Post New

I'm sure that everyone has one.

Appropriate to reference especially given recent chatter on this board. At one of the Berkshire meetings Charley responded to an attendee's question regarding asset allocation with "Asset allocation is bunk."

My own personal favorite, though, was his noting that he and Warren had become proficient in the field of "Sit on your ass investing".

"I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, 'My God, they're purple and green. Do fish really take these lures?' And he said, 'Mister, I don't sell to fish.'"
---
“The big money is not in the buying and selling, but in the waiting,” Munger once said. He added he liked the word “assiduity” because “it means sit down on your ass until you do it.”
---
Around 2016, an acquaintance asked which person, in a long life, he felt most grateful to.
“My second wife’s first husband,” Munger said instantly. “I had the ungrudging love of this magnificent woman for 60 years simply by being a somewhat less awful husband than he was.”
---
“Any time you go to a football game or a function there’s a huge line outside the women’s bathroom. Who doesn’t know that they pee in a different way than the men?” Munger told The Wall Street Journal in 2019. “What kind of idiot would make the men’s bathroom and the women’s bathroom the same size? The answer is, a normal architect!”
---
"The best thing a human being can do is to help another human being know more."
---
"If I can be optimistic when I'm nearly dead, surely the rest of you can handle a little inflation."
---
"You don’t have a lot of envy, you don’t have a lot of resentment, you don’t overspend your income, you stay cheerful in spite of your troubles, you deal with reliable people and you do what you’re supposed to do. All these simple rules work so well to make your life better.”
---
"Without the method of learning, you're like a one-legged man in an ass-kicking contest. It's just not going to work very well."
---
"I am personally skeptical of some of the hype that has gone into artificial intelligence. I think old-fashioned intelligence works pretty well."
---
“Capitalism without failure is like religion without hell.”
---
"Investing is simple, but not easy."

I'm sure that everyone has one.

To Warren once: "I am right and you are wrong. And because you are clever you will see that" (or similar it was).

Here are my favourite Charlie Munger quotations:

It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. Charlie Munger


The whole concept of dividing it up into 'value' and 'growth' strikes me as twaddle. It's convenient for a bunch of pension fund consultants to get fees prattling about and a way for one advisor to distinguish himself from another. But, to me, all intelligent investing is value investing. Charlie Munger


It’s generally quite smart to copy very successful investors. Charlie Munger


Some people seem to think there's no trouble just because it hasn't happened yet. If you jump out the window at the 42nd floor and you're still doing fine as you pass the 27th floor, that doesn't mean you don't have a serious problem. I would want to address the problem right now. Charlie Munger


All intelligent investing is value investing – to acquire more than you are paying for. Investing is where you find a few great companies and then sit on your ass. Charlie Munger


Using volatility as a measure of risk is nuts. Risk to us is 1) the risk of permanent loss of capital, or 2) the risk of inadequate return. Some great businesses have very volatile returns – for example, See’s usually loses money in two quarters of each year – and some terrible businesses can have steady results. Charlie Munger


Virtually every investment expert’s public assessment is that he is above average, no matter what is the evidence to the contrary. Charlie Munger


Over the long term, it’s hard for a stock to earn a much better return that the business which underlies it earns. If the business earns six percent on capital over forty years and you hold it for that forty years, you’re not going to make much different than a six percent return – even if you originally buy it at a huge discount. Conversely, if a business earns eighteen percent on capital over twenty or thirty years, even if you pay an expensive looking price, you’ll end up with one hell of a result. Charlie Munger


In my whole life, I have known no wise people who didn't read all the time – none, zero. You'd be amazed at how much Warren reads, at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out. Charlie Munger


Practically everybody overweighs the stuff that can be numbered, because it yields to the statistical techniques they’re taught in academia, and doesn’t mix in the hard-to-measure stuff that may be more important. That is a mistake I’ve tried all my life to avoid, and I have no regrets for having done that. Charlie Munger


We don’t care about quarterly earnings (though obviously we care about how the business is doing over time) and are unwilling to manipulate in any way to make some quarter look better. Charlie Munger


You must know the big ideas in the big disciplines, and use them routinely – all of them, not just a few. Most people are trained in one model, economics for example, and try to solve all problems in one way. You know the old saying: to the man with a hammer, the world looks like a nail. This is a dumb way of handling problems. Charlie Munger


Understanding how to be a good investor makes you a better business manager and vice versa. Charlie Munger


When we bought See's Candies, we didn't know the power of a good brand. Over time we just discovered that we could raise prices 10% a year and no one cared. Learning that changed Berkshire. It was really important. Charlie Munger


I constantly see people rise in life who are not the smartest – sometimes not even the most diligent. But they are learning machines; they go to bed every night a little wiser than when they got up. And, boy, does that habit help, particularly when you have a long run ahead of you. Charlie Munger


Warren and I have not made our way in life by making successful macroeconomic predictions and betting on our conclusions. Charlie Munger


If you buy a business just because it's undervalued, than you have to worry about selling it when it reaches its intrinsic value. That's hard. But if you can buy a few great companies, then you can sit on your ass. That's a good thing. Charlie Munger


Extra care in thinking is not all good but also introduces extra error. But most good things have undesired 'side effects', and thinking is no exception. Charlie Munger


I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, “My God, they’re purple and green. Do fish really take these lures?” And he said, “Mister, I don’t sell to fish.” Charlie Munger


If you took our top fifteen decisions out, we'd have a pretty average record. It wasn't hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounce on them with vigor. Charlie Munger


We just throw some decisions into the ‘too hard’ file and go onto the others. Charlie Munger


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


The number one idea is to view a stock as an ownership of the business and to judge the staying quality of the business in terms of its competitive advantage. Charlie Munger


The turtles who outrun the hares are learning machines. If you stop learning in this world, the world rushes right by you. Charlie Munger


Another very simple effect I very seldom see discussed either by investment managers or anybody else is the effect of taxes. If you're going to buy something which compounds for 30 years at 15% per annum and you pay one 35% tax at the very end, the way that works out is that after taxes, you keep 13.3% per annum. In contrast, if you bought the same investment, but had to pay taxes every year of 35% out of the 15% that you earned, then your return would be 15% minus 35% of 15% or only 9.75% per year compounded. So the difference there is over 3.5%. And what 3.5% does to the numbers over long holding periods like 30 years is truly eye-opening. If you sit back for long, long stretches in great companies, you can get a huge edge from nothing but the way that income taxes work. Charlie Munger


Almost all good businesses engage in 'pain today, gain tomorrow' activities. Charlie Munger


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. Charlie Munger


People chronically misappraise the limits of their own knowledge; that’s one of the most basic parts of human nature. Knowing the edge of your circle of competence is one of the most difficult things for a human being to do. Knowing what you don’t know is much more useful in life and business than being brilliant. Charlie Munger


Above all, never fool yourself, and remember that you are the easiest person to fool. Charlie Munger


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. Charlie Munger



If you don't allow for self-serving bias in the conduct of others, you are, again, a fool. Charlie Munger



It's kind of a snare and a delusion to outguess macroeconomic cycles ... very few people do it successfully and some of them do it by accident. When the game is that tough why not adopt the other system of swimming as competently as you can and figuring that over a long life you'll have your share of good tides and bad tides? Charlie Munger


When any guy offers you a chance to earn lots of money without risk, don't listen to the rest of his sentence. Follow this, and you'll save yourself a lot of misery. Charlie Munger


I don’t know anyone who’s wise who doesn’t read a lot. But that’s not enough: You have to have a temperament to grab ideas and do sensible things. Most people don’t grab the right ideas or don’t know what to do with them. Charlie Munger


Assume life will be really tough, and then ask if you can handle it. If the answer is yes, you've won. Charlie Munger

"I'm right, and you're smart, and sooner or later you'll see I'm right.”

"Only in fairy tales the emperor gets told he is naked."

Another very simple effect I very seldom see discussed either by investment managers or anybody else is the effect of taxes. If you're going to buy something which compounds for 30 years at 15% per annum and you pay one 35% tax at the very end, the way that works out is that after taxes, you keep 13.3% per annum. In contrast, if you bought the same investment, but had to pay taxes every year of 35% out of the 15% that you earned, then your return would be 15% minus 35% of 15% or only 9.75% per year compounded. So the difference there is over 3.5%. And what 3.5% does to the numbers over long holding periods like 30 years is truly eye-opening. If you sit back for long, long stretches in great companies, you can get a huge edge from nothing but the way that income taxes work. Charlie Munger

This is a bigger deal than it looks like. Deferring taxes for decades is a huge tailwind.

“Any time you go to a football game or a function there’s a huge line outside the women’s bathroom. Who doesn’t know that they pee in a different way than the men?” Munger told The Wall Street Journal in 2019. “What kind of idiot would make the men’s bathroom and the women’s bathroom the same size? The answer is, a normal architect!”

Long ago I was studying to become an architect. This subject was covered.
Some folks did a big analysis on this specific effect. The big factor not mentioned by Charlie is perhaps a bit of a generalization, but in this case an inevitable one: sometimes ladies at sporting events get bored more, too, and are more likely to use the facilities during any average event.
Consequently the recommended rule was to allocate three times the space to the ladies' washrooms as to the men's.

Jim

This recollection of thoughts & memories of Charlie by Whitney Tilson in todays “Daily”.

https://empirefinancialresearch.com/articles/rip-c...


And this being one of my favorite quotes & reminders to me when considering / evaluating risks of any form.


“I'm serious. Once you reach a certain position in life, you should spend most of your time trying to avoid the things that can derail your life and send you back to "go," or worse.

That's true in investing, but it's also true in life. What happens to many people is that even when they've got it made, they can't help but stretch to try to grab the brass ring – and fall, bringing themselves to ruin.”

“RIP Charlie”

ciao

This is a bigger deal than it looks like. Deferring taxes for decades is a huge tailwind.

This also works for college savings plans like 529's.

A couple of decades ago I was approached to set up such plans when the grandchildren started coming along. Instead, I bought and held Berkshire stock for them with after tax money. As a bonus there is much more flexibility with how you can use the proceeds. And you avoid the fees in the 529 investment alternates - which was a bigger deal back then than now.

The tax benefits of owning BRK with all earnings reinvested and taxes deferred are significant. And you also get smart investors who are dedicated to avoiding permanent loss of capital.

This is well known but not always well appreciated.

I'm sure that everyone has one.

When I saw the news yesterday the first thing that popped into my mind was as a proverb that so aptly describes Mr Munger.

“When an old man dies a library burns to the ground.”

—cliff

"Instead, I bought and held Berkshire stock for them with after tax money. As a bonus there is much more flexibility with how you can use the proceeds. And you avoid the fees in the 529 investment alternates - which was a bigger deal back then than now."

I did the same for my grandkids and even just gifting the annual limit that doesn't have to be reported becomes a massive number of dollars over time.

Plus I will pay their tuition directly to get more money out of my estate.

That way they can let these funds compound for a very long time.

Back when I was working with younger people on projects that benefited from what we used to call objectivity, I would earnestly recommend they devote 75 minutes of their lives to Charlie's 1995 lecture at the Harvard Business School entitled, Twenty-four standard causes of human misjudgment. Alas, there is no video of the talk and without video most of these folks didn't have the patience to listen to it all the way through. At least, I never got any feedback that indicated they had gotten half as much from it as I did.

Many folks on this board are probably familiar with it, but I'm posting the audio-only Youtube link in case any are not. His label for the first item on his list was "Under-recognition of the power of what psychologists call reinforcement and economists call incentives."

"Well, you could say everybody knows that," Charlie said. "Well, I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives and all my life I’ve underestimated it."

I can barely remember my phone number these days, but this sentence stuck in my memory. It helped me to resist unproductive value judgments and to work through problems, particularly in the labor-management space, just by taking the time to figure out the various players' obvious incentives.

Charlie credits Robert Cialdini's book Influence: The Psychology of Persuasion with filling in the holes in his own theories of the most common causes of human misjudgment, so I bought the book, but I did not find it as compelling as Charlie's talk, maybe because Charlie is the superior storyteller. The practical examples in this talk, many business-related, helped me to understand derailments along the epistemological tracks that had previously been mysteries to me.

In what has been dubbed our current "post-truth" era, it is more difficult than ever to understand why people believe the things they believe. Charlie's talk seems almost quaint now, devoid of examples of social media rabbit holes and the like. Still, I find it a great way to keep him alive in my head:

https://www.youtube.com/watch?v=4ICaAKuAudQ

Plus I will pay their tuition directly to get more money out of my estate.

That way they can let these funds compound for a very long time.

I did the same thing. Same reasoning. Payed their undergrad tuition via gifts and let BRK ride. Now one either has the early life assets needed for more advanced degrees, starting her own savings/investments, or home ownership without years of saving etc.. The other has her med school expenses covered.

I encourage friends to think about the same strategy.

That’s so interesting— I did something very similar.

I set up joint brokerage accounts for my kids when they were born and bought some Berkshire B shares in the accounts. The money was supposed to be used for college expenses, but when the time came I couldn’t make myself sell the shares so just funded their college expenses using other means. I recently turned those accounts over to them with and the Berkshire shares have appreciated nicely. I told them please don’t sell the shares so the compounding can continue. We shall see how that goes! 😬

Great minds think alike 😉

When I went to my first annual meeting ever, at Wesco, as it happens, the subject was insurance. Being a punkrock-kind of person, I didn't understand a thing. Then, a well-dressed, articulate man got up and asked a question. Parsing Charlie's words, "is that what you mean?"
Charlie answered simply, "I don't parse words. I said what I meant." I didn't understand the question, but I understood Charlie.

I bought my very first share of (Berkshire Hathaway) stock the next day, $32,000, which was the most significant purchase of anything I ever made, up to that time.

Thank you, Charlie, for seconding Warren Buffett and starting me on a lifelong journey of learning. You taught me to be skeptical, even of a hero, and to do my own thinking. Forever grateful.

Post New

US Policy FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.