About Charlie Munger

Professional

  • Gave up his law practice to focus on something, investing, that seemed more sensible as a vehicle toward the financial freedom that he so desired.
  • Was instrumental, along with investor and author Phil Fisher, in expanding Warren Buffett’s investment philosophy by arguing that a great business at a fair price is superior to a fair business at a great price.
    Popularized the concepts of a multidisciplinary approach to learning, which consists of taking the big ideas in the big disciplines and using them routinely to effectively solve problems, and lollapalooza effects, which are a combination of multidisciplinary factors that produce a great result.
  • Averaged a compounded annual return of 20% from 1962 to1975, compared to 5% for the DJIA.
    Strives to avoid delusion and is a man of refreshing candor. Here are some of his thoughts on high frequency trading: “I think the long term investor is not too much affected by things like the flash crash. That said, I think it is very stupid to allow a system to evolve where half of the trading is a bunch of short term people trying to get information one millionth of a nanosecond ahead of somebody else. It’s legalized front-running. I think it is basically evil and I don’t think it should have ever been allowed to reach the size that it did. Why should all of us pay a little group of people to engage in legalized front-running of our orders?”

Personal

  • Did not earn an undergraduate degree, yet graduated magna cum laude from Harvard Law School, and never took a course in business, economics, or finance, yet managed to become a billionaire in the field of investments.
  • In dealing with the lost of vision in one eye many years ago due to complications from cataract surgery, and most tragically, as Ravi Shrestha mentioned in his answer, in overcoming the loss of his child during a time when he was broke and going through a divorce, he has become an embodiment of the notion that what’s important is not what happens to you but how you react to what happens.
  • Upon his departure, decided that it made more sense to leave his share of the firm Munger, Tolles & Olson, the law firm that he helped to establish in 1962, to the estate of a younger partner at the firm who left behind a wife and children when he died of cancer.
  • Is relatively unperturbed by what people think about him.
  • Feels it’s a moral duty to share with others what he’s learned, and is adamant about giving credit to those who have enriched him with their knowledge.
  • Holds himself to a high level of ethical standards.
  • Sees contributing to the well being of others as a high virtue, and has thus donated hundreds of millions of dollars to various organizations.
  • Is a firm believer that one should apply logic to help avoid fooling oneself. You should not accept anything just because anyone says so.

 

Quotes

  • “Three rules for a career: 1) Don’t sell anything you wouldn’t buy yourself; 2) Don’t work for anyone you don’t respect and admire; and 3) Work only with people you enjoy.”
  • “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero. You’d be amazed at how much Warren reads – and at how much I read. My children laugh at me. They think I’m a book with a coupe of legs sticking out.”
  • “It never ceases to amaze me to see how much territory can be grasped if one merely masters and consistently uses all the obvious and easily learned principles.”
  • “I’m not entitled to have an opinion unless I can state the arguments against my position better than the people who are in opposition. I think that I am qualified to speak only when I’ve reached that state.”
    “We don’t claim to have perfect morals, but at least we have a huge area of things that, while legal, are beneath us. We won’t do them. Currently, there’s a culture in America that says that anything that won’t send you to prison is okay. We believe there should be a huge area between everything you should do and everything you can do without getting into legal trouble. I don’t think you should come anywhere near that line. We don’t deserve much credit for this. It helps us make more money. I’d like to believe that we’d behave well even if it didn’t work. But more often, we’ve made extra money from doing the right thing.”

 

Endorsements

  • “He is truly the broadest thinker I have ever encountered.” – Bill Gates, Microsoft
    “When the East and the West coasts fall into the sea, either through storm, earthquake, or a deterioration of values, there will still be Munger’s Omaha. Charlie’s ethical standards should be beamed by satellite to all global financial centers to prevent future Enrons and WorldComs.” – Bill Gross, PIMCO
    “On two occasions, I saw Charlie pay more than he needed to in business transactions. First, with two little old ladies who held notes in a business we were buying, which we could have easily redeemed at far less than face value – Charlie nevertheless paid them face value. Second, to raise some cash I needed for another investment, I offered to sell him my half of a venture we were in together, and he said to set a fair price – I said $130,00; he said, no, $230,000 was correct, and he paid me that.” – Rick Guerin, Pacific Partners
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