Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger

Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger

"Poor Charlie's Almanack" got on my list because Drew Houston of Dropbox said it was one of the best books he had ever read. After blasting through it... I can understand why he said so, but I’m not sure I agree with him.

This is a book that talks a lot about how great and wise Charlie Munger (Warren Buffet's business partner) is, but comes up a bit short in the actual wisdom-dispensing department. The one-liner for this book is basically “Be wise, don’t fool yourself, and make the right decisions.” Thanks Charlie. I’ll get right on that.

There wasn’t anything mind-blowing in here. Munger’s advice is typically Midwestern-style morality like “be reliable”, “be honest”, “be patient” with a dash of chaos theory and psychology. He’s big into synthesis and this book is itself an entertaining synthesis of business, history, philosophy, and psychology. There are a couple gems in here that I’ve pulled out in the quotes below.

Also, potential readers should be forewarned - this is an enormous coffee-table-style book. You can’t get it on Kindle or even on Amazon. You have to buy it straight from some weird publishing house’s website. And it’s expensive - I bought mine for like $80 or something. A bit ridiculous if you ask me!

A final note... there’s an Easter Egg in here for any Yalies reading. Munger has a picture of Yale’s Hall of Graduate Studies building in his section on “Critique of Academia: Fatal Disconnectedness” and 2 pages later has a picture of him reading Paul Kennedy’s “Rise and Fall of the Great Powers”... I’m not sure he or his editor were quite aware of what they were doing!

My highlights below:

The quotes, talks, and speeches presented here are rooted in the old-fashioned Midwestern values for which Charlie has become known: lifelong learning, intellectual curiosity, sobriety, avoidance of envy and resentment, reliability, learning from the mistakes of others, perseverance, objectivity, willingness to test one’s own beliefs, and many more.

To Cicero, it is unworthy that an old man would work to improve only what he would live to enjoy. For him the only life worth living is dedicated in substantial part to good outcomes one cannot possibly survive to see.

Early retirement is criticized by Cicero as virtually unthinkable. He cites the moral idea of Pythagoras that “no man should quit his post but at the command of his General; that is, of God himself”

If Berkshire has made a modest progress, a good deal of it is because Warren and I are very good at destroying our own best-loved ideas. Any year that you don’t destroy one of your best-loved ideas is probably a wasted year.

Like Franklin, Charlie has made himself into a grandmaster of preparation, patience, discipline, and objectivity.

Perhaps the most valuable result of all education is the ability to make yourself do the thing you have to do, when it ought to be done, whether you like it or not. It is the first lesson that out to be learned and however early a man’s training begins, it is probably the last lesson that he learns thoroughly.

There’s an important lesson here: Once wrongdoers get rich, they get enormous political power and you can’t stop it, so the key is to nip things like this in the bud.

We read a lot. I don’t know anyone who’s wise who doesn’t read a lot. But that’s not enough: You have to have a temperament to grab ideas and do sensible things.

Henry Singleton has the best operating and capital deployment record in American business.

If all you succeed in doing in life is getting rich by buying little pieces of paper, it’s a failed life. Life is more than being shrewd in wealth accumulation. A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.

Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in fast spurts. But you build discipline by preparing for fast spurts... Slug it out one inch at a time, day by day. At the end of the day - if you live long enough - most people get what they deserve.

In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time - none, zero. You’d be amazed at how much Warren reads - and at how much I read.

Reduce material needs.

Carson’s prescription for sure misery included: ingesting chemicals in an effort to alter mood or perceptions, envy, and resentment.

For those of you who want misery, I also recommend refraining from the practice of the Disraeli compromise, designed for people who find it impossible to quit resentment cold turkey. Disraeli, as he rose to become one of the greatest prime ministers, learned to give up vengeance as a motivation for action, but he did retain some outlet for resentment by putting the names of people who wronged him on pieces of paper in a drawer. Then, from time to time, he reviewed these names and took pleasure in noting the way the world had taken his enemies down without assistance.

First, be unreliable. If you will only master this one habit, you will more than counterbalance the combined effect of all your virtues, howsoever great. If you like being distrusted and excluded from the best human contribution and company, this prescription is for you. Master this one habit, and you will always play the role of the hare in the fable, except that instead of being outrun by one fine turtle, you will be outrun by hordes and hordes of mediocre turtles and even some mediocre turtles on crutches.

Pascal said, “the mind of man at one and the same time is both the glory and the shame of the universe”

And it isn’t that the machines weren’t better. It’s just that the savings didn’t go to you. The cost reductions came through all right. But the benefit of the cost reductions didn’t go to the guy who bought the equipment. It’s such a simple idea. It’s so basic. And yet it’s so often forgotten.

When Warren lectures at business schools, he says, “I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches - representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all.

Finally, somebody got the idea to pay all these people not so much an hour, but so much a shift - and when it’s all done, they can all go home. Well, their problems cleared up overnight.

Of course, the best part of it all was his concept of “Mr. Market.” Instead of thinking the market was efficient, Graham treated it as a manic-depressive who comes by every day... To Graham, it was a blessing to be in business with a manic-depressive who gave you this series of options all the time.

Psychology to me, as currently organized, is like electromagnetism after Faraday, but before Maxwell - a lot has been discovered, but no one mind has put it all together in proper form.

The five essential entrepreneurial skills for success are concentration, discrimination, organization, innovation, and communication (Faraday)

“What can I do to ruin our civilization?” That’s easy. If what you want to do is ruin your civilization, just go to the legislature and pass laws that create systems wherein people can easily cheat. It will work perfectly.

“The Intelligent Investor” is still the best book on investing. It has only three ideas you really need: 1) The Mr. Market analogy 2) A stock is a piece of a business 3) Margin of safety

Both Warren and I, in the makeup of our personalities, and in our ethical systems, believe being an effective teacher is a high calling... Properly done, if teaching isn’t the highest calling of man, it is near it.

Or as Mark Twain once complained, “These are sad days in literature. Homer is dead. Shakespeare is dead. And I myself am not feeling at all well.”

One of Bernard Shaw’s characters explained professional defects as follows: “In the last analysis, every profession is a conspiracy against the laity.”

Reading is key. Reading has made me rich over time (Buffett)

There is an old two-part rule that often works wonders in business, science, and elsewhere: 1) Take a simple, basic idea and 2) take it very seriously.

There is no limit to what a man can do or where he can go if he doesn’t mind who gets the credit (Woodruff)

In the United States, a person or institution with almost all wealth invested long-term, in just three fine domestic corporations, is securely rich.

Furthermore, all the good in the world is not done by foundation donations. Much more good is done through the ordinary business operations of the corporations in which the foundations invest.

It is paradoxical and disturbing to us that economists have long praised foolish spending as a necessary ingredient of a successful economy.

Thomas Hunt Morgan banned the Friden calculator from the biology department. And when they said, “What the hell are you doing, Dr. Morgan?” he said, “Well, I am like a guy who is prospecting for gold along the banks of the Sacramento River in 1849. With a little intelligence, I can reach down and pick up big nuggets of gold. And as long as I can do that, I’m not going to let any people in my department waste scarce resources in placer mining.

Sharon Stone contributed to the subject because someone once asked her if she was bothered by penis envy. And she said, “Absolutely not. I have more trouble than I can handle with what I’ve got”

Why did Max Planck, one of the smartest people who ever lived, give up economics? The answer is, he said, “It’s too hard. The best solution you can get is messy and uncertain.”

Usually, 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.

The cash register did more for human morality than the Congregational Church. It was a really powerful phenomenon to make an economic system work better, just as, in reverse, a system that can be easily defrauded ruins a civilization.

Few things are harder to put up with than the annoyance of a good example (Twain)

I frequently cite the example of having your career over, in the Navy, if your ship goes aground, even if it wasn’t your fault. I say the lack of justice for the one guy that wasn’t at fault is way more than made up by a greater justice for everybody when every captain of a ship always sweats blood to make sure the ship doesn’t go aground. Tolerating a little unfairness to some to get a greater fairness for all is a model I recommend to all of you.

Keynes said, “It’s not bringing in the new ideas that’s so hard. It’s getting rid of the old ones.”

The acquisition of knowledge is a moral duty. It’s not something you do just to advance in life. And there’s a corollary to that idea that is very important. It requires that you’re hooked on lifetime learning. Without lifetime learning, you people are not going to do very well. You are not going to get very far in life based on what you already know. You’re going to advance in life by what you learn after you leave here.

I have what I call an “iron prescription” that helps me keep sane when I drift toward preferring one intense ideology over another. I feel that I’m not entitled to have an opinion unless I can state the arguments against my position better than the people who are in opposition. I think that I am qualified to speak only when I’ve reached that state.

I think the game of competitive life often requires maximizing the experience of the people who have the most aptitude and the most determination as learning machines.

Here are the [psychological] tendencies:

  • Reward and Punishment
  • Liking/Loving
  • Disliking/Hating
  • Doubt-avoidance
  • Inconsistency-avoidance
  • Curiosity
  • Kantian Fairness
  • Envy/Jealousy
  • Reciprocation
  • Influence-from-mere-association
  • Simple Pain-Avoiding Psychological Denial
  • Excessive Self-Regard
  • Overoptimism
  • Deprival-superreaction
  • Social-Proof
  • Contrast-Misreaction
  • Stress-Influence
  • Availability Misweighting
  • Use-it-or-lose-it
  • Drug-misinfluence
  • Senescence-misinfluence
  • Authority-misinfluence
  • Twaddle
  • Reason-respecting
  • Lollapalooza

Widespread incentive-caused bias requires that one should often distrust, or take with a grain of salt, the advice of one’s professional advisor.

Granny’s Rule, to be specific, is the requirement that children eat their carrots before they get dessert.

Few people can list a lot of bad habits that they have eliminated, and some people can not identify even one of these. Instead, practically everyone has a great many bad habits he has long maintained despite their being known as bad.

And proper education is one long exercise in augmentation of high cognition so that our wisdom becomes strong enough to destroy wrong thinking maintained by resistance to change.

Moreover, the tendency will often make man a “patsy’” of manipulative “compliance-practitioners,” who gain advantage from triggering his subconscious Inconsistency-Avoidance Tendency. Few people demonstrated this process better than Ben Franklin. As he was rising from obscurity in Philadelphia and wanted the approval of some important man, Franklin would often maneuver that man into doing Franklin some unimportant favor, like lending Franklin a book. Thereafter the man would admire and trust Franklin more because a non-admired and non-trusted Franklin would be inconsistent with the appraisal implicit in lending Franklin the book.

It is not greed that drives the world, but envy.

The standard antidote to one’s overactive hostility is to train oneself to defer reaction... “You can always tell the man off tomorrow, if it is such a good idea.”

Cialdini believes that subconscious Reciprocation Tendency thus became one important cause of the resignation of a United States president in the Watergate debacle, and so do I.

Some of the most useful members of our civilization are those who are willing to “clean house” when they find a mess under their ambit of control.

When a man’s steps are consecutively taken toward disaster, with each step being very small, the brain’s Contrast-Misreaction Tendency will often let the man go too far toward disaster to be able to avoid it. This happens because each step presents so small a contrast from his present position.

A rightly famous Caltech engineering professor, exhibiting more insight than tact, once expressed his version of this idea as follows: “The principal job of an academic administration is to keep the people who don’t matter from interfering with the work of the people that do.”