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.
8. On 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.
Fool contributor Morgan Housel has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.