Investor. Philanthropist. Mentor.
Charlie Munger was a giant among giants.
When I heard that he had passed away last week, my first thought was this: ‘We have lost not only a man but a mountain of wisdom.’
Munger was 99, and he had seen a century’s worth of booms and busts; transitions and cycles. His life was a life well-lived.
Source: Nick Webb, Wikimedia Commons
Like his good friend, Warren Buffett, Munger was an old-fashioned gentleman with old-fashioned values:
- He believed in discipline, consistency, focus. These were his sacred touchstones. He followed them with religious conviction.
- He also had a deep mind and a quick tongue. He wasn’t afraid to call a spade a spade. Indeed, his school was the school of hard knocks.
- So, to commemorate Munger’s remarkable legacy, I want to revisit some of his most outstanding ideas. His words are evergreen. Eternally relevant. We should continue to learn from them…
‘A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success.’
- Yes, this is Charlie Munger with his acidic wit. And he’s totally right. We now live in a world of noise, sensation, impulse. These days, more than ever, our 24/7 news cycle is filled with angertainment. It brainwashes us to be reactive, to be hasty, to be reckless.
- But Munger, in his folksy wisdom, encourages us to ignore the noise. It’s not the wild swings of social media that matter. Rather, it’s long-term ebb and flow of the time horizon that’s critical. And guess what? You can only grasp this fact if you have the right temperament.
- Munger urges us to ‘invert, always invert’. Be counter-cyclical. Be contrarian. Be rational. Be steadfast. Be disciplined.
‘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?’
- Yes, once again, Munger hits the hammer on the head. He’s absolutely right. Because let’s face it: we all know someone in our social circle who loves to boast. They will boast about what they own. They will boast about what they earn. They will boast what they have achieved.
- Now, if we’re not careful, this might just plant the seed of green-eyed envy within us. And soon enough, that seed sprouts. We might start doing crazy things in an attempt to compete with the Joneses. We might try to supersize our social status in a hurry.
- Of course, Munger rejects that kind of foolishness. His message is simple: you should run your own race. You should pace yourself. Don’t get distracted by vanity. You should aim to be a first-rate version of yourself instead of a second-rate version of someone else.
‘The big money is not in the buying and the selling, but in the waiting.’
- This is excellent advice from Munger. It’s so obvious, isn’t it? And yet it’s astonishing that many people still refuse to follow his advice.
- Right now, even as we speak, the market is filled with speculators who continue to buy and sell feverishly. They’re hoping to score huge profits within a short period of time. But is this a fool’s errand? Research has shown that 80% of day traders actually lose money over the course of a year.
- Of course, Munger has the perfect solution for this. It’s simple: you shouldn’t gamble. You shouldn’t depend on luck. Instead, you should cultivate discipline. Because good investing is actually about the long haul. Buying and holding quality assets over an extended time frame will give you the benefit of compounding, as well as margin of safety.
‘It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.’
- This is my all-time favourite quote by Charlie Munger. It sums up a powerful truth. Deferred gratification is the single-most compelling force in wealth generation — and yet it’s the hardest thing to master.
- Indeed, this will be Munger’s enduring legacy. He was a thinker. A teacher. A mentor. His valuable insights will continue to resonate and inspire. He was not just a successful investor. He was a wise man who taught us how to think about the world in a more lucid and rational way.
- Now, here’s the bad news: we will get no more classic quotes from Charlie Munger. This is sad. But here’s the good news: he’s left us a lifetime’s worth of wisdom. They will be always be accessible. For us to revisit. For us to ponder over. And, truly, that’s the gift that will keep on giving.
Regards,
John Ling
Analyst, Wealth Morning
(This article is commentary and the author’s personal opinion only. It is general in nature and should not be construed as any financial or investment advice. To obtain guidance for your specific situation, please consult a licensed Financial Advice Provider.)