When a person dies whom you have only known from afar and who did not know someone like you existed, and yet, you feel a deep sense of loss, then it means the person has made a difference in your life. Today I silently mourn the passing away of Charlie Munger.
When I first started investing in the early 1990s, it did not take long to stumble upon Warren Buffett and from him on to Charlie Munger. Over the years, Charlie has spent much less time talking about investing and more on “worldly wisdom”.
Both Buffett and Munger, grandfather figures are my inspirational heroes and I have learnt so much from them about leading a good and honourable life.
‘The Tao of Charlie Munger’ – a compilation of quotes by Charlie on Life, Business and the pursuit of Wealth adorns my bookshelf in easy reach for many years now and it has become a habit to read a page a day when I start my work day.
Charlie’s focus on what he called a “latticework of mental models” attracted me very quickly because I was made of the same mould (or so I would like to think) of assimilating knowledge across multiple domains.
Charlie was an avid card player and his investment philosophy reflected the learnings of his card game.
He was supposedly an amazing Card Counter. The way card counting works is this. When you start playing blackjack with a full deck, the odds are (slightly) in the dealer’s favour. So mathematically, in the course of a full game, from beginning to the end of the deck, the odds are in the casino’s favour. However, as the play progresses and the cards get played, the odds swing back and forth depending on which cards are left in the deck. At certain points, the odds tilt in favour of the player. If you can figure out when that is, and bet heavily during those periods, you can consistently win. By counting cards, you can keep track of which way odds have swung.
This is the same strategy professional horserace bettors use. Wait, Wait, Wait, until there is a bet where the odds are completely wrong, and then bet heavy. Because the odds in horseracing (and sports betting) is set not by the likelihood that a horse will win but rather on the number of people betting on that horse, sometimes the odds will be radically off from actual probability of the horse’s winning.
Charlie Munger and Warren Buffet’s main investment strategy boils down to that. This is why they say that you should buy stock as if you could only buy 4 or 5 stocks in your lifetime. Is this one of the best 4 or 5 investment opportunities that you will see? Charlie and Warren’s advice is, you want to go for no brainers, and go big when those opportunities present themselves.
The other thing that attracted me to Charlie was his candour. He was very clear that he wanted to be rich because he wanted to be free to pursue his passions. Over the years, I have collected his sayings and quotes and some are etched in my mind and in my life and have become my life mantras. I am putting them here more as a reminder to myself and to remember him today.
The passing away of Charlie has created a huge void in the financial world, which will always reverberate his timeless lessons.
Here are a few of the many things that Charlie taught.
#1 Spend each day trying to be a little wise than you were when you wake up
#2 Those who keep learning will keep rising in life
#3 The big money is not in the buying or selling, but in the waiting
#4 A lot of people with high IQs are terrible investors because they’ve got terrible temperaments
#5 Success means being very patient, but aggressive when it’s time.
#6 People are trying to be smart—all I am trying to do is not to be idiotic, but it’s harder than most people think.
#7 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 they were when they got up and boy does that help, particularly when you have a long run ahead of you.
#8 Like Warren, I had a considerable passion to get rich, not because I wanted Ferraris – I wanted independence. I desperately wanted it.
#9 Our biggest mistakes, were things we didn’t do, companies we didn’t buy.
#10 Bull markets go to people’s heads. If you’re a duck on a pond, and it’s rising due to a downpour, you start going up in the world. But you think it’s you, not the pond.
Warren Buffet once said, “Charlie’s most important architectural feat was the design of Today’s Berkshire Hathaway. The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead buy wonderful businesses at fair prices. Consequently Berkshire has been built on Charlie’s blueprint.”
Charlie Munger has passed on but he will live on in thousands of his followers who learnt so much from him and hopefully, we will be able to pass on a part of our learnings to the next generation.
Adieu Charlie Munger – Your Words of wisdom & teachings will remain forever.
