The Tao of Charlie Munger

Investing
By
Sarah F. Roach

Berkshire Hathaway’s annual meeting was held in Omaha over the weekend of May 6th, spotlighting once again the opinions and investment savvy of its Chairman, Warren Buffett. Although Buffett captures most of the attention, long-time Berkshire followers understand the important role of 93-year old Berkshire Vice Chairman, Charlie Munger. Opinionated and acerbic, Munger has contributed immeasurably to Berkshire’s investment success and is famously sharp tongued when it comes to…well, just about everything. The recently-published book, The Tao of Charlie Munger, offers readers a compilation of Munger quotations, supplemented with editor David Clark’s brief commen­taries. As a primer about long-term investing and living a long life, I can recommend this quick read.  The book is divided into sections such as “Successful Investing” and “Charlie’s Advice on Life, Education and the Pursuit of Happiness”—so the quotations clearly cover a wide variety of topics. Some themes are well known to Berkshire followers, such as staying within one’s circle of competence. On that Munger says, “Knowing what you don’t know is more useful than being brilliant.” Another topic reflects Berkshire’s philosophy: “A great business at a fair price is superior to a fair business at a great price.”

Other subjects have a distinctly Munger-esque flair. One example is his emphasis on avoiding “stupid” decisions: “People are trying to be smart—all I am trying to do is not to be idiotic, but it’s harder than most people think.” And “[There is a] long term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” A recurring theme is his belief in patience as a key component to investing success: “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait.”

Munger also holds forth on topics we’ve written about frequently, such as the volatility of markets: “If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century … you deserve the mediocre result you’re going to get compared to the people who do have the temper­ament, who can be more philosophical about these market fluctuations.”

It may be in his advice about life in general that Munger’s perspective particularly hits home. In terms of careers he offers the following: “Three rules for a career: (1) Don’t sell anything you wouldn’t buy yourself; (2) Don’t work for anyone you don’t respect and admire; and (3) Work only with people you enjoy.” At J. V. Bruni and Company, we all feel fortunate to be on target with all three of Munger’s recommenda­tions. We eat our own investment “cooking,” which is as close as it comes to not “selling” anything we wouldn’t buy. Moreover, we admire, respect and enjoy each other—making it a joy to come to work each day. In the end, one of the final quotes in the book is one of Munger’s best: “The best armor of old age is a well-spent life preceding it.”