A wise old man once said...
My personal education in the mind of Munger
As we near the end of what I've decided to call Season 1 of Raising Unicorns, I thought I would switch things up again. As there was an off-week for the program this past weekend as students prepare for their Showcase, I'll share something I've been learning about instead.
During TKS, we talk about a different Person of the Week that students should be learning about each week. At one point, Charlie Munger was that person.
“Take a simple idea and take it seriously.”
—Charlie Munger
Charlie Munger is Warren Buffett's business partner at Berkshire Hathaway. They complement each other nicely in their public persona and constantly push the other's thinking. He may not be as well known as Warren outside of investment circles, but he's full of interesting wisdom.
I spent the last month reacquainting myself with Charlie and diving deeper into his life and ideas. I just finished my 3rd book on him and listened to a handful of podcasts as well. Here is a selection of ideas and lessons that I'm trying to internalize from what I’ve learned. To me, virtually everything can be summed up as “play the long game”. Think long term and the ideas compound over time if taken seriously.
Lessons from Charlie
It's never too late. The tl;dr of this idea is that life is long and you're still young. Charlie and Warren didn't meet until they were 36 and 29 respectively! This should give us all hope. Charlie had a whole life as a lawyer before meeting Warren and kept practicing law for another 6 years before investing full-time. Despite meeting "late" in life, they have spent the last 64 years since then collaborating investing, and growing became and is now Berkshire Hathaway. There is still lots of time.
"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 wise than they were when they got up.”
—Charlie Munger
Learn like crazy. Charlie is obsessed with reading and learning about a broad variety of fields and historical figures; this keeps his mind sharp and his knowledge broad. And all of this knowledge compounds. Think about how great you will be at something thirty years from now let alone sixty thanks to compounding. Because as I just said, it's never too late. All you need is time and consistency. My advice? Start by picking the thing you want to go deep on and get really good.
Invest in personal projects to build wealth. Most of us spend time doing things for other people. They tell us what to do, what to learn, or what to work on. But what are you creating just for yourself? How are you building your own capital? One of Charlie’s goals early in life was to build significant wealth. When he was a lawyer, Charlie would spend an hour a day on his own real estate projects to start to build capital and a portfolio. Put regular time every day and week towards something personally meaningful.
Find your crew. I'm sure there is a crocheted poster somewhere that says "Investments are best shared with friends". Charlie invited friends, past collaborators, and partners to join him in ventures and investments throughout his life. If they worked well together in the past, they benefited from these opportunities. Not only that, but Warren hosted an annual conference with his own crew of friends where they exchanged ideas and hosted seminars on random topics. Smart people want to be around smart people, and being part of a crew like this is surprisingly rare. Once you find (or build) your crew, nurture it.
Be someone people want to work with. This is such a career cheat code. I've found so many people who are willing to help me now because I must have left a positive impression before. You always be the better person in any deal you do, you never know who you might work with again. In every business deal Charlie did, he aimed to be the more generous party. He and Warren even got smacked with a lawsuit at one point when they paid above-asking in an acquisition because the SEC thought something fishy was going on. This stacks nicely with finding your crew + compounding knowledge.
Have both patience and high standards. Most people think they are patient, but nobody is patient like Charlie and Warren. And I’ve seen patience wear away at high standards like a slow drip of water wearing away a stone. What happens is when we wait too long, we feel compelled to act. We end up lowering our standards and choosing the best of what's available. This is not how Berkshire got to where it is today and this is not what you should do. This is the hard part. It's supposed to be hard. The most obvious place this happens in most companies is in hiring decisions – urgency outweighs high standards.
Incentives are everything. We act the way we do because we have the incentive to do so – and the tricky thing is these incentives are always obvious. Incentives rule human behavior so understanding them will help you understand others. When you’re curious as to why people act the way they do, you can start to dig into their incentives. And don’t forget – you have your own incentives you might not even be aware of.
“I think that one should recognize reality, even when one doesn’t like it; indeed, especially when one doesn’t like it.”
—Charlie Munger
Recognizing reality is key. A fan of Richard Feynman, Charlie regularly references the idea of never fooling yourself. We tend to avoid facing reality (remember the monkey?) and tell ourselves different stories to feel more comfortable. Our incentive is usually related to ego-preservation or giving ourselves a sense of control. Ask yourself: what realities have I been avoiding?
Focus > Diversification. I think this is a two-fold principle that is good to know. On the one hand, Charlie believes multitasking puts you at a disadvantage compared to those who know how to focus1. This is something I really need to get better at. On the other hand, success rarely comes as a result of diversification. Diversification is a risk-mitigation strategy, not a return-maximizing one. If your goal is to maximize your upside you need to focus.
Through the course of reading multiple books back-to-back, spotting patterns became way easier. The key to ideas like these is to constantly remind yourself of them. Pick a couple that resonate with you and write them down somewhere you’ll remember.
If you're curious to learn more about Munger, here's what I've been reading and listening to:
The Tao of Charlie Munger by David Clark
Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe
Charlie Munger: The Complete Investor by Tren Griffin
Poor Charlie's Almanack by Charlie Munger and Peter Kaufman2
All of the Charlie Munger episodes on the Founders Podcast.
Who's somebody that you want to do a deep dive on? Hit reply and let me know.
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I’m also working on this still. I believe reading books is one of the best ways to practice focusing for long periods of time.
Stripe Press is re-issuing an abridged version of this in the coming year!