Life & Money Lessons

From Charlie Munger

Take Simplicity Seriously

Taking a simple idea seriously means focusing on buying good businesses at fair prices, just like Charlie Munger's investment strategy. It may sound obvious, but many people struggle to follow this approach.

The financial industry tends to overcomplicate things, making us believe that money and investing are complex. They say you need intricate and over engineered solutions to make money in the market. But Charlie Munger disagrees. He believes that making money in the market is simple: just buy good, ethical businesses and wait.

Charlie Munger and Warren Buffett, through Berkshire Hathaway, have invested in companies like the Washington Post, Coca-Cola, Gillette, and American Express. They've also acquired private companies like See's Candies and Geico. The key is that they hold onto these investments for the long term. Focus on investing in businesses that you believe in, ones that have a strong ethical foundation and a fair price.

Little Wiser Everyday

Charlie Munger made it a goal to be a little wiser each day than when he woke up. One way he did this was by reading voraciously. He would even read himself to sleep with books on science or history.

Charlie Munger understood that many of the world's problems and solutions have already been figured out by smart people who came before us. They left their knowledge in books, articles, and even YouTube videos. So, by reading and learning from these resources, we can gain wisdom and insights that can help us in our own lives.

The key is to have the motivation and willingness to learn. Like Munger said, it's not always about being the smartest or the most diligent. It's about constantly learning and growing.

Always Strive For Win-Win Solutions

Charlie Munger and Warren Buffett always strive for win-win solutions in their business ventures. When they acquired Dairy Queen, they saw it as a win-win for everyone involved. By removing Dairy Queen from the stock market, the management could focus on the long-term success of the company without being pressured by short-term forecasts.

This allowed them to prioritize taking care of customers, innovating new products, and creating a great work environment. When Dairy Queen does well and makes a profit, it benefits not only the customers and management but also the shareholders of Berkshire Hathaway, like Warren Buffett and Charlie Munger.

Know Your Circle Of Competence

Understand that real knowledge includes recognizing the extent of your ignorance. It's more valuable to know what you don't know than to pretend to be brilliant. Munger and Buffett had a "two hard pile" approach, where they discarded any investment ideas they couldn't fully understand. They only invested in companies that fell within their circle of competence.

For example, while Berkshire Hathaway owns a significant share of Apple, they are cautious about investing in other tech companies. Munger openly admits that he and Buffett don't feel they have an advantage in the high-tech sector and may struggle to grasp technical developments in software or computer chips. They make investment decisions based on their understanding of their own circle of competence.

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