Mungerisms: Words of Wisdom from Charlie
Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Buffet, Lynch and other legends - Investing Strategies
Forum Discription: DIscuss about the strategies followed by the great investors. Share an idea which would have impressed the masters. Try and bring their International experience into the Indian Markets.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=799
Printed Date: 25/Apr/2024 at 3:07pm
Topic: Mungerisms: Words of Wisdom from Charlie
Posted By: kulman
Subject: Mungerisms: Words of Wisdom from Charlie
Date Posted: 08/Mar/2007 at 6:22pm
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While Warren Buffett gets most of the attention, Charlie Munger, his partner in managing Berkshire Hathaway http://quote.fool.com/uberdata.asp?symbols=BRK.A - http://quote.fool.com/uberdata.asp?symbols=BRK.A - is also an investment genius in his own right. He has an acerbic, dry wit which makes interesting reading. This thread is devoted to Charlie's words of wisdom.
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A young shareholder asked Munger how to follow in his footsteps to become Rich. Munger: "We get these questions a lot from the enterprising young. It's a very intelligent question: You look at some old guy who's rich and you ask, 'How can I become like you, except faster?'
Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in fast spurts. But you build discipline by preparing for fast spurts... Slug it out one inch at a time, day by day, at the end of the day -- if you live long enough -- most people get what they deserve."
------------- Life can only be understood backwards—but it must be lived forwards |
Replies:
Posted By: kulman
Date Posted: 08/Mar/2007 at 6:13am
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"What's the best way to get a good spouse? The best single way is to deserve a good spouse because a good spouse is by definition not nuts."---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 12/Mar/2007 at 7:19am
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The mental habit of thinking backward forces objectivity. One of the ways you think a thing through backward is you take your initial assumption and say, Let’s try and disprove it. For example, if you were hired by the World Bank to help ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: s_praharaj
Date Posted: 13/Mar/2007 at 10:28pm
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Kulmanji, Thanx a lot for starting this thread on Charles Munger. He is no less than Warren Buffet and even Buffet acknowledges that. I have read one of his books, "Poor Charli's Almanac". If you know any other books pls, let me know. Once Warren Buffet was asked to say about the secrets of success of Munger. Warren Buffet's reply to the audience was as follows.
"Well, One time some attractive woman sat next to Charlie and asked him what he owed his success to, and , unfortunately, she insisted on a one word answer. He had a speech prepared that would have gone on for several hours. But when forced to boil it down to one word, he said that was "rational".. You know, he comes equipped for rationality, and he applies it in business. He doesn't always apply it elsewhere, but he applies it in business and that has made him a huge business success." ------------- Shashi Praharaj |
Posted By: kulman
Date Posted: 13/Mar/2007 at 10:32pm
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The ethos of not fooling yourself is one of the best you could possibly have. It's powerful because it's so rare.---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 13/Mar/2007 at 10:37pm
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Thanks Shashi jee for that anecdote.
The word RATIONAL literally means: Having its source in or being guided by the intellect (distinguished from experience or emotion)
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 14/Mar/2007 at 6:10pm
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"The idea of caring that someone is making money faster (than you are) is one of the deadly sins. Envy is a really stupid sin because it's the only one you could never possibly have any fun at. There's a lot of pain and no fun. Why would you want to get on that trolley?"
---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: deveshkayal
Date Posted: 14/Mar/2007 at 7:42pm
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I know Kulmanji has already posted this in Warren Buffet thread,but then i would like it here..
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In the Bookworm’s corner of our bazaar, there will be about 25 books and DVDs – all discounted – led again by Poor Charlie’s Almanack. (One hapless soul last year asked Charlie what he should do if he didn’t enjoy the book. Back came a Mungerism: “No problem – just give it to someone more intelligent.”)
---from WB's letter to shareholders 2006. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: tigershark
Date Posted: 14/Mar/2007 at 7:58pm
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charlie munger is in fact the reincarnation of benjamin franklin.PATIENCE THE ART OF WAITING WITHOUT TIRING OF WAITING.look at those hedge funds you think they can wait? they dont know how to wait! as jesse livermore said the BIG MONEY IS NOT IN BUYING AND SELLING BUT IN WAITING. ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: basant
Date Posted: 14/Mar/2007 at 8:04pm
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Men who can be right and sit tight are uncommon. I found it the hardest thing to learn. But it is only after an investor has firmly grasped this that he can make big money. It is literally true that millions came easier to a trader after he knows how to trade then hundreds came in the days of his ignorance. - Jesse Livermore ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: tigershark
Date Posted: 14/Mar/2007 at 8:04pm
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mungers three great lessons of investing 1-A GREAT BUSINESS AT A FAIR PRICE IS SUPERIOR TO A FAIR BUSINESS AT A GREAT PRICE 2-AGREAT BUSINESS AT A FAIR PRICE IS SUPERIOR TO A FAIR BUSINESS AT A GREAT PRICE 3-AGREAT BUSINESS AT A FAIR PRICE IS SUPERIOR TO A FAIR BUSINESS AT A GREAT PRICE ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: tigershark
Date Posted: 14/Mar/2007 at 8:09pm
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charlie shoved me in the direction of not just buying bargains as ben graham had tought me. this was the real impact charlie had on me.it took a powerful force to move on from grahams limiting views. it was the power of charlies mind.he expanded my horizons-WARREN BUFFET. IN SHORT HE TOUGHT WARREN HOW TO BUY GREAT BUSINESSES. ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: kulman
Date Posted: 15/Mar/2007 at 12:17pm
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"Organized common (or uncommon) sense -- very basic knowledge -- is an enormously powerful tool. People calculate too much and think too little."---Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 15/Mar/2007 at 8:58am
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“The name of the game is continuing to learn. Even if you’re very well trained and have some natural aptitude, you still need to keep learning."---Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 16/Mar/2007 at 11:43am
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"You need a different checklist and different mental models for different companies. I can never make it easy by saying, 'Here are three things' You have to derive it yourself to ingrain it in your head for the rest of your life."---Charlie Munger on Investing models ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 17/Mar/2007 at 11:55am
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I’ve heard Warren say since very early in his life that the difference between a good business and a bad one is that a good business throws up one easy decision after another, whereas a bad one gives you horrible choices—decisions that are extremely hard to make. For example, it’s not hard for us to decide whether or not we want to open a See’s store in a new shopping center in ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 19/Mar/2007 at 2:52pm
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“When they’re talking, they’re lying, and when they’re quiet, they’re stealing”---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 19/Mar/2007 at 7:59pm
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"A lot of opportunities in life tend to last a short while, due to some temporary inefficiency... For each of us, really good investment opportunities aren't going to come along too often and won't last too long, so you've got to be ready to act and have a prepared mind”---Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 20/Mar/2007 at 6:34pm
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"Some people seem to think there is no trouble just because it has not happened yet. If you jump out the window at the 42nd floor and you are still doing fine as you pass the 27th floor, that does not mean you do not have a serious problem. I would want to address the problem right now. They'd better face it”---Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: BubbleVision
Date Posted: 20/Mar/2007 at 8:31pm
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This quote was really out of the box by Charlie. ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: Mohan
Date Posted: 20/Mar/2007 at 10:03pm
Wow, To have foresight,vision and conviction like this is simply amazing ------------- Be fearful when others are greedy and be greedy when others are fearful. |
Posted By: manishdave
Date Posted: 20/Mar/2007 at 4:50am
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Charlie's Favourite quote - To a man with hammer, everything looks like nail. |
Posted By: kulman
Date Posted: 21/Mar/2007 at 10:42pm
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"In many corporations, there is an obsession with meeting quarterly earnings targets. To do so, they'd fudge a little, sell stock at a capital gain, sell a building or two... Then, if that was not enough, they would engage in channel stuffing — if you were selling through a middleman, you could unload your product at the end of the quarter and make the current quarter look better but, of course, the next quarter would be worse. For many major pharmaceutical, consumer products and software companies, at the end of quarter, this was very common. That is pretty well over. A few public hangings will really change behaviour."---Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 22/Mar/2007 at 8:42am
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“ ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 27/Mar/2007 at 1:00pm
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Question: You've said previously that 15 or so great investments have made the difference for Charlie Munger: Well, they all worked. But they have been very different. It does emphasise just how few great investments you really need in a lifetime. Patience and aggressive opportunism are part of our game. People who have to make an acquisition every month, will eventually crater. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 29/Mar/2007 at 5:36pm
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This compared to Buffet's famous 20 hole punchcard. He advocated that any investor should not think of buying more then 20 stocks during his life time and he should do well.
I think anybody who has made serious money in this market can count the number of stocks which helped him make that wealth. If he cannot count them then it means he was holding too many or in other words has done only as good as the market.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 29/Mar/2007 at 9:16pm
| Very true Sir. Although, I am a strict advocate of diversification, yet the laodings can never will be equal. If you keep a diversified portfolio, markets will take care of the weightages.... and with no churning, the performers weightage will increase. In the end, Pareto's principle will hold. I admit diversification is an admission of lack of confidence, but I have seen people with confidence losing hell lot of money in no time. Am not saying that its forever the case, but small investors should always adopt highest degrees of risk management. |
Posted By: kulman
Date Posted: 29/Mar/2007 at 11:09pm
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Question: What about benchmark risk? Charlie Munger: If you're an investment manager and you're going to get fired if you don't beat your benchmark, then you'll do some strange things to make sure that doesn't happen. We are in a benchmarking world right now. You often get investors who are really closet indexers, in which case you're being played for a sucker. These guys have 85 per cent of their assets linked to the index, and they charge big fees.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 30/Mar/2007 at 11:16am
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So, economics should emulate physics' basic ethos, but its search for precision in physics–like formulas is almost always wrong in economics.---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 01/Apr/2007 at 5:41pm
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Thanks to Devesh, I got to read an excellent article he sent me. Following is just an excerpt. Complete article is http://joecit.com/2007/03/30/how-to-actually-invest-like-warren-buffett-and-charlie-munger - available here
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I personally believe Munger’s influence at Berkshire and on Buffett’s thinking goes, regrettably, unsung. Very unsung. If Munger hadn’t been around, Buffett arguably would not have gained an appreciation of buying great businesses rather than cigar butts. Munger helped make Berkshire’s returns phenomenal, while allowing for scalability that could not have otherwise been achieved. In other words, Berkshire could never have been scaled to its huge size by purchasing cigar butts — there aren’t enough of them, and the returns are not “continuing” (i.e. when they reach fair value, there’s no further upside. You must sell it and move on). Berkshire, therefore, needed to invest in great businesses that it could hold on to.
Charlie Munger is a staunch proponent of a type of interdisciplinary model of thinking in which one draws on the accumulated wisdom of many different disciplines (including, but certainly not limited to, psychology, physics, biology, economics, etc.) and understands how they interact. This “latticework” of mental models ultimately becomes worldly wisdom. And it is a structure for thinking, solving problems, and, yes, finding investments. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 01/Apr/2007 at 5:54pm
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What an observation:
"Berkshire could never have been scaled to its huge size by purchasing cigar butts — there aren’t enough of them, and the returns are not “continuing” (i.e. when they reach fair value, there’s no further upside. You must sell it and move on)"
Maybe Munger was the guiding force that made the Buffet of today different from what he started as a student of Graham.
While Buffet is the proponent of the instrinsic value theory most of Buffet's investments are in vauable businesses Insurance, Banking, Rating agencies, Media, Consumer comapnies have never appeared to be cheap whether you look at it from the PE basis or a typical analyst's perspective of book value/dividend etc but yet he continued to make money out of them year after year maybe for two reasons:
1) His purchase price was very attractive - this can only help you in your first year not after that because by then the valuation gap closes down.
2) Those businesses became cheap every six months. That is the EPS kept on growinmg and growing interest rates or no interest rates these are busiensses any one can dream of holding. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 01/Apr/2007 at 6:48pm
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You are absolutely right. Buffet has best of both Graham & Munger. By the way, Basant jee while going through previous letters by WB to shareholders, I came across a very interesting concept called 'look- through earnings'. Quote
We also believe that investors can benefit by focusing on their own look-through earnings. To calculate these, they should determine the underlying earnings attributable to the shares they hold in their portfolio and total these. The goal of each investor should be to create a portfolio (in effect, a "company") that will deliver him or her the highest possible look-through earnings a decade or so from now. An approach of this kind will force the investor to think about long-term business prospects rather than short-term stock market prospects, a perspective likely to improve results.
Unquote
For example.....
& so on.......to determine how much 'real' growth is there in investments!
WB used to mention that his aim was to achieve min 15% CAGR in 'look-through earnings' so as to achieve growth in Berkshire's intrinsic value.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: manishdave
Date Posted: 01/Apr/2007 at 5:27am
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Sometimes interdiciplinary does wonders. Before Apple, computers had dull single type of fonts. But somehow Steve Jobs had done course on calligraphy and had knowledge of computers and we have this wonderful things. Otherwise all computer genius people would have no idea that there is other font too. It is different thing that MS copied apple and did better marketing.
This is really interesting piece of read. It is not related to WB or Charlie and amin can move it at right place:
http://news-service.stanford.edu/news/2005/june15/jobs-061505.html - http://news-service.stanford.edu/news/2005/june15/jobs-061505.html
On WB's cigar butt investing style Charlie said that WB is smart enough to come out of that mental block. His influence was just to faten it. I think Charlie is not just being humble(he never tries to), but he is right.
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Posted By: kulman
Date Posted: 06/Apr/2007 at 10:01am
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"Investing is where you find a few great companies and then sit on your ass." Charlie Munger's comments at the Berkshire Hathaway 2000 Annual Meeting "If you took out our 15 best ideas, most of you wouldn't be here" Charlie Munger's comments at the
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 06/Apr/2007 at 10:22am
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"If you took out our 15 best ideas, most of you wouldn't be here"
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This one needs to be framed. It does not require 100 companies to make a lot of money in the markets because finally the number of stocks that do it for us would be less then 5 and we better make sure we have enough in them at the starting block!!! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: tigershark
Date Posted: 07/Apr/2007 at 4:22pm
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that is exactly the problem! ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: kulman
Date Posted: 08/Apr/2007 at 1:08pm
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A foreign correspondent said to us, “You don’t seem smart enough to be doing so much better than the rest of us.” We said we know the edge of our competency better than most people do. It’s not a competency if you don’t know the edge of it.---Charlie Munger's comments at the Berkshire Hathaway 2006 Annual Meeting
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: Mohan
Date Posted: 08/Apr/2007 at 9:18am
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Basantji,
Yeh Charles Munger ki baate log sunne lage toh TV18 aur doosre business channel will be out of business. What will they fill their programs with.
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"Investing is where you find a few great companies and then sit on your ass." Charlie Munger's comments at the Berkshire Hathaway 2000 Annual Meeting "If you took out our 15 best ideas, most of you wouldn't be here" Charlie Munger's comments at the |
Posted By: Ajith
Date Posted: 08/Apr/2007 at 10:06am
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IF not the noise from the business channels then the smooth talk from the brokers will make you forget the pearls of wisdom from Buffet and Munger and Phil Fisher(for tech) .Just stick to it unless you are clearly wrong-thats all I have learnt in practice. ------------- Ajith |
Posted By: Mohan
Date Posted: 08/Apr/2007 at 10:24am
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Arrey , Yeh Brokeron ko tho main bhulhi gaya....
Thanks Ajithji
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Posted By: kulman
Date Posted: 09/Apr/2007 at 9:11am
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“If a thing is not worth doing at all, it’s not worth doing well.”---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 13/Apr/2007 at 6:34am
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“Whoever makes you smarter a little earlier in life makes you better”---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: deveshkayal
Date Posted: 07/May/2007 at 10:41pm
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“Whenever you think that some situation or some person is ruining your life, it’s actually you who are ruining your life. It’s such a simple idea. Feeling like a victim is a perfectly disastrous way to make go through life. If you just take the attitude that however bad it is in anyway, it’s always your fault and you just fix it as best you can – the so-called “iron prescription” – I think that really works” ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: deveshkayal
Date Posted: 07/May/2007 at 10:45pm
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“The name of the game is continuing to learn. Even if you’re very well trained and have some natural aptitude, you still need to keep learning”—Munger. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: kulman
Date Posted: 15/May/2007 at 9:11am
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The interesting question asked was why they had bought a railroad when they had eschewed investments of that nature. Munger replied that they used to not like them because they needed large amounts of capital, had tough unions, and stiff competition from the trucking business. He said that their paradigm had shifted and that they were two years too late in making this investment. He used an old quote and said that man is too old too soon and too smart too late. Now the railroad industry has a competitive advantage by double-stacking freight. With all of the imports from
Source: excerpt from Wesco meeting; gurufocus ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 16/May/2007 at 9:56pm
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On the hot topic of global warming.
Mr. Munger thinks it's not as big a deal as everyone says it is. He says that it is very difficult to change the path that we are on and we have no influence over emerging countries. He went on to say that global warming changes take place over a very long period of time and used as an example one hundred years. He said that we can adjust over long periods of time. If
Source: excerpt from Wesco meeting; gurufocus ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 21/May/2007 at 12:33pm
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Excerpt from 2007 annual meeting (source: JV Bruni)
An attendee from Hong Kong asked Buffett and Munger to address the topics of decreasing risk premiums, increasing correlations across markets, and the proliferation of a short-term mindset in investing.
Charlie Munger: Bad things in markets are not Gaussian. When people talk about sigmas in terms of disastrous results in markets, they’re all crazy! People who use Gaussian distributions have to believe in the Tooth Fairy to believe that—but it’s easy to teach. I once asked a surgeon why he still did an outdated procedure. “Because it’s so easy to teach!” There’s more of that in university finance departments than you’d believe. That stuff has no utility at all, but they keep on teaching it.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 22/May/2007 at 6:06pm
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Finance taught in business schools is about 50% twaddle. We early recognized that very smart people do very dumb things. We wanted to figure out when and why…and who, so we could avoid them.---Charlie Munger------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 22/May/2007 at 7:14am
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It’s a combination of sin and folly. Lending institutions showed profits where no one would do so until loans matured. The accounting profession laid down on the job again. Poor lending—how could they do it and still shave in the morning? The face looking back at them was evil and stupid.---Charlie Munger (while responding to a question about sub-prime lending) ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 23/May/2007 at 11:23pm
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During the recent shareholder meet at Omaha, a 10-year-old from Kentucky asked about the best ways for a 10-year-old to earn money. Following are the responses from m/s Buffet & Munger. Read Munger's reply carefully.... Warren Buffett : There’s a study I’ve often quoted that shows that the best correlation with business success is the age at which you started your first business. The earlier, the better. I got half the investment capital I started with delivering newspapers. Ten may be a little young to deliver papers—maybe 12 or 13. I must have tried 20 businesses by the time I graduated from high school. Charlie, didn’t you sell time to yourself?Charlie Munger : I did that. I sold myself one hour a day of my own time—I gave the best hour of the day to developing my mind. Read The Richest Man in Babylon—underspend your income and invest over time. Make yourself a reliable person. If you stay a reliable person all your life, it will be very hard to fail in anything you want. Be faithful to yourself.------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 23/May/2007 at 7:46am
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The concept of hurdle rates makes nothing but sense, but it doesn’t work. Hurdle rates don’t work as well as a system of comparing things. Finance departments ignore it, because it’s not easy to teach. Just because you can measure something doesn’t mean it’s the determining variable in an uncertain world. The concept of opportunity cost is overlooked. In the real world, your opportunity costs are what you want to base your decisions on.---Charlie Munger (while responding to a question about rate of return & discounting) ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 23/May/2007 at 9:40am
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In the real world, your opportunity costs are what you want to base your decisions on
____________________________________________________
This is a lesson to anyone who holds on to underperforming stocks for years and labels himself as value/patient investor. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Vivek Sukhani
Date Posted: 23/May/2007 at 9:50am
| Thats the risk of being a value investor just like losing a major chunk of your investment is in the case of growth investor..... |
Posted By: kulman
Date Posted: 26/May/2007 at 9:00pm
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There is no one easy method that can be simply or mechanically applied by computer. You must use multiple techniques and multiple models. You can’t become a good investor rapidly, you need experience. It’s very important to be learning, to start early and to continue.---Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: deveshkayal
Date Posted: 26/May/2007 at 10:19pm
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It’s very important to be learning, to start early and to continue.---Charlie Munger
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This quote is very much applicable to me...Thanks Kulmanji. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: kulman
Date Posted: 30/May/2007 at 9:01am
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“An idea or fact is not worth more just because it is readily available to you”—Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 01/Jun/2007 at 10:46pm
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‘To avoid envy from others, you should deserve your success’---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 13/Jun/2007 at 5:48pm
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Envy is the silliest of the sins. You suffer and the other guy isn't affected.---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: tigershark
Date Posted: 13/Jun/2007 at 9:54pm
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you suffer,the other guy isnt affected and the doctor makes all the money treating your high bp and sleepless nights! ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: kulman
Date Posted: 13/Jun/2007 at 7:26am
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Very true....especially when it's a confession by a Doctor!
You can progress only when you learn the methods of learning. Warren & I have certain things in common. We both hate to have too many forward commitments in our schedules. We both insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think. So Warren and I do more reading and thinking and less doing than most people in business. We do that because we like that kind of a life. But we've turned that quirk into a positive outcome for ourselves---Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 15/Jun/2007 at 12:12pm
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“One approach is rationality—the way you'd work out a bridge problem: by evaluating the real interests, the real probabilities and so forth. And the other is to evaluate the psychological factors that cause subconscious conclusions, many of which are wrong”---Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 18/Jun/2007 at 11:43pm
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comments on the sub-prime debacle: "It is in the nation’s interest to give loans to the deserving poor. However, the moment you give loans to the undeserving poor or the stretched rich, it’s trouble.”----Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: Mr. V
Date Posted: 19/Jun/2007 at 11:11pm
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Charlie Munger - USC School of Law Commencement - May 13, 2007
Safest way to get what you want is to deserve what you want. Deliver to the world what you would buy if you were on the other end. There is huge pleasure in life to be obtained from getting deserved trust. And the way to get it is to deliver what you would want to buy if the circumstances were reversed. There’s no love that’s so right as admiration based love and that love should include the instructive dead. Wisdom acquisition is a moral duty. It’s not something you do just to advance in life. As a corollary to that proposition which is very important, it means that you are hooked for lifetime learning. And without lifetime learning, you people are not going to do very well. You are not going to get very far in life based on what you already know. You’re going to advance in life by what you learn after you leave here. 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 wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you. …so if civilization can progress only with an advanced method of invention, you can progress only when you learn the method of learning. Nothing has served me better in my long life than continuous learning. I went through life constantly practicing (because if you don’t practice it, you lose it) the multi-disciplinary approach and I can’t tell you what that’s done for me. It’s made life more fun, it’s made me more constructive, its made me more helpful to others, its made me enormously rich. You name it, that attitude really helps. Now, there are dangers in it because it works so well that if you do it, you will frequently find you’re sitting in the presence of some other expert, maybe even an expert superior to you (supervising you), and you’ll know more than he does about his own specialty, a lot more. You’ll see the correct answer and he’s missed it. That is a very dangerous position to be in. You can cause enormous offense by being right in a way that causes somebody else to lose face. And I never found a perfect way to solve that problem. My advice to you is to learn sometimes to keep your light under a bushel. Marcus Cicero is famous for saying that the man who doesn’t know what happened before he was born goes through life like a child. That is a very correct idea. If you generalize Cicero, as I think one should, there are 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. It doesn’t help just to know them enough so you can [repeat] 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. If you do that I solemnly promise you that one day you’ll be walking down the street and you’ll look to your right and left and you’ll think “my heavenly days, I’m now one of the of the few most competent people in my whole age cohort.” If you don’t do it, many of the brightest of you will live in the middle ranks or in the shallows. The way complex adaptive systems work and the way mental constructs work is that problems frequently get easier, I’d even say usually are easier to solve if you turn them around in reverse. In other words, if you want to help India, the question you should ask is not “how can I help India”, it’s “what is doing the worst damage in India? What will automatically do the worst damage and how do I avoid it?” In life, unless you’re more gifted than Einstein, inversion will help you solve problems. Let me use a little inversion now. What will really fail in life? What do you want to avoid? Such an easy answer: sloth and unreliability. If you’re unreliable it doesn’t matter what your virtues are. Doing what you have faithfully engaged to do should be an automatic part of your conduct. You want to avoid sloth and unreliability. Another thing I think should be avoided is extremely intense ideology because it cabbages up one’s mind. You see it a lot with T.V. preachers (many have minds made of cabbage) but it can also happen with political ideology. When you’re young it’s easy to drift into loyalties and when you announce that you’re a loyal member and you start shouting the orthodox ideology out, what you’re doing is pounding it in, pounding it in, and you’re gradually ruining your mind. So you want to be very, very careful of this ideology. It’s a big danger. In my mind, I have a little example I use whenever I think about ideology. The example is these Scandinavia canoeists who succeeded in taming all the rapids of Scandinavia and they thought they would tackle the whirlpools of the Aron (sp) Rapids here in the United States. The death rate was 100%. A big whirlpool is not something you want to go into, and I think the same is true about a really deep ideology. I have what I call an iron prescription that helps me keep sane when I naturally drift toward preferring one ideology over another and that is: I say that I’m not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people who support it. I think only when I’ve reached that state am I qualified to speak. This business of not drifting into extreme ideology is a very, very important thing in life. Another thing that does one in, of course, is the self-serving bias to which we’re all subject. You think the true little me is entitled to do what it wants to do. And, for instance, why shouldn’t the true little me overspend my income. Mozart became the most famous composer in the world but was utterly miserable most of the time, and one of the reasons was because he always overspent his income. If Mozart can’t get by with this kind of asinine conduct, I don’t think you should try. Generally speaking, envy, resentment, revenge and self-pity are disastrous modes of thoughts. Self-pity gets fairly close to paranoia, and paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity. It’s a ridiculous way to behave and when you avoid it, you get a great advantage over everybody else or almost everybody else because self-pity is a standard condition, and yet you can train yourself out of it. Of course the self-serving bias is something you want to get out of yourself. Thinking that what’s good for you is good for the wider civilization and rationalizing all these ridiculous conclusions based on this subconscious tendency to serve one’s self is a terribly inaccurate way to think. Of course you want to drive that out of yourself because you want to be wise, not foolish. You also have to allow for the self-serving bias of everybody else because most people are not going to remove it all that successfully, the human condition being what it is. If you don’t allow for self-serving bias in your conduct, again you’re a fool. The correct answer to situations like [the Saloman case] was given by Ben Franklin, “If you would persuade, appeal to interest not to reason.” Another thing, perverse incentives. You do not want to be in a perverse incentive system that’s causing you to behave more and more foolishly or worse and worse - incentives are too powerful a control over human cognition or human behavior. If you’re in one, I don’t have a solution for you. You’ll have to figure it out for yourself, but it’s a significant problem. Perverse associations, also to be avoided. You particularly want to avoid working under somebody you really don’t admire and don’t want to be like. We’re all subject to control to some extent by authority figures, particularly authority figures that are rewarding us. Getting to work under people we admire requires some talent. The way I solved that is I figured out the people I did admire and I maneuvered cleverly without criticizing anybody so I was working entirely under people I admired. You’re outcome in life will be way more satisfactory and way better if you work under people you really admire. The alternative is not a good idea. Objectivity maintenance. Darwin paid particular attention to disconfirming evidence. Objectivity maintenance routines are totally required in life if you’re going to be a great thinker. There, we're talking about Darwin’s special attention to disconfirming evidence and also about checklist routines. Checklist routines avoid a lot of errors. You should have all this elementary wisdom and then you should go through a mental checklist in order to use it. There is no other procedure in the world that will work as well. The last idea that I found very important is that I realized very early that non-egality would work better in the parts of the world that I wanted to inhabit. What do I mean by non-egality? I mean John Wooden when he was the number one basketball coach in the world. He just said to the bottom five players that you don’t get to play. The top seven did all the playing. Well the top seven learned more, remember the learning machine, they learned more because they did all the playing. And when he got to that system he won more than he had ever won before. I think the game of life, in many respects, is about getting a lot of practice into the hands of the people that have the most aptitude to learn and the most tendency to be learning machines. And if you want the very highest reaches of human civilization, that’s where you have to go. You do not want to choose a brain surgeon for your child from 50 applicants where all of them just take turns doing the procedure. You don’t want your airplanes designed that way. You don’t want your Berkshire Hathaway’s run that way. You want to get the power into the right people. [Told the story of Max Planck and his chauffeur. After winning the Nobel Prize, Planck toured around giving a speech. The chauffeur memorized the speech and asked if he could give it for him, pretending to be Planck, in Munich and Planck would pretend to be the chauffeur. Planck let him do it and after the speech someone asked a tough question. The real chauffeur said that he couldn’t believe someone in such an advanced city like Munich would ask such an elementary question and as such, he was going to ask his chauffeur (Planck) to reply]. In this world we have two kinds of knowledge. One is Planck knowledge, the people who really know. They’ve paid the dues, they have the aptitude. And then we’ve got chauffeur knowledge. They have learned the talk. They may have a big head of hair, they may have fine temper in the voice, they’ll make a hell of an impression. But in the end, all they have is chauffeur knowledge. I think I’ve just described practically every politician in the United States. And you are going to have the problem in your life of getting the responsibility into the people with the Planck knowledge [and away from the people with the chauffeur knowledge]. And there are huge forces working against you. My generation has failed you a bit…..but you wouldn’t like it to be too easy now would you? Another thing that I found is that an intense interest in the subject is indispensable if you’re really going to excel in it. I could force myself to be fairly good in a lot of things but I couldn’t be really good at anything where I didn’t have an intense interest. So to some extent, you’re going to have to follow me. If at all feasible, drift into something where you have an intense interest. Another thing you have to do, of course, is to have a lot of assiduity. I like that word because it means: sit down on your ass until you do it. Two partners that I chose for one little phase in my life had the following rule when they created a design, build, construction team. They sat down and said, two-man partnership, divide everything equally, here’s the rule: if ever we’re behind in commitments to other people, we will both work 14 hours a day until we’re caught up. Needless to say, that firm didn’t fail. The people died very rich. It’s such a simple idea. Another thing, of course, is that life will have terrible blows in it, horrible blows, unfair blows. And some people recover and others don’t. And there I think the attitude of Epectitus is the best. He said that every missed chance in life was an opportunity to behave well, every missed chance in life was an opportunity to learn something, and that your duty was not to be submerged in self-pity, but to utilize the terrible blow in constructive fashion. That is a very good idea. You may remember the epitaph which Epectitus left for himself: “Here lies Epectitus, a slave maimed in body, the ultimate in poverty, and the favored of the gods.” I’ve got a final little idea because I’m all for prudence as well as opportunism. [He talked about his grandfather, Judge Munger, who under spent his income all his life and left his grandmother in comfortable circumstances, which he had to because there were no pensions for federal judges back then. Along the way, he bailed out Charlie’s uncle’s bank back in the ‘30s by taking over 1/3 of his good assets in exchange for bad assets of the bank. He remembered his grandfather’s example in college when he came across] Housman’s poem: The thoughts of others Were light and fleeting, Of lovers’ meeting Or luck or fame. Mine were of trouble, And mine were steady, So I was ready When trouble came. You can say, who wants to go through life anticipating trouble? Well I did. All my life I’ve gone through life anticipating trouble. And here I am, going along in my 84th year and like Epectitus, I’ve had a favored life. It didn’t make me unhappy to anticipate trouble all the time and be ready to perform adequately if trouble came. It didn’t hurt me at all. In fact it helped me. The last idea I want to give to you…..is that this is not the highest form that a civilization can reach. The highest form a civilization can reach is a seamless web of deserved trust. Not much procedure, just totally reliable people correctly trusting one another. That’s the way an operating room works at the Mayo Clinic. So never forget, when you’re a lawyer, that you may be rewarded for selling this stuff but you don’t have to buy. What you want in your own life is a seamless web of deserved trust. And so if your proposed marriage contract has 47 pages, my suggestion is you not enter. Well that’s enough for one graduation. I hope these ruminations of an old man are useful to you. In the end I’m like an old VALIANT-FOR-TRUTH in The Pilgrim’s Progress. “My sword I leave to him who can wear it.” |
Posted By: kulman
Date Posted: 20/Jun/2007 at 12:22pm
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Thanks Mr. V for that article.
Here's one from one of the shareholders meetings:
When a shareholder asked how they would recommend selecting a professional investment manager,
Then Munger weighed in: "Mutual funds took bribes for the proposition of betraying their shareholders. It was like someone coming to you and saying, "Why don't I kill your mother and we'll split the insurance money?"
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 24/Jun/2007 at 7:29am
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Investors should estimate the value of our operating subsidiaries, and the value of our marketable securities. That gives you the value of our operating business. But you also need to estimate how effectively we’ll deploy our retained earnings. In 1965,
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Basant jee....your comments please!
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 24/Jun/2007 at 10:02am
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The operative word here is "estimate" Investors should estimate the value of our operating subsidiaries. It would have been better had Munger indicated the way he wanted this estimation to come about.
Broadly since he mentions it I would not think that he would have been talking about any sort of a discount. Rather (my assumption is that) Munger's statement indicates that the value of the operating business should be taken face value.Everything else looks clear!
Companies with operating subsidiaries should not be valued at a discount. At least this is what I can make out from the above statement.Can you post the full reference or the context or the link?
Any other views? ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 25/Jun/2007 at 8:43pm
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Actually it was in response to a question by a shareholder during recent annual meeting. The whole conversation went like this...........
Question: How do you calculate intrinsic value? Warren: The intrinsic value of Berkshire Hathaway equals the amount of its future cash flows, discounted at a proper rate. Charlie Munger: Investors should estimate the value of our operating subsidiaries, and the value of our marketable securities. That gives you the value of our operating business. But you also need to estimate how effectively we’ll deploy our retained earnings. In 1965, Warren: If Charlie and I wrote down our estimate of ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 25/Jun/2007 at 9:06pm
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Munger is referring to operating subsidiaries as operating businesses not as holding company subsidiaries etc. This means he finds no differnce between operating businesses and operating subsidiaries. See this quote "That gives you the value of our operating business."
Buffet sums it up the best "If Charlie and I wrote down our estimate of
Over the weekend I read Graham and Dodd's security analysis. Page of that book explains the differnce in valuation depending on whether a company holds 50% and above; 20% - 50% and less then 20% of voting rights.
In case a company holds more then 50% and above voting rights Graham says that investors should look at consolidated results Pg 263- 265. There is no mention of discount ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 28/Jun/2007 at 7:45pm
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We learned about everything we needed to know about foreign labor competition after we invested in the shoe business. Will Rogers said, "I’d like to be able to learn to not pee on an electric fence without having to try it.”---Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 09/Jul/2007 at 8:49am
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I think that economists would be way better off if they paid more attention to Einstein and Sharon Stone. Well, Einstein is easy because Einstein is famous for saying, "Everything should be made as simple as possible, but no more simple." Now, the saying is a tautology, but it’s very useful, and some economist – it may have been Herb Stein – had a similar tautological saying that I dearly love: "If a thing can’t go on forever, it will eventually stop." Sharon Stone contributed to the subject because someone once asked her if she was bothered by p*nis envy. And she said, "absolutely not, I have more trouble than I can handle with what I’ve got." ---Charlie Munger during a speech on "Academic Economics: Strengths and Faults After Considering Interdisciplinary Needs" at University of California, Santa Barbara, Oct 2003------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 10/Jul/2007 at 8:47am
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For a long time there was a Nobel Prize-winning economist who explained Berkshire Hathaway’s success as follows: First, he said Berkshire beat the market in common stock investing through one sigma of luck, because nobody could beat the market except by luck. This hard-form version of efficient market theory was taught in most schools of economics at the time. People were taught that nobody could beat the market. Next the professor went to two sigmas, and three sigmas, and four sigmas, and when he finally got to six sigmas of luck, people were laughing so hard he stopped doing it. Then he reversed the explanation 180 degrees. He said, "No, it was still six sigmas, but is was six sigmas of skill." Well this very sad history demonstrates the truth of Benjamin Franklin’s observation in Poor Richard’s Almanac. If you would persuade, appeal to interest and not to reason. The man changed his view when his incentives made him change it, and not before. ---Charlie Munger during a speech on "Academic Economics: Strengths and Faults After Considering Interdisciplinary Needs" at University of California, Santa Barbara, Oct 2003
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 12/Jul/2007 at 8:50am
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As I conclude, I want to tell one more story demonstrating how awful it is to get a wrong idea from a limited repertoire and just stick to it. And this is the story of Hyman Liebowitz who came to America from the old country. In the new country, as in the old, he tried to make his way in the family trade, which was manufacturing nails. And he struggled and he struggled, and finally his little nail business got to vast prosperity, and his wife said to him, "You are old, Hyman, it’s time to go to Florida and turn the business over to our son." So down he went to Florida, turning his business over to the son, but he got weekly financial reports. And he hadn’t been in Florida very long before they turned sharply negative. In fact, they were terrible. So he got on an airplane and he went back to New Jersey, where the factory was. As he left the airport on the way to the factory he saw this enormous outdoor advertising sign lighted up. And there was Jesus, spread out on the cross. And under it was a big legend, "They Used Liebowitz’s Nails." So he stormed into the factory and said, "You dumb son! What do you think you’re doing? It took me 50 years to create this business!" "Papa," he said, "trust me. I will fix it." So back he went to Florida, and while he was in Florida he got more reports, and the results kept getting worse. So he got on the airplane again. Left the airport, drove by the sign, looked up at this big lighted sign, and now there’s a vacant cross. And, low and behold, Jesus is crumpled on the ground under the cross, and the sign said, "They Didn’t Use Liebowitz’s Nails." (Laugher). Well, you can laugh at that. It is ridiculous but it’s no more ridiculous than the way a lot of people cling to failed ideas. Keynes said "It’s not bringing in the new ideas that’s so hard. It’s getting rid of the old ones." And Einstein said it better, attributing his mental success to "curiosity, concentration, perseverance and self-criticism." By self-criticism he meant becoming good at destroying your own best-loved and hardest-won ideas. If you can get really good at destroying your own wrong ideas, that is a great gift. ---Charlie Munger during a speech on "Academic Economics: Strengths and Faults After Considering Interdisciplinary Needs" at University of California, Santa Barbara, Oct 2003
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 19/Jul/2007 at 10:15pm
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My fourth criticism is that there’s too much emphasis on macroeconomics and not enough on microeconomics. I think this is wrong. It’s like trying to master medicine without knowing anatomy and chemistry. Also, the discipline of microeconomics is a lot of fun. It helps you correctly understand macroeconomics. And it’s a perfect circus to do. In contrast, I don’t think macroeconomics people have all that much fun. For one thing they are often wrong because of extreme complexity in the system they wish to understand.
---Charlie Munger during a speech on "Academic Economics: Strengths and Faults After Considering Interdisciplinary Needs" at University of California, Santa Barbara, Oct 2003
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 22/Jul/2007 at 9:01pm
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"We have a high moral responsibility to be rational"---Charlie Munger while answering a question during Berkshire's 2006 annual meeting.
Think about that for a minute. Have you ever heard any business leader describe their charge thusly? There's a reason that there's just one Berkshire Hathaway and one Warren Buffett. And one Charlie Munger---Andy Serwer, FORTUNE magazine
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: deepinsight
Date Posted: 31/Jul/2007 at 7:48pm
Charlie Munger's Keynote Speech at USC School of Law CommencementJuly-4-2007
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Posted By: kulman
Date Posted: 31/Jul/2007 at 9:32pm
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Very interesting points explained by Charlie Munger. Somethings to learn from. Thanks for the post.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: vivekkumar_in
Date Posted: 01/Aug/2007 at 12:22pm
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Excellent speech.. Wrapped with numerous thoughts to capture.. I read over certain passages over and over again to sink it... I thought Charlie Munger was known for his quick wit.. but this is some deep message... Thanks for bringing this to the forum Deep insight ji ! ------------- Often we forget there's a company behind every stock,and there's only one reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies. P Lynch |
Posted By: kulman
Date Posted: 09/Aug/2007 at 9:05am
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"I regard the amount of brainpower going into money management as a national scandal. When some idiot would get rich, they'd say, 'Well, old Charlie was out in the field playing the big brass tuba on the day it rained gold.' A lot of people have become rich lately who were playing the tuba on the day it rained gold."---Charlie Munger at WESCO's annual meet 2006 ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 09/Aug/2007 at 9:29am
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You are right. I have seen people around me who have become experts in their own little ways.They have bought stocks which are going up and that is what counts. Don't we say about not confusing the bull market with brains. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 24/Aug/2007 at 12:13pm
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This is a MUST READ. I'll be posting the full version later. A good reading for the weekend Art of Stock Picking
By Charlie Munger Click here: http://www.vinvesting.com/docs/munger/art_stockpicking.html - vinvesting ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 01/Sep/2007 at 11:42am
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Question: Is there a trend in the private equity business? Charlie Munger: Of course there’s a trend. The LBO funds get larger and larger and buy larger and larger businesses, so it’s a huge trend.
It’s a different lifestyle than Berkshire’s. We almost never sell – we don’t want to do that. We don’t want to play gin rummy with our friends, dumping five businesses and getting five new ones. We aren’t buying to resell. The leveraged equity crowd is getting bigger and bigger and bigger. What’s happened is endowments and pension plans are believing in the tooth fairy. With assets being bid up, they’re not getting enough return from ordinary investments from stocks and bonds. Then silver-tongued people came along and said you don’t have to suffer low returns. Give us the money, we’ll lever up, pay us a lot of compensation and we will give you 15% not 5%. It’s worked – not as well as claimed; there’s dubious use of statistics – but for good shops, it works. Then, a lot of envy sweeps the field. Yale can’t stand Harvard making more. Envy is a huge motivator, though it’s seldom admitted. In my whole life, I’ve never had someone say, "Charlie, I’m doing this out of envy." In venture capital, except for a handful of firms at the top, the returns are lousy. This will eventually happen to the LBO firms as well. God has not decided that anyone who wants 15% can get it. Source: Wesco AGM notes by W. Tilson ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 03/Sep/2007 at 9:19pm
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Question: What is your favorite human misjudgment? Charlie Munger: My favorite human misjudgment is self-serving bias: how the brain subconsciously will decide that what’s good for the holder of the brain is good for everyone else. If the little me wants it, why shouldn’t the little me have it? People go through life like this. I’ve underestimated this phenomenon all my life. People go bonkers taking care of their own self-interest. It’s a sea of miscognition. People who write the laws, people who treat patients, who experiment with rats, all suffer horribly from this bias. Hardly anything could be more important to the study of law than the study of psychology, but there’s a taboo against it. You see many people who’ve gotten straight A’s at law school, but they screw up in dealing with self-serving bias. I would say that the current head of the World Bank [Paul Wolfowitz] had an elementary question: as head of the Bank, a lot of people hate you, so how bright do you have to be to distance yourself from a question of a large raise from your live-in girlfriend? He sent it to the lawyers, they hemmed and hawed, and he lost his moorings. Even a child shouldn’t make his obvious mistake. Similarly, I’d guess President Clinton would have had a better record if he’d had better insight on certain subjects. Note that I carefully picked one from each party. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 04/Sep/2007 at 10:40pm
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Also, an enormous pleasure in life is to be rightly trusted. One of my kids was a computer nerd and his school gave him access to the entire school computer system. He was exultant by the extreme trust. If your friends are asking you to raise their children if they die, you’re doing something right. It’s wonderful to be trusted. Some think if we just had more compliance checks and process, virtue would be maximized. At Berkshire, we have subnormal process. We try to operate in a web of seamless trust, deserved trust, and try to be careful whom we let in. They act like this at the Mayo Clinic. Imagine if they didn’t. Most patients would die. ---Charlie Munger Source: Wesco AGM notes by W.Tilson
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 05/Sep/2007 at 10:32pm
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"Think about it a little bit more and you'll agree with me, because you're smart and I'm right" --- Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 06/Sep/2007 at 12:59pm
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This is one of the best from Munger...
Figure out what you don’t want and avoid it and you’ll get what you do want. Warren had the same instincts I had. We haven’t had our share of disappointed, angry people that ruin so many lives. It’s easy to get into that position.
Ask the question: How can you best get what you want? The answer: Deserve what you want! How can it be any other way? ---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 07/Sep/2007 at 3:29pm
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The importance of reading It’s a good question, which brings up a very interesting fact. How did Berkshire’s track record happen? If you were an observer, you’d see that Warren did most of it sitting on his ass and reading. If you want to be an outlier in achievement, just sit on your ass and read most of your life. But they fire you for that! Look at this generation, with all of its electronic devices and multi-tasking. I will confidently predict less success than Warren, who just focused on reading. If you want wisdom, you’ll get it sitting on your ass. That’s the way it comes.
---Charlie Munger
P.S.: Please don't take this literally.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 07/Sep/2007 at 9:52am
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"The definition of hell in the legal system is: endless due process and no justice; (in the corporate world) it would be: endless due diligence and no horse sense." ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 09/Sep/2007 at 8:44am
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"The whole concept of dividing it up into 'value' and 'growth' strikes me as twaddle. It's convenient for a bunch of pension fund consultants to get fees prattling about and a way for one advisor to distinguish himself from another. But, to me, all intelligent investing is value investing." --- Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 12/Sep/2007 at 9:30pm
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Nuttiness in the world I once asked a doctor why he was still doing an obsolete cataract operation when a new, better one had been developed. He said, "Because it’s so wonderful to teach!" He only changed when patients voted with their feet. And this was at one of the best medical schools! There’s a lot of miscognition. If you can just tune out all of the big folly, you’d be surprised how well you can do. There’s a lot of nuttiness. Who gives up an operation he likes doing and is really good at? It’s a really human thing to cling to things most practiced. This happens even in physics. A lot of people cling to bad ideas. If the brightest people in the world do this, imagine everyone else. If you can train yourself not to do this, you’ll be way ahead. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: tigershark
Date Posted: 13/Sep/2007 at 4:07pm
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charlie munger lost eye sight in one eye after a botched up catract operation ------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: kulman
Date Posted: 14/Sep/2007 at 9:30pm
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Mozart is a good example of a life ruined by nuttiness. His achievement wasn’t diminished – he may well have had the best innate musical talent ever – but from that start, he was pretty miserable. He overspent his income his entire life – that will make you miserable. He was consumed with envy and jealousy of other people who were treated better than he felt they deserved, and he was filled with self-pity. Nothing could be stupider. Even if your child is dying of cancer, it’s not OK to feel self pity. In general, it’s totally nonproductive to get the idea that the world is unfair. Roman emperor Marcus Aurelius had the notion that every tough stretch was an opportunity – to learn, to display manhood, you name it. To him, it was as natural as breathing to have tough stretches. Warren doesn’t spend any time on self-pity, envy, etc.
---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: omshivaya
Date Posted: 14/Sep/2007 at 2:06am
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"I am busy. I don't have time to be sad" - I read this somewhere. Busy people dont have time to be sad. Give mind free time, and the empty mind's devil will find out every wretchedness in the world to ponder upon. When Mozart felt self-pity, he was free. He should have been busy composing something or sleeping. Physical workout of some kind usually helps a lot from letting negative thoughts enter as the body is so tirrred, it doesn't have time for anything else. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: kulman
Date Posted: 15/Sep/2007 at 3:23pm
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http://www.cnbc.com/id/20777168 - Berkshire's Charles Munger Donates Stock Worth Over $20 Million to Pair of LA-Area Schools
Warren Buffet's investing partner and Berkshire Hathaway Vice-Chairman Charles Munger has made a couple of very big donations to a pair of schools in the Los Angeles area, where he resides.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 23/Sep/2007 at 2:04pm
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"When you mix raisins with turds, they are still turds." ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 24/Sep/2007 at 11:05pm
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Here's Charlie at his best----
I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, "My God, they're purple and green. Do fish really take these lures?" And he said, "Mister, I don't sell to fish."
---Charlie Munger
Investment managers are in the position of that fishing tackle salesman. They're like the guy who was selling salt to the guy who already had too much salt. And as long as the guy will buy salt, why they'll sell salt. But that isn't what ordinarily works for the buyer of investment advice. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 02/Oct/2007 at 7:14pm
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To us, investing is the equivalent of going out and betting against the pari-mutuel system. We look for the horse with one chance in two of winning which pays you three to one. You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing. ---Charlie Munger ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 09/Oct/2007 at 10:05pm
Pitfalls primer for irrational investorsby Arne AlsinCharlie Munger was asked a few years ago to explain how he achieved his amazing success in the stock market. He thought for a second, and then replied simply: “I’m rational.” Implicit in Munger’s reply is that other investors are prone to bouts of irrationality. A rational investor, such as Munger, has an edge if other investors make decisions that are subjective, impulsive or emotion-based. To understand better what it takes to be such an investor, here are three core concepts that every rational investor understands and embraces. If you invest your capital in contravention to any one of these concepts, you are not a rational investor.
Before making an investment decision, the rational investor requires answers to two simple questions: “What’s it cost?” and “What’s it worth?” The first question is easy to answer. The second question is difficult to answer, sometimes exceedingly difficult. Regardless, a rational investor will not allocate capital unless both questions can be answered with a reasonable level of confidence. In other asset classes, the nexus for decision-making always revolves around a comparison of price and an appraisal of value. For example, a rational person is not going to sell a car valued at $20,000 for $10,000. This sort of irrationality does not happen with cars. But it happens every day in the stock market. Many investors are, in effect, “blind investors” because they make buy and sell decisions without knowing value. You are a blind investor, for example, if you buy the stock of a company because you like its products, or because the company has impressive growth prospects. These are reasons to become interested in a company. But they are not sufficient reasons to buy the stock. The stock might be overvalued by 50 per cent or more. Without an understanding of both price and value, an investor cannot make an informed, rational investment decision.
Many investors misunderstand the purpose of the stock market and this leads to irrational decision-making. Its purpose is to provide a venue for buyers to acquire ownership in publicly traded businesses and for owners (investors as well as companies trying to raise capital) to sell those interests. The market is amazingly efficient in this regard. There is always a ready bid and there is always a ready offer. It just takes a second or two to acquire or sell a part-ownership interest in a publicly traded business. But that is as far as it goes. The market tells you price. The market does not tell you value. To ask the market to facilitate the trading of business ownership and, in addition, to value those businesses accurately is asking too much. When investors see one of their stocks drop by 20 per cent, they get upset because they think they have lost money. But all that has happened, in reality, is that the current offer for their asset has declined by 20 per cent. The value may have not declined at all. It is entirely possible that it has increased. The owner of a private business does not get upset if he gets a lousy offer for his business. Even if the private business owner actively solicits offers, he does not expect to get a full value offer each and every day. The rational owner of a business, whether it is a private business or a publicly traded business, knows that full value offers occur infrequently.
Most investors misunderstand risk as it applies to the stock market. Most do not understand that, generally, as price declines, risk declines. If the price quote for a stock worth $100 falls from $80 to $60, the risk of buying or owning that stock has declined in concert with the price. When value exceeds price, risk declines when value subsequently increases and/or price decreases. And when value exceeds price, risk escalates when value subsequently decreases and/or price increases. When irrational investors think about risk, they focus only on price. Price is everything to such investors. The fact that they are not carefully comparing price and value creates an analytical void. Emotions usually fill that void. Higher prices create enthusiasm and an increased interest in buying. Falling prices cause worry, but there is a way for the irrational investor to alleviate the worry: sell everything! Ironically, irrational investors tend to worry most when they should be worrying the least – when value exceeds price by a wide margin. And they tend to worry least when they should worry the most: when value exceeds price by a narrow margin, or, worse, when prices exceed value. ©The Financial Times ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: kulman
Date Posted: 13/Oct/2007 at 10:13pm
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Of the fifty most important stocks on the NYSE in 1911, today only one, General Electric, remains in business. That’s how powerful the forces of competitive destruction are. Over the very long term, history shows that the chances of any business surviving in a manner agreeable to a company’s owners are slim at best. ---Charlie Munger
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: PKB2000
Date Posted: 13/Oct/2007 at 10:27pm
This only encourages to change stocks in stock market as much frequently as possible!  ------------- I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso |
Posted By: kaushalchawla
Date Posted: 13/Oct/2007 at 11:14pm
I think that statement simply tells us that "there is no life-time-buy and hold-stock".  ------------- Warm Regards, Kaushal |