Timeless Truths From Charlie Munger

The investment world lost an icon Tuesday, with Charlie Munger passing peacefully at the ripe old age of 99. As Warren Buffett’s longtime business partner, Munger was famous for always being ready and willing to say “no” to bad investment ideas—a valuable, underrated trait—earning him the affectionate nickname of The Abominable No-Man. But he was also a wise investor in his own right, an established one even before joining with Buffett. And he had a healthy dose of wit to boot. So what better way to pay tribute than to round up our favorite Mungerisms—timeless truths that investors, and people in general, can always learn from.

“A great business at a fair price is superior to a fair business at a great price.”^[i]

“In my whole life, I have known no wise people who didn’t read all the time—none, zero.”^[ii]

“Trying to minimize taxes too much is one of the great causes of really dumb mistakes in investing.”^[iii]

“Anytime somebody offers you a tax shelter from here on in life, my advice would be don’t buy it. In fact, anytime anybody offers you anything with a big commission and a 200-page prospectus, don’t buy it. Occasionally, you’ll be wrong if you adopt the ‘Munger’s Rule.’ However, over a lifetime, you’ll be a long way ahead — and you will miss a lot of unhappy experiences that might otherwise reduce your love for your fellow man.”^[iv]

“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.”^[v]

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

“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.”^[vii]

“It’s so simple. You spend less than you earn. Invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, etcetera etcetera. And do a lot of deferred gratification because you prefer life that way. And if you do all those things you are almost certain to succeed. And if you don’t, you're gonna need a lot of luck.”^[viii]

“Generally speaking, envy, resentment, revenge 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. You do not want to drift into self-pity. ... Self-pity will not improve the situation.”^[ix]

“Confucius said that real knowledge is knowing the extent of one’s ignorance. Aristotle and Socrates said the same thing. Is it a skill that can be taught or learned? It probably can, if you have enough of a stake riding on the outcome. Some people are extraordinarily good at knowing the limits of their knowledge, because they have to be. Think of somebody who’s been a professional tightrope walker for 20 years – and has survived. He couldn’t survive as a tightrope walker for 20 years unless he knows exactly what he knows and what he doesn’t know. He’s worked so hard at it, because he knows if he gets it wrong he won’t survive. The survivors know.”^[x]

“If you can get really good at destroying your own wrong ideas, that is a great gift.”^[xi]