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Charlie Munger

A teacher asks a class a question: There are ten sheep in a pen. One jumps out, how many are left?

Everyone except one boy said nine are left. The boy said none are left.

The teacher said, “You don’t understand arithmetic.”

He said: “You don’t understand sheep.”

— Charlie Munger (Former Vice Chairman of Berkshire Hathaway)

Charlie Munger was a billionaire investor, mostly known as Warren Buffett’s partner at Berkshire Hathaway.

I received more texts from friends about his death on November 28th, 2023 than I have for anyone else who has passed away, which is wild.

While I don’t idolize anything or anyone, the only people that have influenced my thinking and my life more than him are my parents and a couple friends.

I read Poor Charlie’s Almanack (a collection of his talks) for the first time in 2011. Stripe Press just published an aesthetic new edition, which is a good enough reason to read it again. I pre-ordered it and it’s already out-of-stock.

Even though the book is a billion dollar business education, what is more interesting is how the ideas have shaped and improved every other part of my life.

Here are some of my favorite ideas from Munger:

Personally, I’ve gotten so that I now use a kind of two-track analysis.

First, what are the factors that really govern the interests involved, rationally considered?

And second, what are the subconscious influences where the brain at a subconscious level is automatically doing these things — which by and large are useful, but which often misfunction.

  1. You don’t have a lot of envy.
  2. You don’t have a lot of resentment.
  3. You don’t overspend your income.
  4. You stay cheerful in spite of your troubles.
  5. You deal with reliable people.
  6. You do what you’re supposed to do.
  7. Never think about anything else when you should be thinking about the power of incentives. If you want ants, put sugar on the floor.
  8. It’s 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.
  9. The best way to get what you want is to deserve it.
  10. Neither Warren nor I are smart enough to make decisions with no time to think. We make actual decisions very rapidly, but that’s because we have spent so much time preparing ourselves by quietly reading.
  11. The storyteller is the most powerful person.
  12. Before having an opinion, you should know the other side’s argument better than they do.
  13. Be dependable.
  14. There isn’t a single formula. You need to know a lot about business and human nature and the numbers… It is unreasonable to expect that there is a magic system that will do it for you.
  15. If you skillfully follow the multidisciplinary path, you will never wish to come back. It would be like cutting off your hands.
  16. Self pity has no utility. It is inevitable that bad things will happen to you. When they do, keep going.
  17. Learning is changing behavior.
  18. Avoiding bad habits is easier than breaking bad habits.
  19. The point of having money is to buy freedom and independence.
  20. Invert. Always invert. When you have a hard problem work backwards. “All I want to know is where I’m going to die so I never go there.”
  21. Humans have been writing down their best ideas for 5,000 years. Read them.
  22. Tell people why.
  23. Work with people you admire.
  24. Don’t sell anything you wouldn’t buy.
  25. An example of a really responsible system is the system the Romans used when they built an arch. The guy who created the arch stood under it as the scaffolding was removed. It’s like packing your own parachute.
  26. We have the same problem as everyone else: It’s very hard to predict the future.
  27. Stay in the game long enough to get lucky.
  28. The first rule of compounding is to never disrupt it unnecessarily. Because of the way compounding works over time, by interrupting it, you forgo most of the upside, which happens later.
  29. Understanding opportunity cost is a superpower.
  30. Make sure your best players get the most playing time.
  31. Emotion blurs judgment.
  32. Find out what you are the best at. Then pound away at it forever.
  33. Avoid ideology.
  34. Good ideas are rare. “I know from being a poker player that you have to bet heavily when the odds are in your favor.”
  35. I think Warren and I know the edge of our competency better than other people do.
  36. I like people admitting they were complete stupid horses’ asses. I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.
  37. It takes character to sit with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.
  38. It’s not supposed to be easy. Anyone who finds it easy is stupid.
  39. Acknowledge what you don’t know.
  40. Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much-loved hand — you must learn to handle mistakes and new facts that change the odds.
  41. Quickly identify mistakes and take action.
  42. Self improvement never ends.
  43. Avoid crazy at all costs.
  44. Figure out what works. Then do it.

All these simple rules work so well to make your life better. And they’re so trite.

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