Charlie Munger on investing principles
Munger invests as an owner: stay inside the known edge of your competence and out of games where others have the gift, demand a margin of safety, and keep ideas simple. Big opportunities are rare, so wait, then act decisively, ignore the tides and avoid leverage that a single bad day could turn fatal. Late in life he stressed that the easy, Graham-style bargains have been competed away.
16 points · 6 appearances · 2007–2023
How the view evolved
It's not a competency if you don't know its edge → Stay out of games where others have the gift
In 2008 at Caltech the circle of competence is an abstract rule — know the edge of your competency or you're a disaster. By the 2023 CNBC interview he frames it as choosing games by native aptitude: no effort would make him the Davises' equal, so he stayed out of their businesses.
Great investments are often simple and obvious → Graham's low-hanging fruit has been picked
In 2008 he stresses how simple and obvious the winning ideas were (buy the monopoly newspaper). By 2023 he says those Graham-style easy pickings, abundant after the Depression, have been competed away as everyone crowded in.
Up next
1995–2023 · changed view
“But of course, when people use the word common sense, what they mean is uncommon sense, because the standard human condition is ignorance and stupidity. They say old Joe has common sense, they mean as he has uncommon sense, I guess.”
1995–2020 · changed view
“Cicero is famous for saying a man who doesn't know what happened before he's born goes through life like a child. ... If you generalize Cicero, as I think one should, all these other things that you should know in addition to history — and those other things are the big ideas in all the other disciplines. And it doesn't help you just to know them enough so you could prattle them back on an exam and get an A. You have to learn these things in such a way that they're in a mental latticework in your head and you automatically use them for the rest of your life.”
2008–2023 · changed view
“If you get right down to it, what I am is a lover of the progress of civilization. That turns me on.”
2007–2023 · changed view
“What are the core ideas that have helped me? Well, luckily I got at a very early age the idea that the safest way to try and get what you want is to try and deserve what you want. It's such a simple idea. It's the golden rule, so to speak. You want to deliver to the world what you would buy if you were on the other end. There is no ethos in my opinion that is better for any lawyer or any other person to have. By and large the people who had this ethos win in life, and they don't win just money, just honors and emoluments. They win the respect, the deserved trust of the people they deal with. And there is huge pleasure in life to be obtained from getting deserved trust. And so, and the way to get it is to deliver what you'd want to buy if the circumstances were reversed.”