Charlie Munger 2

Supported by Greenhaven Road Capital, finding value off the beaten path.

I almost didn’t write this post because you should watch (or listen to) the 2017 Daily Journal meeting rather than read my notes and summary. These notes are like a bread course, technically full of calories, but not really enough.

My favorite quote from the meeting was this:

“If you’re glued together, honorable, get up every morning and keep doing it, keep learning every day, and you’re willing to go in for a lot of deferred gratification in your life you’re gonna succeed. It may not be as much as you want but you’re going to succeed. The main thing is to keep in there. Get rid of your stupidities as fast as you can and avoid the bad people as much as you can and you’ll do reasonably well.”

1/ More than money. Life and business are about more than money.

“I wish our example spread more because if you’re wealthy and you own a big share of a company and you get to decide what it does and whether it liquidates or whether it keeps going that’s a nice position to be in and maybe you shouldn’t grab more money in addition.” “I don’t think capitalism requires you make all of the money you can. I think there are times when you can be satisfied with less.”

Mr. Money Mustache and Early Retirement Extreme are bloggers who settled on the conclusion that money isn’t your most valuable thing early on. What is most valuable? Freedom of time and choice. This makes sense. We work for money so that we can get time and choice. Time not to do our taxes, time to have someone mow our yard, time to pay back a loan on something we want to buy like a house, car, education.

Time and choice aren’t common denominators because they’re harder to quantify than dollars. Yet, the way we define things matter.

I think Munger is nudging us to think this way. Why does he say “wealthy” instead of “richer”? Those words mean different things. When I think of wealth it means ample time and happiness. When I think of rich it just means money.

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2/ Run your race. Someone asks how Tyler Technologies strategies affect the Daily Journal Corporation. Munger says that Tyler is “an extremely aggressive company but I like our ethos of operation better than I like theirs.” He and Warren Buffett said much the same thing about Amazon at the 2016 Berkshire meeting. Brent Beshore‘s company notes on the bottom of their site, you do you, we’ll do us. 

This idea struck me while on the treadmill. I was momentarily proud of being the longest runner with the fastest speed. If things were still gamified I’d have gotten a digital badge. Echo Charles has seen this too.

But watching what other people are doing is one thing, a distraction.

Charley Ellis said that people wonder why he’s invested in volatile securities at his age. “Becuase I’m not investing for me,” Ellis said. Ryan Holiday cautioned writers to not fall into running someone else’s race. Seth Klarman had a client come in who wanted to dictate a finish line. “I’ll meet with you on anything but that,” Klarman said. A mistake for failed startups was watching what other people were doing.

If your core actions are correct, focus on those.

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3/ What to do about mistakes? For starters, get ready for them.  Munger has many, “my life is one long litany of mistakes and failures.”

When you make a mistake, act quickly and firmly to correct it. Wells Fargo, Munger says, failed to do this. But they’ll be better for it. “One nice thing about doing something dumb is that you probably won’t do it again.”

To prevent those dumb things try to create a system that incentivizes the right things. Wells Fargo, Munger says, failed at this too. “They got so caught up in cross-selling and having tough incentive systems that they got the incentive system so aggressive that some people reacted badly and did things they shouldn’t.”

Know you can’t fully design systems, but you can refine incentives through proper steps.

Shane Parrish suggests a decision journal for keeping track of your mistakes to combat the hindsight bias. Sam Hinkie suggested red teams in meetings and no cherry picking your decisions. Flesh out mistakes and don’t double down.

When you say them, says Munger, you’re pounding them in harder and harder. “One of the reasons I don’t tell the world what I think about how the Federal Reserve should behave and so forth is, I know that I’m just pounding the ideas into my own head.”

If you do happen to destroy an idea, Munger says to pat yourself on the back. “I’m very busy destroying bad ideas because I keep having them. It’s hard for me to just single out one from such a multitude. I actually like it when I destroy a bad idea because it’s my duty to destroy it.”

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4/ Follow your passion? Passion is a bad career indicator, interest is better.

When asked what sort of work young people should pursue Munger says to find something that interests you. “In my whole life, I’ve never succeeded much in something I wasn’t interested in. I don’t think you’re going to succeed if what you’re doing all day doesn’t interest you.”

Mohnish Pabrai asks, what do you choose to do instead of watching a movie? We can expand it and ask, what do you choose to do? What do you engage in?  Munger says, “I recommend that you engage life. If you spend all your time on how some politician wants it this way or that way and you’re sure you know what’s right – you’re on the wrong track. You want to do something every day where you’re coping with reality.”

Munger wants us to be there. Be like Paul Farmer, John Boyd, and Kara Swisher. Find something that interests you and get in there and mix it up.

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5/ Multidisciplinary thinking.  “I don’t think that operating over many disciplines as I do is a good idea for most people.” “Generally specialization is the way to go for most people.” “If you want to get rich the way I did by learning a little bit about a hell of a lot I don’t recommend it to others.”

I felt let down by this. I’m building mental models. I’m solving problems with interdomain solutions. It interests me (#4). But maybe it’s the wrong path.

Munger suggests instead to get good at something that society rewards and spend “10-20%” of your time learning the big ideas in the other disciplines.

Maybe the job I’m hired for is to make the 10-20% easier for others. If Munger is right I need to reread Cal Newport.

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6/ A philosophy buffet.  When asked about Donald Trump, Munger says, “He’s not wrong about everything and just because he isn’t like us – – roll with it.” Kara Swisher noted the same thing.

This can be hard with things in the news. Ryan Holiday gave this advice:

“Whenever you start to feel stressed, upset, depressed, confused, worried, put down your phone, step away from the television or computer and pick up a book. Ideally, pick up a very old book. There was a wonderful New York Times article last week from Alexis Coe where she discussed the clarity that comes from reading old presidential biographies.”

Munger likes dead people too.

“I spent my whole life with dead people. They’re so much better than the people I’m with here on earth. You can learn a lot from them and they’re very convenient to reach (via books). I recommend making friends with the eminent dead which I did very early and it’s been enormously helpful.”

Just keep reading and learning. You’ll see that there’s never been ‘golden days’ for life. That life is a struggle.  If you want a break from the news and a reminder that life has been full of less-than-qualified politicians, adventurous inventors, and American culture let me suggests One Summer by Bill Bryson. If you want to see everything I read, sign up here: http://eepurl.com/bgRZOX.

Thanks for reading. If you liked this I just finished a longer article about Sam Hinkie. It’s available for download here: https://gumroad.com/l/philiprocess