The Uncommon Sense of Charlie Munger

99 of my favorite Munger-isms

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One of the enduring lessons that I learned from the late Charlie Munger was to make friends with the eminent dead. To befriend those great men and women who came before us and already succeeded in navigating life’s many obstacles and challenges.

“Some of my best friends don’t even know I exist,” podcaster Lex Fridman once admitted. “Actually, most of my friends are dead.” He is referencing, of course, the one-way friendships that we build with writers and thinkers when we study their work.

(This also explains why Munger himself was such an avid reader of biographies.)

I was reminded of this advice late last month when value investor Guy Spier posted a short remembrance of Munger on YouTube. In particular, he really hit the bullseye with this line: “What we are behooved to do now is to remember [Charlie] well and to treat him as the ‘eminent dead’ that he is. We can continue to spend time with him and his ideas.”

In other words, our chance to learn from Charlie Munger need not end with his passing. But, rather, will continue on as long as we never let go of his timeless wisdom.

To aid in this endeavor, I’ve gathered together 99 of my favorite Munger-isms as (hopefully) a launchpad for deeper study into his life and example…

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1. “[When] somebody says that old Joe has common sense, they don’t mean that. They mean he’s got uncommon sense. People who are sensible on everything they deal with, they’re uncommon — not common. Most people are a mass of crazy prejudices.”

2. “I would like my legacy to be a more relentless determination to develop and use what I call an ‘uncommon sense’.”

3. “The first rule of a happy life is low expectations. If you have unrealistic expectations, you’re going to be miserable your whole life. You want to have reasonable expectations and take life’s results — good and bad — with a certain amount of stoicism.”

4. “If you have unreasonable demands on life, you’re almost like a bird that’s trying to destroy himself by bashing his wings on the edge of the cage.”

5. “Gentlemen, may each of you rise by spending each day of a long life aiming low.”

• In 1986, trustee Charlie Munger delivered the commencement address at the Harvard School (now Harvard-Westlake) in Los Angeles. In it, he urged the graduating class to avoid the standard stupidities and pitfalls of life. And, as Munger wryly noted, while eliminating these common missteps might look to the untrained eye like “aiming low” — it’s actually the surest path to lasting success.

6. “We all start out stupid and we all have a hard time staying sensible. You have to keep working at it. Berkshire would be a wreck today if it were run by what Warren and I knew when we started. We kept learning. I don’t think we’d have all the billions of stock of Coca-Cola that we now have if we hadn’t bought See’s [Candies]. There were huge consequences to getting over that last stupidity.”

7. “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 when they got up and, boy, does that help — particularly when you have a long run ahead of you.”

8. “There is no better teacher than history in determining the future … There are answers worth billions of dollars in a history book.”

9. “I almost worship reason. You can argue that Henry Singleton did, too — and, certainly, Warren Buffett does, too. The people I know that are good, they feel you have a duty to become as wise as you can be by constantly studying things and thinking about them.”

10. “Like Warren, I had a considerable passion to get rich. Not because I wanted Ferraris — I wanted the independence. I desperately wanted it. I thought it was undignified to have to send invoices to other people.”

11. “The big money is not in the buying and the selling — but in the waiting.”

12. “My Berkshire Hathaway stock cost me $16 a share. It’s now selling for almost $300,000 a share. That’s been a very good investment. It took a long time. It was a long-term investment where I liked the people I was investing with and I liked the company I was investing in and I just sat there for more than 50 years. Lo and behold, it has worked out very well.”

13. “It is said that an institution is often the lengthened shadow of a single man … We are, in part, engaged in the business of trying to invest in the lengthened shadows of the right sort of people.”

14. “Part of the reason I’ve been a little more successful than most people is [that] I’m good at destroying my own best-loved ideas. I knew early in life that would be a useful knack and I’ve honed it all these years, so I’m pleased when I can destroy an idea that I’ve worked very hard on over a long period of time. And most people aren’t.”

15. “The nature of capitalism is that all things die — but death is part of the creative process.”

16. “Capitalism without failure is like religion without hell.”

17. “I’ve written my obituary by the way I’ve lived my life. If you want to pay attention to it, that’s alright with me. And if you want to ignore it, that’s okay with me, too. I’ll be dead — what difference will it make.”

18. “I’m optimistic about life. If I can be optimistic when I’m nearly dead, surely the rest of you can handle a little inflation.”

19. “There is no way to know enough about a thousand different stocks to be very good at it. If you want to be good, you have to pick a few.”

20. “The people who tend to get the best results are these fanatics who just keep searching for the great businesses. And the best of them don’t expect to find ten or twenty or thirty. They find one or two. That’s the right way to do it — all you need are one or two.”

21. “What you don’t want to be is like the man who, when they had his funeral, the minister said, ‘Now’s the time for someone to say something nice about the deceased,’ and nobody came forward. He said, ‘Surely, somebody can say something nice about the deceased,’ and nobody came forward. Finally, one man came up and said, ‘Well, his brother was worse.’”

22. “You can be disappointed in your political opponent, [but] you don’t have to hate him. After all, you’re probably just as much of a nutcase as he is in some ways.”

23. “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?”

24. “Whenever you think something or someone is ruining your life, it’s [actually] you. A victimization mentality is so debilitating.”

25. “Just because it’s trite doesn’t mean it isn’t right. In fact, I like to say, ‘If it’s trite, it’s right.’”

26. “In my whole life, I have known no other wise people who didn’t read all the time. None. Zero. You’d be amazed at how much Warren reads — and at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”

27. “If you don’t get … the mathematics of elementary probability into your repertoire, then you [will] go through a long life like a one-legged man in an ass-kicking contest.”

28. “Competency is a relative concept … What I needed to get ahead was to compete against idiots. And, luckily, there was a large supply.”

29. “I am a biography nut myself. When you’re trying to teach the great concepts that work, it helps to tie them into the lives and personalities of the people who developed them. I think you learn economics better if you make Adam Smith your friend. That sounds funny, but if you go through life making friends with the ‘eminent dead’ who had the right ideas, I think it will work better for you in life and work better in education. It’s way better than just giving the basic concepts.”

30. “Just hold the goddamn stock.”

• Charlie’s estate planning advice for Berkshire shareholders.

31. “Give a whole lot of things a wide berth … Crooks, crazies, egomaniacs, people full of resentment, people full of self-pity, people who feel like victims — there’s a lot of things that aren’t going to work for you. Figure out what they are and then avoid them like the plague.”

32. “The toxic people who are trying to fool you or lie to you — who aren’t reliable in meeting their commitments — the great lesson is [to] get them the hell out of your life. And do it fast.”

33. “[Warren and I] have this fundamental idea that the world works better if you make your relationships win-win. And we both learned early that the way to get a good partner was to be a good partner. These are very old-fashioned ideas — and they just worked so fabulously well.”

34. “You only have to get rich once. You don’t have to climb this mountain four times. You just have to do it once.”

35. “A lot of people think that if they have a hundred stocks, they’re investing more professionally than they are if they have four or five. I regard this as insanity.”

36. “The wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s that simple.”

37. “Part of the Berkshire secret is that when there’s nothing to do, Warren is very good at doing nothing.”

38. “All investment is intrinsically damn difficult because obviously good ideas get bid to such [high] prices that they get dangerous. There’s no investment that is so good that you can’t ruin it by raising the price higher and higher. None of them are worth an infinite amount of money.”

39. “Warren, think it over and you’ll agree with me — because you’re smart and I’m right.”

• What Charlie would say to Warren on the rare times when they disagreed. But, as both men proudly attested, they never once had an argument.

40. “The four closest friends of my youth were highly intelligent, ethical, humorous types … Two are long dead — with alcohol a contributing factor — and the third is a living alcoholic (if you call that living). While susceptibility varies, addiction can happen to any of us through a subtle process where the bonds of degradation are too light to be felt until they are too strong to be broken. And, yet, I have yet to meet anyone — in over six decades of life — whose life was worsened by fear and avoidance of such a deceptive pathway to destruction.”

41. “Why should I expect my society is always going to be marching upwards [just] because it has for a long time? I believe you [should] adjust to whatever society turns out to be and you do the best you can. That’s all any human being can do — and that’s all I’m going to do.”

42. “The ethos of not fooling yourself is one of the best you could possibly have. It’s powerful because it’s so rare.”

43. “I like people [who can] admit they were complete horses’ asses. I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.”

44. “Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group — then to hell with them.”

45. “We want to buy something that’s intrinsically a very good business, meaning that an idiot could run it and it would do alright. Then we want that business, which an idiot could run successfully, to have a wonderful person running it. If we have a wonderful business with a wonderful person running it, that really turns us on.”

46. “I had a friend who said, ‘If it won’t stand a little mismanagement, it’s not much of a business.’ We like businesses that can stand a lot of mismanagement — but don’t get it. That’s our formula.”

47. “The best way to get what you want in life is to deserve what you want. If you apply that to business, that means you really take care of your customers.”

48. “I’ve patterned my life after [Benjamin] Franklin. I stopped trying to make more money when I had enough. He did the same damn thing. He didn’t try and die with all his money. He gave a lot of it away … I’ve done the same thing.”

49. “It would be nice if I were Mother Teresa and did something I didn’t like doing because I am a noble soul, but my life is organized so that — time after time — what works for my pocketbook [also] works for every moral teaching that I’ve been taught.”

50. “I’ve known a lot of roguish people that made a fair amount of money — and they started giving a little money [to charitable causes] to show off. Twenty years later, they’re actually real philanthropists. You become what you pretend to be, to some considerable extent.”

51. “You don’t have a lot of envy, you don’t have a lot of resentment, you don’t overspend your income, you stay cheerful in spite of your troubles, you deal with reliable people and you do what you’re supposed to do. All of these simple rules work so well to make your life better.”

52. “The most famous composer in the world was utterly miserable most of the time … because he always overspent his income. This was Mozart. If Mozart couldn’t get by with this kind of asinine conduct, I don’t think you should try.”

53. “We’ve had enough good sense, when something is working very well, to keep doing it. I’d say we’re demonstrating what might be called the fundamental algorithm of life — repeat what works.”

• Charlie often praised Lee Kuan Yew’s work in Singapore as an exemplar to other political leaders around the world. In particular, he appreciated the prime minister’s simple mantra: “Figure out what works and do it.”

54. “It’s not that much fun to buy a business where you really hope this sucker liquidates before it goes broke.”

55. “I’m no good at exits. I don’t like even looking for exits. I’m looking for holds.”

56. “All good investing is value investing. It’s just that some people look for value in strong companies and some look for value in weak companies — but every value investor tries to get more value than he pays for.”

57. “I didn’t get rich by buying stocks at a high price-earnings multiple in the midst of crazy speculative booms — and I’m not going to change.”

58. “You don’t need perfect. If you’re 96% sure, that’s all you’re entitled to in many cases. I see these people doing due diligence and the weaker they are as thinkers, the more due diligence they do. It’s a way of allaying inner insecurity — but it doesn’t work.”

59. “Playing poker in the army and as a young lawyer honed my business skills. What you have to learn is to fold early when the odds are against you — or, if you have a big edge, to back it heavily. You don’t get a big edge very often, so seize it when it does come.”

60. “It’s kind of fun to sit there and out-think people who are way smarter than you are because you’ve trained yourself to be more objective and more multidisciplinary. Furthermore, there is a lot of money in it — as I can testify from my own personal experience.”

61. “Knowing the edge of your circle of competence is one of the most difficult things for a human being to do. Knowing what you don’t know is much more useful in life and business than being brilliant.”

62. “People chronically mis-appraise the limits of their own knowledge. That’s one of the most basic parts of human nature.”

63. “It’s much better to think you’re ignorant. If people weren’t so often wrong, we wouldn’t be so rich.”

64. “If you stay rational yourself, the stupidity of the world helps you.”

65. “Most people probably shouldn’t do anything other than have index funds … That is a perfectly rational thing to do for somebody who doesn’t want to think much about it and has no reason to think he has any advantage as a stock picker. Why should he try and pick his own stocks? He doesn’t design his own electric motors and his egg beater.

66. “When you borrow a man’s car, you always return it with a full tank of gas.”

67. “I don’t think we’ve got any rules about what we do at Berkshire. If it makes sense at the time in a rough kind of way, we do it. That’s our system.”

68. “Understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things.”

69. “If you soldier through, you can get through almost anything. It’s your only option. You can’t bring back the dead. You can’t cure the dying child. You can’t do all kinds of things. You have to soldier through it. If you have to walk through the streets, crying for a few hours a day as part of the soldiering through — go ahead and cry away. But you can’t quit. You can cry, but you can’t quit.”

70. “All I want to know is where I’m going to die, so I’ll never go there.”

• Charlie loved to solve problems through inversion. Or, in other words, he flipped the problem upside down and reached the solution in reverse. When tasked with charting safe flight paths for Air Force pilots during World War II, he asked himself what he would do if he were trying to get those pilots killed — and then studiously avoided those potential missteps. Perhaps the most famous of Charlie’s many mental models.

71. “I don’t use formal projections. I don’t let people do them for me because I don’t like throwing up on the desk.”

72. “The great lesson in microeconomics is to discriminate between when technology is going to help you and when it’s going to kill you.”

73. “I did not intend to get rich. I wanted to get independent. I just overshot.”

74. “There are a lot of cognitive biases that are very significant. One is the constant tendency to overrate your own intelligence and skills in deciding what to do and what not to do.”

75. “I didn’t mind at all playing second fiddle to Warren. Ordinarily, everywhere I go I am very dominant, but when somebody is better, I’m willing to play second fiddle. It’s just that I was seldom in that position — except with Warren.”

76. “We have three baskets for investing: yes, no, and too tough to understand.”

77. “Take a simple idea — and take it seriously.”

78. “Acknowledging what you don’t know is the dawning of wisdom.”

79. “You can call [Bitcoin] a store of wealth. I call it a store of delusion.”

• Another withering dismissal of cryptocurrency — joining previous entrants like “rat poison”, “worthless artificial gold”, and “scumball activity”. 🤣

80. “My theory, from the very beginning, was [to] eliminate the most conventional asininity. If I could just do that, I’d have an advantage over most people. So I collected asininities as things I should avoid.”

81. “The highest form that civilization can reach is a seamless web of deserved trust … Just totally reliable people correctly trusting one another.”

82. Charlie was once asked to whom he felt most grateful: “My wife’s first husband. I had the ungrudging love of this magnificent woman for 60 years simply by being a somewhat less awful husband than he was.”

83. “Of all of the arts, I think architecture is the best because it gives you not only the pleasant views and all that, but it makes the civilization work better. It’s the space in which [people] live. And, if it’s organized intelligently, it really helps them.”

84. “[Warren and I] realized that some company that was selling at 2-3x book value could still be a hell of a bargain because of momentums implicit in its position, sometimes combined with an unusual managerial skill plainly present in some individual — or some system.”

85. “Trust first, ability second.”

• Charlie’s fool-proof hiring philosophy.

86. “I think you would understand any presentation using the word EBITDA [better] if, every time you saw that word, you just substituted the phrase ‘bullshit earnings’.”

87. “Having a huge proportion of the young and brilliant people all going into wealth management is a crazy development in terms of its natural consequences for American civilization. We don’t need as many wealth managers as we have.”

88. “One of the reasons that I was as economically successful as I was is because I read so damn much all my life — starting when I was six years old. I don’t know how to get smart without reading a lot.”

89. “[Seinfeld] is not really about nothing. It’s about the humor of life being used to make life endurable. By kidding one another … they are amusing us all.”

• I’m a huge Seinfeld fan, so I’m throwing this in here. But, in all seriousness, this is an extremely astute comment. I’m a little bummed that we’ve been missing out on Charlie’s TV show reviews all of these years…

90. “Everybody engaged in complicated work needs colleagues. Just the discipline of having to put your thoughts in order with somebody else is a very useful thing.”

91. “You know this cliche that opposites attract? Well, opposites don’t attract. Psychological experiments prove that it’s people who are alike that are attracted to each other. Our minds work in very much the same way.”

92. “A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. 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.”

93. “If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century, you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get.”

94. “It’s not the bad ideas that do you in — it’s the good ideas. You may say, ‘That can’t be so. That’s paradoxical.’ What [Ben Graham] meant was that if a thing is bad idea, it’s hard to overdo [it]. But where there is a good idea with a core of essential and important truth, you can’t ignore it. And, then, it’s so easy to overdo it. So the good ideas are a wonderful way to suffer terribly if you overdo them.”

95. “The best source of new work is the work on your desk.”

• In other words: If you buckle down and do good work, your boss (or clients) will notice and you’ll be rewarded with more responsibility and more important work.

96. “An example of a really responsible system is the system the Romans used when they built an arch. The guy who created the arch stood under it as the scaffolding was removed. It’s like packing your own parachute.”

97. “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.”

98. “I paid no attention to the territorial boundaries of academic disciplines and I just grabbed all of the big ideas that I could.”

99. Charlie recently told the Wall Street Journal that he hoped his epitaph will read: “I tried to be useful.”