What life lessons can we learn from Charlie Munger’s speeches? Why is Warren Buffet so important in Munger’s life?
Charlie Munger’s speeches highlight moral character, hard work, focus, good partnerships, and a great sense of humor as the secrets to his success in life. His partnership with Warren Buffet is also crucial because Buffett serves as an invaluable ally for testing out his thinking.
Read on to discover more valuable life lessons from Charlie Munger’s speeches.
Moral Character and Honesty
Charlie Munger’s speeches show how much he cares about reputation—the reputation of Berkshire Hathaway, of its owned companies, and of himself. He desires integrity from people he works with and managers of companies he wants to acquire. Companies that have a trusted brand name have a competitive advantage that can persist over time. Trust takes a long time to build, and an instant to vanish.
- “When you borrow a man’s car, you always return it with a full tank of gas.” People notice these little things.
- Track records are important, and if you develop one in an integral trait like honesty, you’ll have a big advantage in the world.
- You should be able to make plenty of money without getting anywhere close to the line of legal trouble. Often you’ll make more money by doing the right thing.
- What’s the best way to have good friends and relationships? By deserving good friends and relationships by deserving it yourself.
- “It’s hard for an empty sack to stand upright.”—Benjamin Franklin
- “Trickery and treachery are the practices of fools that have not the wits enough to be honest.”—Benjamin Franklin
- Warren Buffett hates CEOs who manipulate their financial statements with tricks like adjusted earnings and not counting stock as compensation. “A CEO who, as his company revved up to go public, asked prospective auditors, “What is two plus two?” The answer that won the assignment, of course, was, “What number do you have in mind?”—Warren Buffett, 2016 BRK shareholder letter
- “If you mix raisins with turds, you’ve still got turds.” No accounting standards or degree of auditing can prevent unscrupulous managers from conducting fraud.
- His partner hates the idea of adjusted earnings. In one of Charlie Munger’s speeches, he said, “Every time you see the word EBITDA [earnings before interest, taxes, depreciation, and amortization], you should substitute the words “bullshit earnings.”
Charlie’s Parenting Style
Munger’s children contributed quotes in the Poor Charlie’s Almanack book. They comment on his nature—hard-working, perpetually reading, and absent-minded. But they speak well of his lessons on character, good decision making, and discipline. All seem grateful for the parenting.
His son, Charles Munger Jr. shared a teaching strategy that Munger used. He told a parable, where someone faced an ethical problem. He gave two endings, a good version where someone chose the right path, and a downward spiral tale, where someone chose the wrong path and suffered an endless series of catastrophes. One tale involved a manager who had made an accounting mistake that resulted in big losses. In the correct version of the story, he went to his boss and told him about the mistake. His boss understood, thanking him for admitting to the mistake and forgiving him, also noting that had he tried to hide the mistake, he would have been fired immediately.
Benefits of Old Age
Old age comes with declining physical health, but it comes with increased wisdom and comfort of a life well-lived.
- In the Trojan war of mythology, Agamemnon in the war on Troy “never once wished for ten more men with the strength of Ajax but, instead, wanted ten more with the wisdom of Nestor.”
- “The best Armour of Old Age is a well-spent life preceding it; a Life employed in the Pursuit of useful Knowledge, in honourable Actions and the Practice of Virtue: in which he who labours to improve himself from his Youth, will in Age reap the happiest Fruits of them; not only because these never leave a Man, not even in the extremest Old Age; but because a Conscience bearing Witness that our Life was well-spent, together with the Remembrance of past good Actions, yields an unspeakable Comfort to the Soul.”—Cicero
Work Hard on Good Work
Success doesn’t come without hard work.
- In Charlie Munger’s speeches, he repeatedly emphasized that passion is more important than natural talent or brain power. Berkshire has many companies with people who are fanatics about their business.
- Munger and Buffett are both famous for reading a lot. But reading isn’t enough—you need to have the courage to choose the right ideas and do good things with them.
- In one of Charlie Munger’s Speeches, he stated that McDonald’s is one of the most successful educational institutions in the world. It provides first jobs to millions of young people, many who have trouble in traditional education, and teaches them a valuable lesson—show up daily and do good work to succeed.
- Munger once collaborated with a construction firm with two partners who made a simple agreement—”split the work equally, and when we’re behind, we will both work 14 hours a day, every day of the week, until we’re caught up.” Naturally, they succeeded and were admired.
- “Perhaps the most valuable result of all education is the ability to make yourself do the thing you have to do, when it ought to be done, whether you like it or not. It is the first lesson that ought to be learned and however early a man’s training begins, it is probably the last lesson that he learns thoroughly.”—19th century biologist Thomas Henry Huxley
It’s also important to do meaningful work. An admirable person works on outcomes that she will not survive to see.
Munger’s children and friends noted his ability to focus on the problem at hand. When he concentrates on a problem, he won’t even acknowledge someone who comes into his room.
Focus helps in business management too. General Electric CEO Jack Welch inherited a business that played in far too many fields, an approach he rejected: “To hell with it. We’re either going to be #1 or #2 in every field we’re in or we’re going to be out. I don’t care how many people I have to fire and what I have to sell. We’re going to be #1 or #2 or out.” (Shortform note: Steve Jobs would do the same to Apple when he returned, killing the many forms of unsuccessful devices to focus on only a handful, including the original iMac.)
Warren Buffett and Charlie Munger’s partnership is one of the most famous in the business world. They both have nice things to say about each other.
Buffett considers Munger an invaluable ally who tests his own thinking: The importance of this partnership was addressed in one of Charlie Munger’s speeches when he said, “Look for someone both smarter and wiser than you are. Ask him not to flaunt his superiority so that you may enjoy acclaim for many accomplishments that sprang from his thoughts and advice. Seek a partner who will never second-guess you nor sulk when you make expensive mistakes. Look also for a generous soul who will put up his own money and work for peanuts. Finally, join with someone who will constantly add to the fun as you travel a long road together.”
Munger joined Berkshire Hathaway as a second-in-command rather than an equal partner. Given that he had run his own investment firm before joining, others were surprised, but he didn’t mind it. “There are some people that it is okay to be a subordinate partner to…there are always people who will be better at something than you. You have to learn to be a follower before you become a leader.”
A funny story: Buffett would often call Munger to discuss a deal, and Munger would often respond in shock, pointing out any number of risks. After discussing them through, Buffett would usually admit that Munger was right and turn down the deal. But once in a while, Buffett would say that he was going to go forward with the deal anyway. And at some points, Munger would show how he really felt when he responded, “Warren, if you do it, could I have a percentage of it?”
Munger’s Sense of Humor
In each of Charlie Munger’s speeches, he shows his wry sense of humor, which allows him to state otherwise controversial opinions in palatable ways. Here’s a sample of quotes (read the full speeches for more):
- “I’m right, and you’re smart, and sooner or later you’ll see I’m right.”
- On the importance of math: “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.”
- “The fun never stops. I suppose that it does stop eventually when you’re drooling in the convalescent home at the end.”
- On investing in new technology: “The company that needs a new machine tool, and hasn’t bought it, is already paying for it.”
- On hiring professors with extreme political ideologies: it “made regain of objectivity almost as unlikely as regain of virginity.”
- “I don’t use formal projections. I don’t let people do them for me because I don’t like throwing up on the desk.”
- On accountants who set up an incentive structure that rewarded destructive lending practices: “These people became the equivalent of an armored car cash-carrying service that suddenly decided to dispense with vehicles and have unarmed midgets hand-carry its customers’ cash through slums in open bushel baskets.”
- “To say accounting for derivatives in America is a sewer is an insult to sewage.”
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- A collection of Charlie Munger’s best advice given over 30 years
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