8 of the Smartest Things Charlie Munger Has Ever Said

Listen to a lot of successful business people talk, and you'll often be let down. Many of them just aren't very articulate. Or they choose their words carefully lest they ignite a PR bomb.

Berkshire Hathaway (NYSE: BRK-B  ) vice-chairman Charlie Munger isn't one of them. He's old, he's rich, and he doesn't give a damn what you think about him. He will always provide the unfiltered truth.

In preparation for the upcoming Berkshire Hathaway shareholder meeting eight days from now, here are eight of the smartest things Munger has ever said, culled from various speeches he's given over the last five years.

1. On regulation

When Hitler was in his bunker before he shot himself, he said, 'This isn't my fault. The German people just don't appreciate me enough.' That's the attitude of a lot of bankers. They think their silliness is necessary. Banks will not rein themselves in voluntarily. You need adult supervision.

2. On lifetime learning

When we bought See's Candy, we didn't know the power of a good brand. Over time, we just discovered that we could raise prices 10% a year and no one cared. Learning that changed Berkshire. It was really important.

You have to be a lifelong learner to appreciate this stuff. We think of it as a moral duty. Increasing rationality and improving as much as you can no matter your age or experience is a moral duty. Too many people graduate from Wharton today and think they know how to do everything. It's a considerable mistake.

Most of Berkshire's success grew from stupidity and failure that we learned from. I hope that makes you feel better about your own life.

3. On inflation:

I remember the $0.05 hamburger and a $0.40-per-hour minimum wage, so I've seen a tremendous amount of inflation in my lifetime. Did it ruin the investment climate? I think not.

4. On opportunity:

Patience combined with opportunity is a great thing to have. My grandfather taught me that opportunity is infrequent and one has to be ready when it strikes. That's what Berkshire is. It's amazing how fast Berkshire acts when we find opportunity. You can't be timid -- and that applies to all of life. You can't be timid in marriage when you find the right spouse. It might be your only opportunity to be happy in life. Too many people don't act when they should. That's why half of all marriages don't work out.

5. On diverse learning:

Economists have long been divided by a simple problem. When you go to the movie theater, soda and popcorn costs a totally unfair price compared with other locations. This just tortures economists. At least one million man hours have gone into trying to solve this problem. Economists understand that a first-class ticket on an airplane costs more than coach. They get that one. It's marginal utility. But they can't figure out the movie theater to save their lives.

Here's the Munger approach to the problem. In the auto world, a car manufacturer will sell a car for $40,000, and charge $200 for the extra gizmo. No one cares about the extra $200 when you're already spending $40,000. It's insignificant. The movie theater is basically the same thing. People are OK paying that much for a soda after they've paid so much for an admission ticket.

Now, psychologists can explain this clearly. Economists can't for the life of them. It's so simple what happens with you think beyond your trained field. It's amusing to see someone spend one million man hours on something I can solve with my left hand.

5. On executive leadership:

Some people are more teachable than others. This is also true of dogs, however, so take it as you wish. The executive level should be a tough meritocracy. It shouldn't be easy. I look for people I can trust. Hiring people you can't trust is like starting off by dropping a spider in your bosom.

6. On gold:

I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me that's not optional; that's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works you're a jerk.

7. On investing:

It's in the nature of stock markets to go way down from time to time. There's no system to avoid bad markets. You can't do it unless you try to time the market, which is a seriously dumb thing to do. Conservative investing with steady savings without expecting miracles is the way to go.

8On pundits:

People have always had this craving to have someone tell them the future. Long ago, kings would hire people to read sheep guts. There's always been a market for people who pretend to know the future. Listening to today's forecasters is just as crazy as when he king hired the guy to look at the sheep guts.

Heading to Omaha
On May 4, Berkshire Hathaway will be holding its epic annual meeting in Omaha, and the Fool will be there to bring you everything you need to know from this "Woodstock for Capitalists." Simply click here to follow along with all of the Fool's coverage.


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  • Report this Comment On April 28, 2013, at 4:48 PM, mackie72 wrote:

    This great advice for a young person with no felonies and a future, but what about somebody spent whole life in the joint and needs money now? Somebody ain't ever had a grandpa to give him no advice? He can't wait for no future. He need money now!!

    What's up then?

  • Report this Comment On April 29, 2013, at 9:02 AM, XXF wrote:

    The problem with Bankers isn't that they are children or evil as the popular opinions go, it is that they operate in a no-lose, government-backed, half-cocked environment. We insure the banks to an unlimited amount and so they fall victim to moral hazard and utilize that insurance after doing stupid things. If they did not have that incredibly generous and unnecessary insurance (i.e. were allowed to go bust without dragging other banks down) the moral hazard would disappear and people would leave their money to banks that could be trusted to safeguard it.

    Because of failed regulation banks need more regulation and when that regulation fails we'll regulate them even more. That is terrible logic.

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