The man who thinks about thinking

walk on the beachCharlie Munger is Warren Buffett’s  business partner. Charlie has been successfully investing for decades. And he’s been thinking about thinking for just as long. His thoughts are fairly simple and sometimes counterintuitive, or at least counter to the way most people invest.

Here’re a handful of short, pithy insights and some explanation of his investment philosophy. They’re mostly direct quotes and few that I condensed.

You don’t have to have perfect wisdom to get very rich – just a bit better than average over a long period of time.

I don’t have any wonderful insights that other people don’t have. I just avoided idiocy slightly more consistently than others.

We have a passion for keeping things simple.

We simply try to buy things for less than they’re worth.

A great business at a fair price is superior to a fair business at a great price.

It’s remarkable how much long-term advantage we’ve gotten by trying to be consistently not stupid, instead of trying to be very intelligent. 

You’ll do better if you have passion for something that you have an aptitude for. If Warren Buffett had gone into ballet, no one would have heard of him.

I don’t think you can become a great investor rapidly, no more than you can become a bone-tumor pathologist quickly.

You should be able to learn not to pee on an electrified fence without actually trying it.

It takes character to sit there with cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.

This habit of committing far more time to learning and thinking than to doing is no accident.

It’s not constructive to spend your time worrying about things you can’t fix.

Be prepared for it getting worse. Favorable surprises are easy to handle, it’s the unfavorable surprises that cause the trouble.

Projections should be handled with great care – particularly when provided by someone who has an interest in misleading you.

There’s always been a market for people who pretend to know the future. Listening to today’s forecasters is just as crazy as when the king hired the guy to look at the sheep guts. It happens over and over and over.

If you always tell people why, they’ll understand it better, consider it more important, and  be more likely to comply.

 On his financial freedom: I’d hate to be in a place where I had to pretend to believe all the things I don’t believe in order to handle my daily work and discussions. I just described the working lives of practically everybody. 

The right way to make decisions is basing them on your opportunity costs.

It’s hard to think of great success by committees in the investment world or in physics.

The only thing that’ll change corporate directors’ behavior is looking ridiculous in the press.

Be satisfied with what you have.

It’s so much easier to reduce your wants.

If you want good behavior, don’t pay on a commission basis.

I find a lot of the current financial practices revolting. Just because it’s a free market doesn’t mean it’s honorable.

It’s very, very important to create human systems that are hard to cheat.  These big incentives create incentive-caused bias and people will rationalize that bad behavior is okay.

The iron rule of nature is: you get what you reward for.

Caring that someone is making money faster than you is one of the deadly sins. Envy is the only sin you can’t ever have fun with. Why would you want to get on that train?

A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage etc.

I don’t know anyone who’s wise who doesn’t read a lot. But that’s not enough: You have a to have the 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.

No wise pilot, no matter how great his talent and experience, fails to use a checklist.

All intelligent investing is value investing – acquiring more than you are paying for.

If you have competence, you know it’s boundaries already. To ask the question of whether you are past the boundary is to answer it.

The big money is not in the buying and selling, it’s in the waiting.

When a better tool (idea or approach) comes along, swap it for your old, less useful tool.

I have known no wise people (over a broad subject area) who didn’t read all the time – none, zero.

Necessity never made a good bargain.

Tell me where I’m going to die, so I don’t go there.

Our education was far too uni-disciplinary. Many problems by nature, cross many academic disciplines.

You don’t have to know everything. A few really big ideas carry most of the freight. People underrate the importance of a few simple big ideas – the chief lesson is that a few big ideas really work.

There are huge advantages for an individual to get into a position where you make a few great investments and just sit back, you’re paying less to brokers and listening to less nonsense.

Why shouldn’t we do more of what works well for us and what’s less complicated?

I am a biography nut. If you go through life making friends with the eminent dead who had the right ideas, I think it’ll work better in life and work better in education. It’s way better than just giving the basic concepts.

You can be a dominant partner, subordinate partner, or an always collaborative equal partner. I’ve done all three. I made myself a subordinate partner to Warren. There’re people that it’s okay to be subordinate partner to. I didn’t have the kind of ego that prevented it. There’re always people who’ll be better at something than you are.

Lush landscaping, that’s what sells houses. You spend money on trees, and you get it back triple.

Do the best you can do. Never tell a lie. If you say you’re going to do it, get it done. Nobody cares about an excuse.

What you have to learn is to fold early when the odds are against you. If you have a big edge, back it heavily because you don’t get a big edge often. Opportunity comes, but it doesn’t come often, so seize it when it does come.

The fishing tackle manufacturer had all these flashy green and purple lures. I asked, ‘Do fish take these?’ ‘Charlie’, he said, ‘I don’t sell these lures to fish.’