality even when one doesn’t like it.

An example of a really responsible system is the system the Romans used when they built an arch. The guy who created the arch stood under it as the scaffolding was removed. It’s like packing your own parachute.

Man’s imperfect, limited-capacity brain easily drifts into working with what’s easily available to it. And 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.

On the Ideal Business - Buffett: “Something that costs a penny, sells for a dollar and is habit forming.

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.

Forgetting your mistakes is a terrible error if you’re trying to improve your cognition. Reality doesn’t remind you. Why not celebrate stupidities in both categories?

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.” – Charlie Munger

It’s not possible for investors to consistently outperform the market. Therefore you’re best served investing in a diversified portfolio of low-cost index funds [or exchange-traded funds].

In the 54 years (Charlie Munger and I) have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.

Buffett's methodology was straightforward, and in that sense 'simple.' It was not simple in the sense of being easy to execute. Valuing companies such as Coca-Cola took a wisdom forged by years of experience; even then, there was a highly subjective element. A Berkshire stockholder once complained that there were no more franchises like Coca-Cola left. Munger tartly rebuked him. 'Why should it be easy to do something that, if done well two or three times, will make your family rich for life?

In Buffett’s view, if you cannot write it down, you have not thought it through.

If investors only had to study the past, the richest people would be librarians.

It's not supposed to be easy. Anyone who finds it easy is stupid.

It is remarkable how much long-term advantage we have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.

Buffett has said that if you cannot explain why you failed after you have made a mistake, the business was too complex for you.

Munger likes to say that a year in which you do not change your mind on some big idea that is important to you is a wasted year.

The reason we avoid the word "synergy" is because people generally claim more synergistic benefits than will come. Yes, it exists, but there are so many false promises. Berkshire is full of synergies - we don't avoid synergies, just claims of synergies.

If you wanted to predict how people would behave, Munger said, you only had to look at their incentives. FedEx couldn’t get its night shift to finish on time; they tried everything to speed it up but nothing worked—until they stopped paying night shift workers by the hour and started to pay them by the shift. Xerox created a new, better machine only to have it sell less well than the inferior older ones—until they figured out the salesmen got a bigger commission for selling the older one. “Well, you can say, ‘Everybody knows that,’ ” said Munger. “I think I’ve been in the top five percent 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

After you have enough for daily life, all that matters is your health and those you love.

Yet the industry asks for more money from investors every year. The idea is to find investments that give you money, not take it.

The right manager can have an absolutely huge impact. Find people with brains, energy and integrity,

I observe what works and what doesn’t and why.

People are trying to be smart—all I am trying to do is not to be idiotic, but it’s harder than most people think.

Munger claimed that it is because professors are so enamored by modern portfolio theory. For the man with a hammer, every problem looks like a nail.

Munger noted that high profits on capital often rely on information inefficiencies.

If you want to get rich, you’ll need a few decent ideas where you really know what you’re doing. Then you’ve got to have the courage to stick with them and take the ups and downs. Not very complicated, and it’s very old-fashioned.

It's not the bad ideas that do you in, it’s the good ideas. And you may say, 'That can't be so. That's paradoxical. What he [Graham] meant was that if a thing is a bad idea, it’s hard to overdo. But where there is a good idea with a core of essential and important truth, you can’t ignore it. And then it's so easy to overdo it. So the good ideas are a wonderful way to suffer terribly if you overdo them

The safest way to get what you want is to deserve what you want.

All skills attenuate with disuse.

The secret of happiness is to lower your expectations.

people who cannot be alone with their own thoughts are terrible candidates to become successful investors.

Take a simple idea and take it seriously.

Value is what a business is worth. Price is what you have to pay to get it.

Ben Franklin’s advice: “Keep your eyes wide open before marriage and half shut thereafter.

Own your work and compound credibility.

Stay within a well-defined circle of competence.

Resist the craving for false precision, false certainties, etc.

Good ideas are rare—when the odds are greatly in your favor, bet (allocate) heavily.

Avoid unnecessary transactional taxes and frictional costs; never take action for its own sake.

Show me the incentive and I'll show you the outcome.

One of Buffett’s annual themes is the value of learning. He noted that life properly lived is learning, learning, learning all the time. He observed that being wrong is when he learns the most.

Charlie Munger gave me a great quotation on this subject, from Demosthenes: “Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true.” The belief that some fundamental limiter is no longer valid—and thus historic notions of fair value no longer matter—is invariably at the core of every bubble and consequent crash. In fiction, willing suspension of disbelief adds to our enjoyment.

Passavamo sulla terra leggeri come acqua, disse Antonio Setzu, come acqua che scorre, salta, giù dalla conca piena della fonte, scivola e serpeggia fra muschi e felci, fino alle radici delle sughere e dei mandorli o scende scivolando sulle pietre, per i monti e i colli fino al piano, dai torrenti al fiume, a farsi lenta verso le paludi e il mare, chiamata in vapore dal sole a diventare nube dominata dai venti e pioggia benedetta. A parte la follia di ucciderci l'un l'altro per motivi irrilevanti, eravamo felici. Le piante e le paludi erano fertili, i monti ricchi di pascolo e fonti. Il cibo non mancava neppure negli anni di carestia. Facevamo un vino colore del sangue, dolce al palato e portatore di sogni allegri. Nel settimo giorno del mese del vento che piega le querce incontravamo tutte le genti attorno alla fonte sacra e per sette giorni e sette notti mangiavamo, bevevamo, cantavamo e danzavamo in onore di Is. Cantare, suonare, danzare, coltivare, raccogliere, mungere, intagliare, fondere, uccidere, morire, cantare, suonare, danzare era la nostra vita. Eravamo felici, a parte la follia di ucciderci l'un l'altro per motivi irrilevanti. (pag. 56)

You don't have to pee on an electric fence to learn not to do it

We’d buy great businesses with excellent management at a fair to bargain price and leave them alone.

It's amazing how intelligent it is just to spend some time sitting. A lot of people are way too active.

Tom Murphy, CEO of Capital Cities/ABC and considered by Buffett to be the best business manager in the country, prays every day to be humble.

Buffett continued, saying that MPT has no utility. It is elaborate with lots of little Greek letters to make you feel you are in the big leagues. The

Buffett pointed out that when the investment tide goes out, you will see who has been swimming naked.

The role of democracy is not to banish disagreement but rather to prevent political disagreements from devolving into armed conflict.

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 that help, particularly when you have a long run ahead of you.

18 NEVER PAY YOUR LAWYER BY THE HOUR Incentive Super-Response Tendency To control a rat infestation, French colonial rulers in Hanoi in the nineteenth century passed a law: for every dead rat handed in to the authorities, the catcher would receive a reward. Yes, many rats were destroyed, but many were also bred specially for this purpose. In 1947, when the Dead Sea scrolls were discovered, archaeologists set a finder’s fee for each new parchment. Instead of lots of extra scrolls being found, they were simply torn apart to increase the reward. Similarly, in China in the nineteenth century, an incentive was offered for finding dinosaur bones. Farmers located a few on their land, broke them into pieces and cashed in. Modern incentives are no better: company boards promise bonuses for achieved targets. And what happens? Managers invest more energy in trying to lower the targets than in growing the business. These are examples of the incentive super-response tendency. Credited to Charlie Munger, this titanic name describes a rather trivial observation: people respond to incentives by doing what is in their best interests. What is noteworthy is, first, how quickly and radically people’s behaviour changes when incentives come into play or are altered and, second, the fact that people respond to the incentives themselves and not the grander intentions behind them.

All the equity investors, in total, will surely bear a performance disadvantage per annum equal to the total croupiers’ costs they have jointly elected to bear. This is an inescapable fact of life. And it is also inescapable that exactly half of the investors will get a result below the median result after the croupiers’ take, which median result may well be somewhere between unexciting and lousy.

There are essentially five things public corporations can do with a dollar earned: reinvest in the business, acquire other businesses or assets, pay down debt, pay dividends, and/or buy in shares. Deciding

I want to think about things where I have an advantage over others. I don't want to play a game where people have an advantage over me. I don't play in a game where other people are wise and I am stupid. I look for a game where I am wise, and they are stupid. And believe me, it works better. God bless our stupid competitors. They make us rich.

occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. And the market aberrations produced by them will be equally unpredictable, both as to duration and degree. Therefore, we never try to anticipate the arrival or departure of either disease. Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful. As

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

Successful investors … must possess an interest in the process. It’s no different from carpentry, gardening, or parenting. If money management is not enjoyable, then a lousy job inevitably results, and, unfortunately, most people enjoy finance about as much as they do root canal work.

Everyone makes mistakes, but Munger has repeatedly said that staying away from the really big mistakes, like cocaine and heroin, is vital. As an analogy, Munger has pointed out that if you are floating down a river and there are really dangerous whirlpools that are killing many people on a daily basis, you do not go anywhere near that whirlpool. Munger also pointed to alcoholism as a major cause of failure in life. His point on substance abuse is simple: why play dice with something that can ruin your life forever? His timeless advice in every setting is to avoid situations with a massive downside and a small upside (negative optionality).

Munger has also learned to control certain toxic emotions that would corrode his enjoyment of life. “Crazy anger. Crazy resentment. Avoid all that stuff,” he tells me. “I don’t let it run. I don’t let it start.” The same goes for envy, which he considers the dumbest of the seven deadly sins because it’s not even fun. He also disdains the tendency to view oneself as a victim, and he has no patience for whining. When I ask if he has a mental process that helps him to defuse self-defeating emotions, he replies, “I know that anger is stupid. I know that resentment is stupid. I know self-pity is stupid. So I don’t do them.… I’m trying not to be stupid every day, all day.