3.5 Great Quotes from My Mentor Charlie Munger
Charlie Munger dropped out of the University of Michigan to serve in World War II . . . and the military immediately enrolled him at CalTech.
He lost an eye due to a surgeon’s ineptitude . . . but didn’t sue, noting that complications were expected in five percent of such procedures.
Charlie was a multi-billionaire . . . who lived in the same home for the last 61 years.
He was a thoughtful contrarian, sharing insights generously with a sense of humor. “All I want to know is where I’ll die,” Charlie said often, “so I’ll never go there.”
Charlie Munger died on November 28 at the age of 99.
Smart, funny, and effusive, Charlie largely hid these aspects of his personality to allow the public spotlight to shine brightest on his business partner and best friend.
Munger was the longtime #2 to Warren Buffett at Berkshire Hathaway. Together, they formed the most successful investing duo of all-time. Buffett said Berkshire was built according to Charlie’s blueprint: Buy great businesses—run by strong managers—at reasonable prices. Then let the money pile up, sit on your ass, wait for another great business to come along, and then buy that one too.
Munger became a mentor of mine in 2011.
He changed my life.
But I never met the man.
Never saw him speak live.
Munger’s impact arrived in the form of books, interviews, and stories from people that met with him. You can learn from him just as easily as I did—and my education at the knee of Munger is far from over.
Charlie’s common sense, candor, and sense of humor resonated with me. He was like the geriatric spawn of Jim Collins and Jerry Seinfeld, simplifying business complexity with brevity and wit.
At Berkshire’s annual meeting in 2000, Warren Buffett was asked about the rise of market consolidation and the associated risks of mergers and acquisitions. Buffett answered with a lengthy, nuanced response that lasted more than five minutes.
The moderator then turned to Munger.
He needed nine words:
“If you mix raisins with turds, they’re still turds.”
When I look back at what I learned from Charlie Munger thus far, three insightful and memorable quotes stand out.
1.0
“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. There must be some wisdom in the folk saying: ‘It’s the strong swimmers who drown.’”
A core principle Munger preached was inversion.
“Invert, always invert,” he’d say.
Always flip the situation on its head and first determine the outcomes you wish to avoid. Eliminating stupid mistakes is easier than trying to execute brilliance.
Fifty years ago, Munger and Buffett inverted their partnership’s aspirations.
They determined what they didn’t want:
They didn’t want a poor reputation in the market.
They didn’t want to waste time over-thinking.
They never wanted to be over-leveraged and cash-strapped.
Building trust became the day-to-day primary objective, followed by consistently making quick Yes-No decisions. They always maintained large amounts of cash on hand, ready to deploy when great opportunities appeared.
This timeless recipe, built on the concept of inversion, made Berkshire billions of dollars in profits and attractive business partners.
At Hartmann & Co., we applied the concept of inversion to our training content. What we didn’t want was material that was long, boring, and purely focused on business. So we inverted that to establish our criteria: All our content—be it Construction Spanish, Sales Training, Cultural IQ, or Executive Coaching—would be relatively brief, entertaining (while still delivering insights, of course), and would incorporate topics we were passionate about: sports, music, movies, history, and books.
Following Charlie’s inversion technique like a checklist, we’ve (largely) avoided adding to the endless supply of corporate double-speak and BS.
2.0
This quote contains so much about the man: his “pathological candor,” his passion for profits, and his understanding of human nature.
Munger railed against EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) because it concealed more than it revealed. Financial accounting, sufficiently rife with legal methods toward monkey math (to say nothing of the illegal methods), hardly needed more complexity to communicate the health of an organization.
After all, interest and taxes are very real expenses.
You pay them in the current year.
Depreciation means you spend the money first and record the expense later—again, still very much an expense.
Why are we omitting these? Munger demanded to know.
Focus on the fundamentals.
Don’t overcomplicate it.
Revenue.
Net profitability.
Free cash flow.
Customer retention.
New business generation.
Verifiable competitive advantages.
Focus on those, Munger pleaded.
Munger was one of the few leaders to challenge the use of EBITDA (heaven forbid he heard one of his operator’s cite adjusted EBITDA) and wasn’t afraid of being temporarily unpopular, a condition many leaders fear more than anything.
In a world where consultants view their contract renewals as the primary goal, I’ve found candid conversations about direct observations at work may increase tension, but they increase trust even faster.
3.0
“It’s been my experience in life, if you just keep thinking and reading, you don’t have to work.”
Munger implored me toward multi-disciplinary thinking and reading, especially the domains that investigated human behavior like “the herd mentality” that drove such inanities like EBITDA and NFTs.
Psychology.
Philosophy.
Behavioral economics.
Munger knew long term investing success—and happiness, in general—hinged on these three subjects at least as much as finance, if not more.
3.5
“I have nothing to add.”
Far more common than one-liners about feces and fruit, Munger was famous for following Buffett’s monologues with this gruff mantra: “I have nothing to add.”
Munger was the rare genius—hell, the rare individual!—with restraint.
Content to stand in the shadows.
Always a partner, never in competition with Buffett.
I challenge you to use the line, “I have nothing to add,” at least once this week. I hope you find it easier to say than I have.
Why is it so hard?
So rare?
Because we all want to make a point.
We want to contribute.
We want to look smart.
Munger knew these inclinations were hard-wired into the human mind.
Not easy to overcome, but possible to develop. Munger modeled the behavior dozens of times at every annual meeting.
Shortly before his death, Munger said, “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.”
As you begin 2024, I hope you also have a long run ahead of you.
To help you on your journey, here are a few relevant resources that are worth investing in.
1. Feel free to roll your eyes here . . .
But Berkshire’s annual reports qualify as entertaining and insightful reading. Seriously. Click here to download a random year and see what I mean.
2. Poor Charlie’s Almanack
The greatest coffee table business book ever. Cheaper paperback versions are available, but buy the $75 version. I promise you’ll never regret spending the additional $50.
3. The Tao of Charlie Munger
In this short book, a legendary Munger quote is followed by a couple hundred words of context. It’s an easy read with insights on every page.
4. Invest Like the Best Podcast
Episode 355 released on December 5, 2023:
One of the last interviews Charlie Munger recorded, hosted by John Collison, founder of Stripe.
Without a doubt, I’m a little wiser because of Charlie.
Hopefully digesting these wise Munger-ism morsels can help you, in some small way, live a happier 2024 and beyond.
Thank you for reading.
Click the video above to listen to Tyler Berns, Co-Founder of Birch Construction, discuss how saying no was effectively modeled for him.
Click here to listen to the Construction Leadership Podcast episode.
