The man who is known as learning machine and most notable investor in the world, Charlie Munger is special among his die hard followers because of the wit and wisdom he holds. Considered as most rational investors, Munger born on 1924, is Vice Chairman and second-in-command to Warren Buffett, celebrated and renowned value investor who chairs Berkshire Hathaway.

During Charlie Munger and Warren Buffett’s reign as greatest leaders of Berkshire, it is suggested that the company returned roughly 2,000,000% on its initial value. This was seen in adult lifetime of two men, simply by investing capital of the company in an increasing number of prosperous enterprises and with minimal borrowing.

It is a story for ages. Some people call Charlie a “sidekick.” However, these don’t know him very well.

People who do know him, Charlie Munger is a fiercely independent intellectual. His insights on business and life seem to be unique, rare, and correct. Adopting “Munger” approach to thinking may be quite difficult, as is imitating any genius. However, utilizing core tenets will quickly begin to remove cobwebs from mind. 

 

Here are few interesting thoughts and ideas of Charlie Munger that are worth pondering upon

 

1. Well-managed expectations: Charlie Munger believes that having well-managed or expectations is secret to lead a happy life. People should have reasonable expectations and take life’s results (whether they are good and bad) with a certain amount of stoicism.

He believes that there will never be any shortage of good people. It is important to seek them out. Unrealistic expectations can lead to misery for two reasons. First, world is a fragile and complicated place. Therefore, only way to avoid disappointment is when you expect it to happen. Second, progress moves goal post. Therefore, your expectations should rise slower than its progress.

2. Munger suggests the secret of the long and happy life is simple: Doing simple things and right things is what it all takes. Taking a simple idea and taking it seriously. Focusing on a single thing will help in getting that thing done in a right and accurate manner.

He spent all his life reading, improving his mind and ability to think, which is now responsible for all the fame and money he possesses today. He is an advocate of simple thinking and simple ideas and nothing else. 

3. Know what works: Charlie Munger believes that one cannot get very far in life because of what one already knows. It is very important to maintain a flexible mind i.e., be open to learning what is working for other people.

If you want to achieve outcome you want, continue to look for things that work. Once you find them, make sure to give your best to repeat them. He once said, “I observe what works and what doesn’t and why.”

 

Big money is always in waiting, not in buying and selling:

Charlie Munger always believed in being patient. He believes that patience is key, especially in investments. Typically, investors tend to react to rapid market swings as they actively engage in buying and selling, focusing on latter.

Therefore, they sacrifice sensible investment strategies having possibility of generating strong long-term returns. Stocks that are well-chosen have potential to increase in value many times.

However, it takes time. At the same time, discipline is required and investors are required to have an ability to take losses and adversity.

 

A continuous learning machine:

As Charlie Munger quoted, “If you don't keep learning, other people will pass you by.” He firmly believes that knowledge should be at everyone's fingertips. If you are not making use of this opportunity, you will remain at same place and growth with cease.

He believed that change is only thing which is constant and knowing more, learning more keeps you ahead. Like meals nourish our bodies, continuous learning should help in nourishing minds.

 

Saying no to things out of your circle:

Charlie Munger said that people tend to under-rate importance of simple yet big ideas. He believes in trying not to be consistently stupid, instead of trying to be intelligent. Professionals are aware that they are not playing same game as amateurs are playing.

Therefore, in investing, it is very important to make investments if there is full understanding. Otherwise, investors will end up in a misery situation. Like investing, life offers many challenges, decisions, and events, which if we do not select, would only lead to disasters. The idea is to play within the circle of your competence.

 

Divergence is important:

Divergence should be made a part of life. If you continue to follow herd, results will be same. Therefore, if you want to stand out, you must be different and correct. If you want to exceed average, you must diverge. You should be different. Being consensus would bring consensus results. But being contrarian and doing right things could lead to outstanding results. One cannot beat the market following crowed.

 

 

Time is a friend of good business:

According to Munger, time is most important element when investing in a business. For long-term business, time can serve as a good friend. This is because over long-term that business will grow. However, time is also an enemy of poor business as, in long run, such business might shut down.

 

Mispriced opportunities:

Charlie believes that investing is a parimutuel system and, when you make investments, it is mispriced gamble. It is important to have enough knowledge to know whether gamble is mispriced. It is called value investing. If you are buying something and the world is selling, you have to be right and should know or have an idea better than the rest.

It is important to know that great ideas are very rare. Therefore, when odds are in your favor, bet heavily.

 

Long attention span:

It is not just intelligence, the reasons for his successful in life is that he has a long attention span. If you believe holding an investment for about next 5 years while others are focused on next 5 months, you are at an advantageous position. This is because everyone else is trying to outperform based on sheer intellect.

• Stay away from fake knowledge - According to Charlie Munger, smart people are not safe from professional disasters which come from overconfidence. People nowadays are so used to outsource their thinking to others that they have forgotten what it’s like to really understand something from all angles.

Fake knowledge, which is result of reading headlines and skimming news, can seem harmless in beginning, but it’s not. This is because it makes people overconfident. Anything that is easily accessible through Google or Twitter or any other social media platform will be widely known. Therefore, no weightage should be given to such news.

• Maximizing odds of success- Maximizing competing variables can lead to a disaster. This is because when everything is a priority, nothing becomes a priority. Picking one variable and focusing on it is an effective strategy. Focusing on one variable will increase odds of being successful.

 

Focus on big Ideas:

Munger is a big fan of big picture or big ideas. He once said, “You must know the big ideas in the big disciplines, and use them routinely—all of them, not just a few. Most people are trained in one model—economics, for example—and try to solve all problems in one way. You know the old saying: to the man with a hammer, the world looks like a nail. This is a dumb way of handling problems”

Getting rich and staying happy- Charlie Munger says that desire to become rich fast is quite dangerous. He explains that it is very important to know that getting rich is directly related to being happy with what you have, spending less than your income, and time.

 

To conclude,

Reding and learning from the wisdom that Charlie Munger has shared could add immense value. But as he said no one should try to become one. He once said, “I may be remembered as a wise ass,” whereas his investing partner Warren Buffett will be remembered as a teacher.

People sometimes say to me that they do not understand the fuss about Charlie Munger. Unfortunately, they are missing a key point: no one can ever be Charlie Munger, just like no one can be Warren Buffett,”

Tren Griffin, the author of “Charlie Munger: The Complete Investor,” writes in his book “The point is not to treat anyone like a hero, but rather to consider whether Munger, like his idol Benjamin Franklin, may have qualities, attributes, systems, or approaches to life that we might want to emulate, even in part.

This same process explains why Munger has read hundreds of biographies. Learning from the success and failure of others is the fastest way to get smarter and wiser without a lot of pain”

 

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