If I've read it once, I've read it a hundred times: "Much less has been written about Warren Buffett's longtime partner, Berkshire Hathaway (NYSE: BRKa ) (NYSE: BRKb ) Vice Chairman Charlie Munger." And it's true. It was true at the release of Janet Lowe's Damn Right!, a decent biography of Munger, and it's still true today. That book notwithstanding, Munger has largely been overshadowed by his more voluble and wealthier partner.
Hardcore Munger fans, many of whom flock each year to the Wesco Financial (AMEX: WSC ) annual meeting to hear his words of wisdom, have had no single resource to which they can turn for distilled, unadulterated Munger. His essays and speech transcripts, few in number and published in various places over the years, had never been collected in one book.
A large, heavy, coffee table book, Poor Charlie's Almanack is part fanzine, part analysis, and a lot of pure Munger. It's an eye-catching, cleverly designed volume, colorfully illustrated and sporting a breezy style and easy-to-digest layout. Its creation was clearly a labor of love for the participants. The title is, of course, a play on Poor Richard's Almanack, the 18th century almanac written and published year after year by Benjamin Franklin, one of Munger's heroes.
It says something about the light tone of the book that the foreword by Warren Buffett is followed by a rebuttal by Munger, in which he questions the amount of influence he has had over Buffett. The gushing introduction from editor Peter D. Kaufman follows ("You are about to embark on an extraordinary journey toward better investing and decision making," it informs us), then a "portrait" of Munger that relates his life story and a useful list of his investing principles. Intermixed are various recollections of Munger's family and friends.
While many of the anecdotes give interesting illustrations of Munger's character, or are just plain funny, and the life story and investing principles are informative and useful, the adulatory nature of some of the more fanboyish prose in the front matter can be a bit wearing. "Charlie even takes on the challenge of building, from scratch, a two-trillion-dollar business, and then walks us through his diverse mental models to accomplish that mighty feat." That talk is an interesting one, but let's call it what it is -- a talk, not a challenge or an accomplishment. All in all, by the time the reader has finished Chapter 2, he has begun to tire somewhat of sentences like, "Charlie does this" and "Charlie does that," and longs to hear something from Charlie himself.
Chapter 3 turns the book in that direction by providing a list of Mungerisms, including the legendary, "If you buy a few great companies, you can sit on your ass." Munger's quips on everything from morality to Enron to the public school system make for great reading.
The heart of the book, two-thirds of its bulk, is Chapter 4, which reprints 10 "talks" (two appear to be articles, rather than actual speeches) regarding such topics as "Worldly Wisdom," "Academic Economics," and "The Psychology of Human Misjudgment." In these, Munger expounds his theories on investing, how to live one's life, and how to make good decisions. The reader becomes a bit itchy as Munger repeatedly indicates that there are only 20 or so psychological principles that one needs to know to get through life successfully, without listing exactly what they are. That itch is scratched by Talk 10, specially rewritten for this book, on "The Psychology of Human Misjudgment." In that talk Munger enumerates what he sees as the most important mechanisms by which humans are led to misjudgments. I found it to be the most interesting of the group.
All in all, the talks convey a great deal of wisdom, interesting commentary, and hilarity. There are few investors -- or people -- who would not benefit from assimilating the information they contain. They are the real reason to buy this book.
Throughout Poor Charlie's Almanack, Munger's concept of "mental models" is stressed. Put simply, this method consists of adopting proven methods of analysis and prediction from various disciplines and bringing them to bear during the process of analyzing an investment (or, really, analyzing anything). Like many proven methodologies, I find this one to be both useful and vulnerable to abuse.
For instance, it is a fairly easy and useful analogy to view the business world as a Darwinian struggle for survival, and intelligent judgments and predictions can be made using that model. But when model usage becomes model-mongering, things begin to break down; not all analogies between the animal and business worlds make sense.
In my view, Munger is careful to stay on the right side of the line by not stretching his models to the breaking point -- by knowing when the models work and when they do not. Model usage is itself subject to the "man-with-a-hammer" syndrome described in Poor Charlie's Almanack -- to a man with a model, everything may look like an analogy. There is a lot to be learned, not only from the idea of mental models and the specific ones Munger uses, but also from Munger's instinctive understanding of when to use the models, and how far they can be pushed before they become invalid.
Poor Charlie's Almanack is packed with photos, my favorites being those of Munger reading, of which there are many, almost like a private joke that recurs throughout the book. Others illustrate, with varying degrees of relevance, things discussed in the text. The design is generally pleasing to the eye, making reading the book a fun experience.
My quibbles with the book are few. One minor annoyance is the editorial inconsistency regarding the large excerpted quotations, shown in brown script. Sometimes they flow along with the remainder of the text and should be read in sequence; other times they are simply excerpts. This is mildly frustrating. There are a few editing issues, such as the missing page or pages from the Forbes article on Munger (Appendix II), and sentences that don't quite make sense. This example, "Charlie learned that, by supporting each other, the Mungers weathered the worst economic collapse in the nation's history," would work if it had been intended as a comment on a Munger from the future learning about his family's past, but it was not.
Finally, the quality of the accompanying illustrations and photographs is surprisingly variable. The full-page photo of Munger facing the title page is of excellent quality; the reproduction of the cover of Sam Walton's book on page 168 is noticeably blurred. The selection of illustrations is rather idiosyncratic, reflecting the editor's sense of humor, which the reader may or may not find to his or her taste. It is my understanding that Kaufman spent $750,000 of his own money to bring this book out, so perhaps he may be forgiven for including as one of the accompanying illustrations a photograph of himself and his daughter, or for appending his own book recommendations to Munger's.
The world of "Buffett books" is a varied one, and the ground there has been pretty thoroughly plowed. But Poor Charlie's Almanack has managed to carve out its own niche, standing as an invaluable addition to the genre, and offering a great deal to both investors and non-investors alike. Don't miss it!
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Robert Brokamphas included excerpts from Warren Buffett and Charlie Munger from the latest Berkshire Hathaway annual meeting in hisRule Your Retirementnewsletter. To see more, sign up for a free, no-obligation trial today.