Supported by Greenhaven Road Capital, finding value off the beaten path.
Charlie Munger is ninety-five years old and when asked for advice his answers circle around one thing, honesty.
Honesty in education.
“My definition of being properly educated is being right when the professor is wrong. Anybody can spit back what the professor tells you, the trick is to know when he’s right and when he’s wrong.”
Honesty in problem-solving.
“Denial is a very stupid way to handle a problem.”
Honesty about limitations.
“We never had the illusion that we could just hire a bunch of bright young people and they would know more than anybody about canned soup and aerospace.”
In mapmaking, there’s always lost details. A perfect 1:1 map of France is France. So maps are scaled down to balance detail and convenience. Munger, and Warren Buffett, seek terrain they understand.
Like their famous ‘too hard pile’ – “Part of our secret is that we don’t attempt to know a lot of things.” – is full of subway maps, transit maps, museum maps and so on. They’re looking for maps where they understand what’s on the page and what’s not.
“We never thought we could get really useful information on all subjects like Jim Cramer pretends to have.”
When the right map crosses Munger’s desk he wanted to seize it.
“The whole idea of diversification when you’re looking for excellence is totally ridiculous.”
How, for example, does someone read the map of China. We have books on China but that’s only a start. We can’t ask Charlie either.
“I can’t help you, I solved my problem you’ll have to solve yours.”
“Partly because he’s (Li Lu) fishing in China and not in this over searched, overpopulated, highly competitive American market.”
Honesty about money. Munger said that his family’s net worth would be double if not for one mistake of omission. So what. There are more important things than money.
“We all know people that are out married, what a good decision that was for them, way important than money.”
And maybe in another life, Charlie Munger would be Mr. Charlie Munger Mustache (McMM).
“Controlling cost and living simply is the secret.”
If there’s one financial tip he’d like to pass along it’s probably to pay less.
“We handled those hands (department store, textile factor, trading stamp company) pretty well and we bought in very cheaply and success came from chaining our ways and getting into the better businesses. It isn’t that we were so good at doing things that were difficult, we were avoiding the things that were difficult.”
Honesty with others. Two people that came up multiple times during the two-hours were Abraham Lincoln and Li Lu, “Li Lu is the Chinese Warren Buffett. He’s very talented.” Munger admires both, in part, because of the sacrificial nature of their success. Lincoln’s stepmother taught him to read. Lu’s older brother gave up everything for him. And it’s those that might be the greatest investments we can make.
Thanks for reading.