The Mindset of Investing Wisely - Lessons from Charlie Munger

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The fact that everybody doesn’t know Charlie Munger is a loss for humanity.

The 97 year old billionaire business partner of Warren Buffett is a gold mine of good advice. His interests are broad but everything is focused on his study of the pursuit of wealth, happiness and avoiding stupidity. The best way to introduce one of the most successful investors in history is by reading a few of his quotes. 

“Simplicity has a way of improving performance by enabling us to better understand what we are doing.” 

“Spend each day trying to be a little wiser than you were when you woke up.”  

“We both (Charlie Munger and Warren Buffett) insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think.” 

Together with Warren Buffett, Charlie Munger has grown the investment company Berkshire Hathaway over decades to become worth more than 500 billion dollars. As vice-president, Munger has created the strategy of investing in great companies without having any intentions of selling them. Their patience and trust in great companies like Coca Cola has made them billions during the last decades. 

Charlie Munger believes that the “old values” of honour, trust, hard work and saving is the best way to live life. You will often hear him say that the most important decision in life is the choice of spouse and that to be wealthy one has to live within one’s income. The two business partners are convinced that taking the high road of capitalism is more profitable, because there is less traffic. In the annual report of Berkshire Hathaway, they write that the company is rich enough to lose even a lot of money, but cannot afford to lose even a little bit of trust. 

In addition to the old values, Charlie Munger has developed two guidelines for his successful life that are worth remembering. 

Charlie Munger attributes happiness and wealth to life long learning. He spends most of  his time reading or thinking, taking great satisfaction from it. His goal has been to learn about the big ideas of many academic fields and apply what he learns to what he is thinking about. He thinks that stealing the great ideas is quite easy, and then he tries to avoid foolishness. This habit of life long learning has been of increasing value to the 97 year old investor.  

The second guideline Munger has for success is to know the edge of your circle of competence. We all have competence in a limited area. Both Munger and Buffett are convinced that success depends more of knowing exactly where your competency ends  than to knowing more than your competitors. Know what you know, and what you don’t  know. 

To get where you want in life, you have to have the right mindset. If you feel attracted to the ideas of this old, odd and wise old man, then it is a delight to learn more about him. There are witty and interesting recordings of the Berkshire Hathaway annual meetings on YouTube, that anyone can learn a lot from. Additionally, the book "Tao of Charlie Munger” is a great collection of quotes that describes his personal philosophy which has been refined over a century of business success. His wit and success are admirable, but his wisdom is what makes his so interesting. Here is a man who spends most of his time thinking and reading, and luckily he likes to share his findings. 

“To get what you want, you have to deserve what you want. The world is not yet a crazy  enough place to reward a whole bunch of undeserving people.”

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