THE WIT AND WISDOM OF CHARLIE MUNGER

Born in Omaha, Nebraska in 1924, Charlie Munger studied mathematics at the University of Michigan, trained as a meteorologist at Cal Tech Pasadena while in the Army, and graduated magna cum laude from Harvard Law School without ever earning an undergraduate degree.

The investing world lost a legend last November with the passing of Charlie Munger, Vice Chairman of Berkshire Hathaway. Just a month shy of his 100th birthday, Munger leaves behind a treasure trove of wit and wisdom from his almost century of experience. While never penning an autobiography, Munger’s many commencement speeches and interviews provide financial journalists and biographers with more than enough material to compile numerous books. In lieu of picking just one, I am recommending two that make for excellent reads, The Tao of Charlie Munger, edited by David Clark and Poor Charlie’s Almanack edited by Peter Kaufman.

Munger was born in Omaha, NE on New Year’s Day in 1924. He trained as a meteorologist in the military and later graduated magna cum laude from Harvard Law School. A wildly successful investor (his net worth at the time of his death was reported to be $2.6 billion), it is worth noting that he never had an economics, marketing, finance, or accounting class. What Munger missed in the classroom he made up for with a voracious reading habit and an insatiable appetite to learn all that he could from a wide range of disciplines, ranging from architecture to psychology. This wide-ranging reading caused Munger to develop what he termed mental models that allowed him to make effective decisions. Munger talks in numerous speeches about having close to 100 mental models that he used to decide which investments to make and how to live a happy life.

The Tao of Charlie Munger is a quick read that contains 138 quotes from Munger. Each quote is then expanded on with commentary by David Clark. Much can be gleaned from this compilation. My top three:

“Knowing what you don’t know is more useful than being brilliant.”

“Capitalism without failure is like religion without hell.”

“Being rational is a moral imperative. You should never be stupider than you need to be.” (Munger’s twist on Immanuel Kant)

Poor Charlie’s Almanack (the title a tribute to Charlie’s hero, Benjamin Franklin’s Poor Richard’s Almanack) is a collection of speeches that Munger gave over several years. This book is for the reader that wants to take a deeper dive into the thought process of the legendary investor.

I especially recommend the Psychology of Human Misjudgment from Chapter 4. In this talk (which was never given but was rather a combining of three speeches that Munger had delivered years apart) he discusses 25 of what he calls ‘psychology-based tendencies’. The list of cognitive biases that he describes are instantly recognizable and highly relatable to anyone accustomed to making lots of decisions or reacting to the decision of others and wondering how they could have possibly arrived at the decision they made.

Munger stated on more than one occasion that “In my whole life, I have known no wise people who didn’t read all the time - none, zero.” Munger has left behind a lot for us to read and contemplate, which hopefully makes us all wiser.

Title: The Tao of Charlie Munger

Author: David Clark

Publisher: Scribner