Charles Thomas Munger / b. 1924 / Nebraska, USA / Attorney, Businessman, Investor, Vice Chairman of Berkshire Hathaway, Inc.
Accounting
Obviously, you have to know accounting. It’s the language of practical business life. It was a very useful thing to deliver to civilization. I’ve heard it came to civilization through Venice which of course was once the great commercial power in the Mediterranean. However, double-entry bookkeeping was a hell of an invention. And it’s not that hard to understand.
But you have to know enough about it to understand its limitations—because although accounting is the starting place, it’s only a crude approximation. And it’s not very hard to understand its limitations. For example, everyone can see that you have to more or less just guess at the useful life of a jet airplane or anything like that. Just because you express the depreciation rate in neat numbers doesn’t make it anything you really know.
Speech, “A Lesson on Elementary, Worldly Wisdom As It Relates to Investment Management and Business,” Business School, University of Southern California (USC), 1994.
You can’t give the average Wall Street CEO really lenient standards of accounting and expect the figures to be good. The accountant is like the referee in soccer. The accountant has to be the adult that prevents the mayhem. Accountants don’t want to be the adults because it causes liability, it causes responsibility, it causes difficulty . . . they failed us terribly.
Interview with Ross School of Business, University of Michigan at Ann Arbor, video recording, youtube.com, March 22, 2011.
Berkshire Hathaway
Our investment style has been given a name—focus investing—which implies ten holdings, not one hundred or four hundred. The idea that it is hard to find good investments, so concentrate on a few, seems to me to be an obvious idea. But 98% of the investment world does not think this way. It’s been good for us.
Charles T. Munger, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, edited by Peter D. Kaufman, expanded third edition (2005).
We don’t want to make our money selling things that are bad for people.
Statement, 2021 Berkshire Hathaway annual meeting; reported by Yahoo Finance, youtube.com, May 1, 2021.
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.
Reported by J. Lukas Neely in Value Investing: A Value Investor’s Journey Through the Unknown (2015).
Bitcoin
I see [Bitcoin as] an artificial speculative medium that people are buying just because they think they can sell it to somebody else at a higher price, even though it inherently has no intrinsic value. So, I regard the whole business as anti-social, stupid, immoral. . . . I regard the thing as a combination of dementia and immorality, and I think the people that are pushing it are a disgrace.
Interview with Andrew Serwer, Yahoo Finance, video recording, youtube.com, May 7, 2018.
Business Education
. . . much of what is taught in modern corporate finance courses is twaddle.
Q&A, 1996 Berkshire Hathaway Annual Meeting, video recording, youtube.com, June 28, 2018.
You have to learn all the big ideas in the key disciplines in a way that they’re in a mental latticework in your head and you automatically use them for the rest of your life. If you do that, I solemnly promise you that one day you’ll be walking down the street and you’ll look to your right and left and you’ll think “my heavenly days, I’m now one of the few competent people in my whole age cohort.” If you don’t do it, many of the brightest of you will live in the middle ranks or in the shallows.
Commencement address, Law School, University of Southern California (USC), video recording, genius.com, May 13, 2007.
How do these super-smart people with all these degrees and higher mathematics end up doing these dumb things? I think it’s explainable by the old proverb that to the man with a hammer every problem looks pretty much like a nail. They’ve learned these techniques and they just twist the problem so it fits the solution—which is not the way to do it.
Q&A, 2012 Berkshire Hathaway Annual Meeting, video recording, youtube.com, 2012.
Neither Warren [Buffett] nor I have ever used any fancy math in business—and neither did Ben Graham who taught Warren. Everything I have ever done in business could be done with the simplest algebra and geometry and addition and multiplication and so forth. I never used calculus for any practical work in my whole damn life—and I was a perfect whiz at it when they taught it to me.
Interview with Ross School of Business, University of Michigan at Ann Arbor, video recording, youtube.com, December 20, 2017.
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.
Reported by Philip E. Tetlock and Dan Gardner in Superforecasting: The Art and Science of Prediction (2015).
History
. . . I regard it as a cinch that a great nation will in due time be Rome. . . . Where is Rome? Where is Britain in its heyday? They all pass and so our turn is bound to come some day.
Interview with CNBC Television, “Berkshire Hathaway VP Charlie Munger on investing,” video recording, youtube.com, February 15, 2019.
There is no better teacher than history in determining the future. . . . There are answers worth billions of dollars in a $30 history book.
Charles T. Munger, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, edited by Peter D. Kaufman, expanded third edition (2005).
Munger on Munger
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.
Charles T. Munger, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, edited by Peter D. Kaufman, expanded third edition (2005).
It takes character to sit with all that cash and to do nothing. I didn’t get to where I am by going after mediocre opportunities.
Charles T. Munger, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, edited by Peter D. Kaufman, expanded third edition (2005).
All I want to know is where I’m going to die so I’ll never go there.
Reported by Peter Atkins in Life is Short and So is This Book: Brief Thoughts on Making the Most of Your Life (2011).
Personal Philosophy
What I would say is the single most important thing, if you want to avoid all the stupid errors, is knowing where you’re competent and where you aren’t. And that’s very hard to do because the human mind naturally tries to make you think you’re way smarter than you are.
Interview with Jean-Laurent Rosenthal, California Institute of Technology (Caltech), youtube.com, December 17, 2020.
You fix what can be fixed, and what can’t be fixed you endure.
Interview with Yahoo Finance, video recording, youtube.com, February 24, 2021.
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.
Charles T. Munger, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, edited by Peter D. Kaufman, expanded third edition (2005).
How to find a good spouse? The best single way is to deserve a good spouse.
Charles T. Munger, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, edited by Peter D. Kaufman, expanded third edition (2005).
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.
Charles T. Munger, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, edited by Peter D. Kaufman, expanded third edition (2005).
What are the secrets of success? One-word answer: “rational.”
Charles T. Munger, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, edited by Peter D. Kaufman, expanded third edition (2005).
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.
Reported by Tren Griffin in Charlie Munger: The Complete Investor (2015).
Remember that reputation and integrity are your most valuable assets—and can be lost in a heartbeat.
Reported by Tren Griffin in Charlie Munger: The Complete Investor (2015).
The best armor of old age is a well spent life perfecting it.
Charles T. Munger, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, edited by Peter D. Kaufman, expanded third edition (2005).
Mimicking the herd invites regression to the mean (merely average performance).
Reported by Tren Griffin in Charlie Munger: The Complete Investor (2015).
Politics
Re: US Representative Alexandria Ocasio-Cortez:
I don’t think that she knows who Adam Smith was.
Interview with Yahoo Finance, “Charlie Munger’s advice on investing and life choices that make a person wealthy,” video recording, youtube.com, May 9, 2019.