"…it never ceases to amaze me to see how much territory can be grasped if one merely masters and consistently uses all the obvious and easily learned principles." - Charlie Munger
Alway tell people why
"If you always tell people why, they’ll understand it better, they’ll consider it more important, and they’ll be more likely to comply." - Charlie Munger
obvious vs esoteric
We try more to profit from always remembering the obvious than from grasping the esoteric.
— Charlie Munger
— Charlie Munger
comparing free market economy with ecosystem
I find it quite useful to think of a free-market economy – or partly free market economy – as sort of the equivalent of an ecosystem. Just as animals flourish in niches, people who specialize in some narrow niche can do very well.
— Charlie Munger
— Charlie Munger
bet heavily when the odds are extremely favorable
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. A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind that loves diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past.
— Charlie Munger
— Charlie Munger
Worldly Wisdom
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.
— Charlie Munger
— Charlie Munger
on sharing knowledge
The best thing a human being can do is to help another human being know more.
— Charlie Munge (on sharing knowledge)
— Charlie Munge (on sharing knowledge)
On how to avoid 50% losses in the future
"It's in the nature of stock markets to go way down from time to time. There's no system to avoid bad markets. You can't do it unless you try to time the market, which is a seriously dumb thing to do. Conservative investing with steady savings without expecting miracles is the way to go." - Charlie Munger (On how to avoid 50% losses in the future)
on newspapers
"Ordinary newspapers will come to perish. The microeconomics are too tough to overcome. It's not a place to invest your money." - Charlie Munger (on newspapers)
adapting to peak oil
"The world will adapt to higher oil prices, because it has to. It won't be the end of the world. Even at $200 a barrel, we'd be fine. People would adapt [mentions smaller cars, electric cars, solar power]. We have an enormous power to adapt." - Charlie Munger (On adapting to peak oi)
ethanol
"Ethanol is quite possibly the stupidest thing ever invented by rational people. The ultimate social safety net -- which is a very good idea, by the way -- is cheap food, and ethanol production is destroying this. It was a monstrously stupid idea like I haven't seen before." - Charlie Munger (on ethanol)
how inflation will impact investing
"I remember the $0.05 hamburger and a $0.40-per-hour minimum wage, so I've seen a tremendous amount of inflation in my lifetime. Did it ruin the investment climate? I think not." - Charlie Munger (on how inflation will impact investing)
Look at performance of the assets
"I bought a piece of real estate in New York in 1992, I have not had a quote on it since. I look to the performance of the assets. Maybe...my piece of real estate have had pull backs, but I don't even know about 'em. People pay way too— way too much attention to the short term. If you're getting your money's worth in a stock, buy it and forget it."- Wareen Buffett
Interest Rate
"...interest rates act like gravity to other asset prices. Everything is based off them." - Warren Buffett
Stay within Circle of competence to avoid big mistakes
"Warren and I have skills that could easily be taught to other people. One skill is knowing the edge of your own competency. It's not a competency if you don't know the edge of it. And Warren and I are better at tuning out the standard stupidities. We've left a lot of more talented and diligent people in the dust, just by working hard at eliminating standard error." - Charlie Munger in the Stanford Lawyer (Page 19)
Overconfidence
"Smart people aren't exempt from professional disasters from overconfidence. Often, they just run aground in the more difficult voyages they choose, relying on their self-appraisals that they have superior talents and methods." - Charlie Munger in a Speech to Foundation Financial Officers
durability of investment ideas
Some think if an investment idea is well-known and seems obvious it can't be really good. In 1938, Fortune Magazine concluded "Several times every year, a weighty and serious investor looks long and with profound respect at Coca-Cola's record, but comes regretfully to the conclusion that he is looking too late." Since that time, Coca-Cola has grown significantly both domestically and around the world. It was not too late in 1938, and we believe it is far from that today. - From the 1Q 2010 Yacktman Quarterly Letter
focus investing
Charlie Munger in one of Wesco meeting:
It's a good question. Our approach has worked for us. Look at the fun we, our managers, and our shareholders are having. More people should copy us. It's not difficult, but it looks difficult because it's unconventional -- it isn't the way things are normally done. We have low overhead, don't have quarterly goals and budgets or a standard personnel system, and our investing is much more concentrated than average. It's simple and common sense.
Our investment style has been given a name -- focus investing -- which implies 10 holdings, not 100 or 400. Focus investing is growing somewhat, but what's really growing is the unlimited use of consultants to advise on asset allocation, to analyze other consultants, etc.
I was recently speaking with Jack McDonald, who teaches a course on investing rooted in our principles at Stanford Business School. He said it's lonely -- like he's the Maytag repairman.
It's a good question. Our approach has worked for us. Look at the fun we, our managers, and our shareholders are having. More people should copy us. It's not difficult, but it looks difficult because it's unconventional -- it isn't the way things are normally done. We have low overhead, don't have quarterly goals and budgets or a standard personnel system, and our investing is much more concentrated than average. It's simple and common sense.
Our investment style has been given a name -- focus investing -- which implies 10 holdings, not 100 or 400. Focus investing is growing somewhat, but what's really growing is the unlimited use of consultants to advise on asset allocation, to analyze other consultants, etc.
I was recently speaking with Jack McDonald, who teaches a course on investing rooted in our principles at Stanford Business School. He said it's lonely -- like he's the Maytag repairman.
Great Businesses
It's
obvious that if a company generates high returns on capital and
reinvests at high returns, it will do well. But this wouldn't sell
books, so there's a lot of twaddle and fuzzy concepts that have been
introduced that don't add much -- like cost of capital. It's accepted
because some of it is right, but like psychoanalysis, I don't think
it's an admirable system in its totality. - Charlie Munger
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