Charlie Munger Summary


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Originally published at: https://blog.12min.com/charlie-munger-summary/

The Complete Investor


You want to be the best? Then learn from the best. Because, after all, “learning from the success and failure of others is the fastest way to get smarter and wiser without a lot of pain.”

No wonder the guy who said that is one of the best: Mr. Charlie Munger, Warren Buffett’s personal partner. And, Tren Griffin’s book is all about him and his worldview!

Who Should Read “Charlie Munger”? And Why?

If we presented you with a summary of a biography of Michael Jordan, then obviously it would have been a book we’d recommend to future basketball players and current sports buffs.

Consequently, a book about Charlie Munger is, most obviously, a book about wannabe investors. But, it may be also interesting to students of investments strategies. As well as to those who are curious to learn how one can earn so much money by simply investing.

About Tren Griffin

Tren Griffin is a senior director at Microsoft. Before that, he was a partner at Eagle River, a private equity firm which invests in tech and telecommunications startups.

Griffin is and the author of few well-received books, such as “The Global Negotiator”, a book dedicated on building strong international business relationships, and “A Dozen Lessons for Entrepreneurs.”

He also writes for https://25iq.com/.

"Charlie Munger Summary"

Charlie Munger is the vice president of Berkshire Hathaway – which, if it doesn’t ring a bell straight away, is Warren Buffutt’s multibillion conglomerate.

In other words: Charlie Munger has a lot of money. To be more exact: he’s one of the 2,000 or so living billionaires, with a current net worth of almost 2 billion dollars!

Now, that’s a lot!

And if you want to learn the secrets behind his success – this is the book for you!

Unassumingly titled “Charlie Munger,” Tren Griffin’s 200-page analysis of Charlie Munger investment strategies boils down to something painfully simple: if you aren’t investing into something you know, your story of success is nothing more but a story of luck!

So, invest in the things you know best!

Now, how can you do that?

First of all – by reading. And reading a lot! Both Munger and his partner Warren Buffett spend about four fifths of each of their working days reading almost anything they find interesting. Just like possibly every great person you hear about, they weren’t born geniuses. They became such – by absorbing information, by fact-checking it, and by thirsting for some more all the time!

But, what interests you more is probably not how they got to be so smart, but how they got to be so rich.

Interestingly enough, the answer is, if not the same, pretty much related. Because Munger and Buffett were reading so that they can know where to invest. And because, when it comes to investing, they are intelligent investors.

Namely, firm believers in security analyses and value investing.

As Charlie Munger explains, the logic is fairly simple. You invest only in what you know. That’s why he has three baskets of investment opportunities: In, Out, and Too Tough.

The first one is for the opportunities they know enough about to invest in; the second about those they know nothing about; the third – about those that seem good on the face of it but are yet too tough for them.

That’s what we call reality-check. And what you lack if you want fast stocks and fast money. A lesson from the best: there’s no such thing.

What there is are four rather simple ideas Munger shares with Warren Buffett.

First of all, you must treat a share in a business as if you’d treat the whole business. Buy it – only if you’d buy and run the company. Value it as much as you’d value the company itself.

Secondly, buy shares as you buy chocolate: on discount. This will give you a margin of safety, i.e., you probably won’t lose money, even if you don’t win it in the end.

Thirdly, always stay on the safe side. Or, in other words, disregard the behavior of that bipolar creature, Mr. Market. Don’t try to beat him. And the best way to do this is by not challenging him at all!

Which brings us to the final advice: if Mr. Market is irrational, you don’t need to be. So, stay as cold as ice. Choose investment opportunities with your head – not with your emotions!

And in order to do this, cultivate traits such as patients and courage. “Don’t just sit there: do something!” is a completely wrong philosophy when it comes to investing. The point is, quite contrary, to site and wait.

And even go boldly against the herd mentality – you know, where no man has ever gone before!

Key Lessons from “Charlie Munger”

1. Meet Berkshire Hathaway: It’s a Giant! 2. Investing Is Not a Mysterious Art: It’s as Simple as 1-2-3… and 4 3. Be an Intelligent Investor: Read as Much as You Can!

Meet Berkshire Hathaway: It’s a Giant!

Do you know that Berkshire Hathaway was, in fact, a textile manufacturing company? And that Warren Buffett bought it when its business was declining, so that he can fire a guy who undercut the initial offer to buy his shares? In fact, buying the company was Buffett’s worst trade!

Sixty years later, the company is the third largest public company in the world! It owns GEICO, the fast food restaurant chain “Dairy Queen,” “Fruit of the Loom,” “NetJets”… – you name it! And it has shares in “American Express,” “Coca-Cola” and “Apple”!

The guys who did that: Warren Buffett and Charlie Munger.

Investing Is Not a Mysterious Art: It’s as Simple as 1-2-3… and 4

Both Buffett and Munger are considered sages of investing. However, they claim that they owe everything they have to worldly wisdom and a fairly simple investment strategy: Benjamin Graham’s value investing.

It’s based on a simple premise: only buy what you know. And it’s built around four principles.

First of all, there’s no difference between buying a share and buying a whole company. Secondly, when you buy – buy at a discount. Thirdly, stay on the safe side. And finally, be rational.

Or, in other words, don’t buy Berkshire Hathaway to fire a guy! Warren Buffett says that you would have earned 200 million dollars more otherwise!

Be an Intelligent Investor: Read as Much as You Can!

Benjamin Graham’s most famous book is called “The Intelligent Investor.” And Charlie Munger has taken this quite literally. To him, reading is everything: he reads about 80 percent of the day. That’s exactly how he knows where to invest. And even more: how to differentiate between herd mentality and a Giffen good.

Oh, you don’t know what that is?

Well, educate yourself a bit!

Like this summary? We’d like to invite you to download our free 12 min app, for more amazing summaries and audiobooks.

“Charlie Munger” Quotes

[bctt tweet="I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart." username="get12min"]

[bctt tweet=“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?” username=“get12min”]

[bctt tweet=“Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.” username=“get12min”]

[bctt tweet=“If you want to get rich, you’ll need a few decent ideas where you really know what you’re doing. Then you’ve got to have the courage to stick with them and take the ups and downs. Not very complicated, and it’s very old-fashioned.” username=“get12min”]

[bctt tweet=“If something is too hard, we move on to something else. What could be simpler than that?” username=“get12min”]

Our Critical Review

“Charlie Munger is, arguably, the world's best investor. His 'worldly wisdom'―a latticework of understanding separate disciplines―is a powerful way to achieve superior investment results. Without it, success in the market―or anywhere else―is a short-lived fluke.”

You know who wrote that?

Robert G. Hagstrom, the author of one of the best books on Charlie Munger’s partner, Warren Buffet.

So, a book which unifies and neatly structures Charlie Munger’s investment philosophy should be a delight for all those interested in finance, right?

It is. Of course it is.