Charlie Munger's 108 classic quotes are worth collecting

2023-11-29 03:09:37

Author: Charlie Munger

If you want to persuade others, appeal to profit, not reason.
Don’t wrestle with the same pig, because then you will get your whole body dirty, and the other person will never get tired of it.
The surest way to get something is to make yourself worthy of it.
Think the other way around, always think the other way around.
For complex adaptive systems and the human brain, problems tend to be easier to solve if you think backwards.
In general, jealousy, resentment, hatred, and self-pity are all disastrous states of mind. Excessive self-pity can make people almost paranoid, and paranoia is one of the hardest things to reverse, so don’t fall into self-pity.
You must master a lot of knowledge so that it forms a framework in your mind that you can use automatically in the days that follow.
What you need is not a lot of action, but a lot of patience. You have to stick to your principles, and when the opportunity comes, you try to seize them.
There is a related truth that is very important, that is, you must insist on lifelong learning. You will not achieve much without lifelong learning. I keep seeing people get better and better in life, they’re not the smartest, they’re not even the hardest, but they’re learning machines, and they’re a little bit smarter than they were that morning when they go to bed every night.
I usually act spontaneously, if someone can’t get used to my style, then whatever, I don’t need everyone to like me.
I don’t feel like I’m qualified to have an opinion unless I can refute my position better than my opponent. I think I’m only qualified to have an opinion when I’m at that point.
In my long life, nothing has helped me more than continuous learning.
Human society can only develop after inventing the method of invention, and in the same way, you can only progress after learning the method of learning.
Complex bureaucratic procedures are not the best system for a civilized society. A better system is a seamless, non-bureaucratic web of trust. There aren’t too many outlandish programs. There is only a group of reliable people who have the right trust in each other.
If you see the world clearly, you must become humorous because of its absurdity.
Just look at what is happening around you, and you will understand the consequences of refusing to learn from the lessons of others. All of humanity’s usual disasters are uninventive – deaths from drunk driving, disabilities from reckless driving, incurable venereal diseases, brainwashed and turned into walking dead by brilliant college students who join disastrous cults, business failures due to repeating the obvious mistakes of their predecessors, and various forms of collective madness. If you are looking for the path to real life troubles caused by careless, uncreative mistakes, I suggest you keep in mind this modern proverb: “Life is like a hang glide, and if you don’t get off to the start, you’re done.” —“Poor Charlie’s Book”
At a certain stage in my life, I was determined to become a rich man. It’s not because of the love of money, but because of that sense of independence. I like to be able to speak my mind freely and not be dictated by the will of others.
People underestimate the importance of simple truths. I think, in a sense, Berkshire Hathaway is a didactic enterprise that teaches a right system of thinking. The key lesson is that some of the big truths are really working. I think this penetration of ours has worked really well – because they’re so simple.
Most people are too impetuous and worry too much. Success requires a lot of calm and patience, but you also need to be aggressive when the opportunity arises.
It’s silly to judge risk based on the volatility of stocks. We believe there are only two risks: first, losing all your money, and second, not having enough returns. Some good businesses are also very volatile, such as See’s candy, which usually loses money for two quarters of the year. On the contrary, there are some rotten companies, and the business performance is very stable.
The so-called “EBIT” is shit.
Warren Buffett sometimes mentions “discounted cash flow”, but I’ve never seen him count that. (Warren Buffett replied, “Yes, if you have to calculate the value that can be obtained, it will be too insufficient”)
If you buy an undervalued stock, you have to wait until the price reaches the intrinsic value you calculated to sell it, which is very difficult to calculate. But if you buy a great company, you just sit there and stay.
We bought a textile mill (Berkshire Hathaway) and a California deposit and loan bank (Wesco), both of which later brought disaster. But when we buy it, the price is lower than the liquidation value.
The Internet is extremely beautiful for society, but it is purely a curse for capitalists. The Internet can improve efficiency, but there are many things that increase efficiency and reduce profits. The internet will make American businesses less money than more money.
The evaluation of every investment expert in the market is higher than average, no matter how much evidence there is to prove that it is not the case at all.
Same as Article 5. If you buy a great company, you just sit there and stay.
Warren Buffett spends 70 hours a week thinking about investing.
People count too much and think too little.
Whenever you feel that something is destroying your life, that thing is yourself. The idea of always feeling that you are a victim is the most powerful weapon to weaken yourself.
The tax law has decided, it is most cost-effective to buy a great company and wait for it to fly.
If you buy a stock with a compound annual return of 15% for 30 years, and you pay 35% tax when you sell it for the last time, then your annual return is still 13.3%. Conversely, if you sell the same stock once a year and pay taxes, your annual return will only be 9.75%. This 3.5% gap is magnified to 30 years, which is eye-opening (blogger’s note: after 30 years, the former returns 42.35 times, and the latter is only 16.3 times, a difference of 26.05 times).
The most important thing is to regard the stock as a small piece of ownership of the enterprise, and judge the intrinsic value with the competitive advantage of the enterprise. Look for opportunities where the discounted cash profit in the future is higher than the share price you paid. It’s very basic, you have to understand the probabilities and only bet if you have a better chance of winning.
The common reason why people go bankrupt is that they can’t control their psychological entanglements. The more you spend so much effort and so much money, the more you spend, the easier it is to think, “I guess it’s almost done, and if you spend a little more, you can do it…” That’s how people go bankrupt – because they won’t stop and think, “Even if it’s gone, I can afford it, and I can bounce it back.” I don’t need to dwell on this, it could ruin me. ”
Speaking of the mistakes I’ve seen in business in my life, excessive pursuit of tax avoidance is a common reason for people to do stupid things. I’ve seen people do big wrong things to avoid taxes. Although Warren Buffett and I are not oil diggers, we pay all the taxes we should pay, and we are doing quite well now. If someone sells you a tax avoidance package, don’t buy it.
I think we (the United States) are at or near the apex of our civilization… If, in 50 or 100 years, we [the United States] are only a third of the size of a country in Asia, I wouldn’t be surprised at all. If you want to gamble, Asia will do the best in the world in the future.
In some ways, stocks are like Rembrandt’s paintings. Their prices are based on the prices of past deals. Bonds are much more rational. No one would think that the price of bonds would be sky-high. Imagine if all the pension funds in the United States were to buy Rembrandt’s paintings, they would all appreciate in value and attract a group of followers.
Some people think that what happened in Argentina and Japan will never happen here in our country (the United States), which is crazy.
Real estate investment trusts (REITs) are more suitable for individual investors than institutional investors. Buffett also has a bit of a cigarette-butt personality (a reference to his early Graham-style style of investing in undervalued companies), which makes him willing to use his private money to buy REITs when people don’t like them and the market price falls to within 20%. This kind of behavior can remind him of the joy of picking up cigarette butts back in the day, so it’s good that he has a little spare money to tinker with it.
Smart people are not immune to the disasters brought about by overconfidence. They think they have more abilities and better methods, so often they are exhausted on the harder path.
“Banker advantage” is a very interesting concept in modern financial management. The fund managers of those institutions look a lot like the managers of a casino, only on a larger scale.
There must be a teacher in a threesome, and you must be a follower before becoming a leader.
We are always learning, revising, and even subverting various ideas. It’s important to quickly turn your mind upside down at the right time. You have to force yourself to think about opposing views. If you can’t convince your opponent better than your opponent, then you don’t understand enough.
In my old days, hamburgers were 5 cents a piece and the minimum hourly wage was 40 cents, so I was able to witness huge inflation. But does it destroy the investment climate? I don’t think so.
Most of the success in life and career comes from deliberately avoiding something: early death, wrong marriage, and so on.
There are two kinds of mistakes: one, do nothing (see the opportunity but put it away), which Buffett says is called “the mistake of sucking fingers”;
Checking the list often can avoid mistakes. You should master these foundational wisdoms. There is no substitute for going through a mental checklist (meaning a normal mind) before comparing the list.
Litigation is notoriously time-consuming, laborious, inefficient, and unpredictable.
An investment that returns 20% per year for 40 consecutive years only exists in the country of dreams. In the real world, you have to look for opportunities, compare them to others, and end up looking for the most attractive opportunities to invest in. That’s your opportunity cost, which you’ve learned in your freshman year of economics classes. The game hasn’t changed much, so the so-called “modern portfolio” theory is pretty stupid.
It is better to learn profound lessons from the tragic experiences of others, rather than your own. Some of our successes have been predicted long ago, and some have been achieved by accident.
It’s generally believed that the best-case scenario is when you sit in your office and then great investment opportunities are delivered to you one after another – that’s how people in the venture capital world enjoyed it until a few years ago. But that’s not the case at all – we just look around for good companies to buy from, as if we’re asking for food. For 20 years, we have invested in a maximum of one or two companies per year… It’s not an exaggeration to say that we’ve dug three feet into the ground. There is no such thing as a professional salesman. If you sit there and wait for a good opportunity to come, your seat is dangerous.
Our biggest mistake is not doing what we should be doing and not buying what we should buy.
You will only progress if you learn how to learn.
We have worked hard for a long time to keep not doing stupid things, so we gain much more than those who strive to do smart things.
BRK’s past performance is simply outrageously brilliant. If we also used leverage, even half as little as Murdoch, it would be five times larger than it is now.
When we bought Coca-Cola stock, it took us a few months to save $1 billion in stock— which is 7% of Coca-Cola’s total market capitalization. It’s hard to become a major shareholder.
All big capital will eventually find it difficult to expand, so they will look for some ways with a lower rate of return.
If you have less capital and are young today, you have fewer opportunities than we did then. When we were young, we had just come out of the Great Depression, capitalism was a derogatory term at the time, and the criticism of capitalism was even more raging in the 20s. At that time, there was a popular joke: a man said, “I bought stocks for the sake of old age, but I didn’t expect to use them in six months!” "Just because you’re in a tougher environment doesn’t mean you can’t do it badly – just take more time. But damn it, you might live longer.
Regarding the demographic phenomenon of the so-called “baby boom (born in the 5th and 60s in the United States)”, its impact is much smaller than that of economic growth. Over the past century, the GNP (gross national product) of the United States has increased sevenfold. This is not caused by the baby boom, but by the success of American capitalism and the development of technology. The impact of these two things is too positive, and the baby boom problem is a small fluctuation in comparison. As long as the US GNP grows by 3% a year, it will keep society peaceful – enough to cover the expenses of politicians. If the U.S. stagnates, I can guarantee that you will witness a real generation gap and tensions between generations. The baby boom was the catalyst for this tension, but the root cause was the lack of economic growth.
In fact, everyone will put too much weight on what can be quantified, because they want to “carry forward” the statistical skills they learned in school, so they ignore those things that cannot be quantified but are more important. I’ve spent my life trying to avoid this kind of mistake, and I think it’s pretty good that I’m doing it.
You should have an understanding of all kinds of thinking in a variety of disciplines, and use them often—all of them, not just a few. Most people are proficient in using a single model, such as an economic model, to solve all problems. In response to the old saying: “A carpenter with a hammer looks like a nail when he reads the words in a book.” It’s a very idiotic way of doing things.
For me, dividing stocks into “value stocks” and “growth stocks” is foolishness. It’s a way for fund managers to talk about it and for analysts to label themselves, but in my eyes, all sound investments are value investing.
Of all the wise people I have known in my life, there is no one who does not like to read. Warren Buffett and I read so much that it can scare you. My kids teased me that I was a book with two legs outstretched.
We all love to read a lot, and smart people are like this, but this is not enough, you should also have an attitude of critical acceptance and reasonable application. Most people don’t get the point right when they read the book, and they don’t know how to apply what they’ve learned after reading it.
We often hear these questions from motivated children. It’s a very clever question, and you ask a rich old man, “How can I become you, how can I become you so quickly?”
If we want to open another See’s candy, it will hardly cost any capital. We have so much capital that it’s almost drowning us, so it’s almost zero cost. For some pancake shops that are desperately short of money, adding a franchise is simply crazy. We like to have a direct store to better control the quality of service.
Short-selling is very dangerous.
Sitting in a bearish position and seeing the stock price rise sharply is a particularly infuriating thing. Life is too short to be deserved to suffer this kind of anger.
One of the most frustrating things in the world is when you go to great lengths to discover a scam (and short the company), only to watch the stock price continue to triple and the scammers celebrate with your money, and you have to receive a margin call from the brokerage. How can you touch something like this?
The price of going public has become very high. There is little justification for a small company seeking to go public. Many small companies are going privatized to get rid of the burdens of public companies.
The bidding method of open bidding is designed to make people’s brains become a pot of porridge: because others are also bidding, you feel that (your bidding) has been socially recognized, you will have a tendency to give back, you will fall into a kind of “deprivation superreaction syndrome”, feel that (you must find ways to stop) your “favorites” from leaving you… Anyway, what I mean by that is that it’s designed to manipulate people’s minds and make people do idiotic things.
The problem with dark bidding is that the subject matter is often won by the party that made a technical mistake, such as Shell Oil paying twice as much as Bellich Oil. In an open outcry bid, you can’t afford to pay twice as much as the losing side.
We prefer to put a lot of money into places where we don’t need to make any other decisions.
Being able to understand the essence of investment can also make you a good business manager, and vice versa.
There’s an interesting thing: you might own a $10 billion company, and that company might not even be able to borrow $100 million. However, because the company is a public company, the company’s major shareholders can borrow billions of dollars with the small pieces of paper (shares) in their hands as guarantees. But if the company is not publicly listed, it may not even be able to borrow one-20th of the money that the majority shareholders can borrow.
I often see people who are not smart and successful, and they are not even very diligent. But they’re all “learning machines” who love to learn, and they go to bed every night with a little more wisdom than when they wake up that morning. Man, if you have a long way to go, this is a great benefit.
Whether it is a private enterprise owner or a shareholder of a listed company, the standard of reference when buying and selling should be the intrinsic value of the enterprise rather than the record of past transactions, which is the most basic value concept, and I believe that it will never become obsolete.
Warren Buffett and I didn’t succeed today because we successfully predicted the macroeconomy and bet on it.
The questioner is from Singapore, which is probably the most brilliant developing economy in the history of the world, which is why the questioner called the 15% growth rate “conservative”. But in fact, this is not “conservative”, this is very arrogant. Only Singaporeans would dare to call the 15% “conservative”.
I won’t spend too much time repenting about the past, and once I learn my lesson, I won’t be stuck in it anymore.
If you remove the best 15 from our investment decisions, our performance will be very mediocre. [The point of the game] is not a lot of action, but a lot of patience. You have to stick to your principles and strike hard when the opportunity arises.
We will throw some decision-making issues into the filing cabinet called “Too Hard” and then look at other issues.
If you want to improve your cognitive ability, it is resolutely impossible to forget the mistakes you have made in the past.

In the 84s and 30s, mortgages on property could get more loans than the sale price of a house. That’s probably what is happening in private equity right now.

Imitating a whole bunch of people means being close to their average.
Many opportunities in life only last for a short period of time, and they last because (others) are temporarily inconvenient (to grab it)… For each of us, there is no time to lose, so it’s best to be ready to act and mentally prepared.
Where there are huge commissions, there are often scams.
Admitting that you don’t understand something means that the dawn of wisdom is coming.
Even if you don’t like reality, admit it — In fact, the more you don’t like it, the more you should admit it.
We strive to make money by remembering common sense rather than by knowing cutting-edge knowledge.
In the long run, it is difficult for a company’s stock to make more profits than the company’s profits. If the company earns 6% per year for 40 years, your final annualized return will be around 6%, even if you buy the stock at a significant discount. But on the other hand, if the company has an annual return on assets of 18% and continues for twenty or thirty years, it will still surprise you even if it looks expensive when you buy it.
Just as a worker must understand the limitations of his tools, so a person who eats with his brain must also know the limitations of his brain.
Many markets end up with two or three big competitors – or five or six. In some of these markets, no one makes any money at all. There are markets where every competitor is doing well. For many years, we’ve been studying why some markets are more rational in competition and shareholders are getting good returns, while in others competition is costing shareholders money. Let’s take the example of airlines, and we sit here and think about the various contributions that airlines make to the world – safe travel, better experiences, the ability to fly to your loved ones at any time, and so on. But the industry, since the Wright brothers’ time, has returned negative profits to shareholders, and it’s a hugely negative number. The competition in this market is so fierce that once it is deregulated, airlines start to hurt their shareholders. However, in other industries, such as cereal, almost all competitors are comfortable mixing. If you’re a medium-sized cereal producer, you’ll probably have a 15% return on assets. If you’re particularly good, you can even reach 40%. But why is cereal so profitable? It seems to me that they are making so much money by doing all kinds of crazy marketing, promotions, and coupons all day long to compete fiercely. I don’t really understand. Obviously, the factor of brand effect is something that the cereal industry has but the airline industry does not. This may be a major factor. Or maybe there is a consensus among the cereal producers that no one can compete so frantically – because if there is a Erleng that values market share, for example, if I am the owner of Kellogg’s and I decide to take 60% of the market share, I think I can lose most of the profits in this market. I might destroy Kellogg’s in the process. But I think I can still do it (to take over the market and eliminate the profits of the industry). You should have the confidence to subvert those who are older than you, provided that their cognition is clouded by motivational biases or significantly influenced by similar psychological factors. But in other cases, you should recognize that you may not have anything new to think of – your best bet is to trust the experts in these fields.
We found that the “systems” that excel in business tend to have variables that are almost absurdly maximized or minimized – such as Costco’s discounted warehouses.
Some situations are worse than sitting on a large amount of cash with nowhere to invest. I still remember the lack of money – I don’t want to go back to that time.
If you always tell them your reasons (when giving instructions and appeals), they will understand your intentions better and feel that your ideas are more important, and they will be more willing to listen to you.
Live within your means, save money at all times, and put money in an account that can defer tax payments. Over time, you’ll be able to save up a fortune. It’s a no-brainer.
I try to stay away from those who don’t know how to pretend to understand.
I think that mastering the knowledge that others have sorted out is a reliable learning method. I don’t approve of the way to work out the results behind closed doors. No one can be that smart.
I have an acquaintance who looks like an inconspicuous house next to their house, but it sold for $17 million. There is an extreme bubble in the housing market.
Experience tells us that when the opportunity comes, if you are prepared enough and do something simple and reasonable in a timely, decisive and courageous manner, you can miraculously make you rich. Occasionally, this opportunity is given to those who are always ready, always searching, and willing to analyze complex things. When the opportunity arises, all you have to do is use the ammunition you’ve saved up with your usual caution and patience to make big bets on games that have a good chance of winning.
The present era is something that has not been seen in previous capitalism. More than ever, we have the largest number of intellectuals in history engaged in stock speculation and speculation. Many of the things I saw reminded me of Sodom and Gomorrah (the fallen city of sin). Selfishness, jealousy, and all sorts of knockoffs. There have been these things before, and they have led to dire consequences.
Our investment style is called focused investing, which is intended to hold ten stocks instead of 100 or 400. It’s hard to find good investments, so it’s obvious to me to focus on the few good ones. But 98% of the investment community doesn’t think so. That’s good for us.
You have to beware of overly strong ideological concepts. If you only have one thought in your head, it’s very dangerous.
Like Warren Buffett, I have a strong desire to get rich. It’s not because I like Ferrari or anything, it’s that I like independence, I desperate for it.
Everyone with an engineer’s thinking will want to vomit when they see accounting standards.
You can only progress if you learn how to learn.
Talk more about your failure and less about your success, which is good for you.

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