1. Munger advocated “inverted thinking” throughout his life. His style often carries a tone of irony or employs double negatives.
2. This is a compilation about Charlie Munger, collecting his “learning methods,” decision-making processes, and investment strategies.
3. Buffett offered a few pieces of advice on “how to choose partners.” First, find someone smarter and wiser than you. Next, this person should be both honest and hardworking. If they are smart and hardworking but not honest without integrity, your company will be doomed, just like anything multiplied by zero will always result in zero.
4. Munger does not speculate on the market. For 80% of the time, his attitude towards the stock market maintains agnosticism.
5. Munger believes that “life decisions” are more important than “investment decisions.” He focuses on mental models that recur across various disciplines but never pays attention to Business Investment Portfolio Strategies, Beta Coefficients, or Capital Asset Pricing Models.
He centers on basic axioms, human achievements, human weaknesses, and the rugged road to wisdom.
The beta coefficient is a measure of an asset’s systematic risk and is one of the parameters of the Capital Asset Pricing Model (CAPM). It measures the volatility of a security or investment portfolio relative to the overall market. Simply put, if a stock has a beta of 1.2, it means that if the market index rises by 1%, the stock will rise by 1.2%.
6. Munger said, “Like Keynes, I want to become independent by getting rich.” For Charlie, independence is the purpose of making money, not the other way around.
7. In the long run, stock prices are always determined by the value of the company, just like a dog on a leash usually follows its owner. A smart investor should buy when the stock price is well below the company’s actual value and sell when the price approaches or exceeds the market value. A better approach is to hold on for a lifetime and never sell.
8. Ordinary investors, especially institutional investors, generally adhere to what I consider to be fundamentally flawed theories, such as believing in the “efficient market hypothesis,” equating stock price volatility with real risk, and evaluating performance mainly based on volatility. I find talking to them to be like playing music to a cow.
In my view, the greatest risk in investing in the stock market is not price volatility, but whether the investment will result in a permanent loss in the future. Purely declining stock prices are not a risk; they are actually an opportunity. Otherwise, where else would you find cheap stocks?
9. Although Buffett and Munger are very successful, the actual practices of individual and institutional investors are completely opposite to theirs! On the surface, those famous fund managers accept the theories of these two elderly gentlemen and hold them in high regard, but in reality, they are heading in completely different directions! This is because their clients are also heading in completely different directions! They still adhere to mistaken theories such as “volatility equals risk” and “the market is always right,” which, in my view, are complete absurdities.
10. If one is simultaneously going long and short, controlling the risks of short positions requires constant trading. However, if one is constantly trading, there is simply no time to genuinely research long-term investment opportunities, making it a case of diminishing returns.
11. I can spend all my time researching and understanding companies without being entangled in the fluctuations of stock market prices.
12. Inverse thinking: Charlie always starts his thinking process inversely. To understand how to achieve happiness in life, Charlie first studies how life can become miserable! To study how companies become strong, Charlie first examines how companies decline!
While most people are concerned with how to succeed in the stock market, Charlie is most concerned with why most people fail in the stock market. Throughout his long life, Charlie has continuously collected famous cases of human failure across various domains, including individuals, companies, government management, and academic research.
Charlie’s method of thinking stems from a farmer’s proverb: “I just want to know where people will die, so I won’t go there.”
13. Charlie’s mind is original and never constrained by any rules or dogma. He has the curiosity of a child and possesses the research qualities and methods of a top-notch scientist. He has maintained a strong desire for knowledge and curiosity throughout his life, being interested in almost every problem! In his view, any problem can be fully mastered through the correct self-study methods, and innovations can be made on the foundation laid by his predecessors!
14. In modern times, many top experts and scholars can be “relatively objective” within their narrow fields of study, but once they step outside their field, they start to become subjective, dogmatic, rigid, and may even lose their ability to self-learn. As a result, many inevitably fall into the limitations of “blind men feeling an elephant.”
15. In Charlie’s view, the entire universe is an interconnected whole! All human knowledge is a partial attempt to study this whole, and only by combining this knowledge and integrating it into a cohesive framework of thought can it contribute to correct cognition and decision-making.
Therefore, he advocates learning the truly important theories from all disciplines and forming what he calls “worldly wisdom” on this basis.
16. Buffett once said, “Graham taught me to only buy cheap stocks, but Charlie changed my thinking on this. It would take a strong force to pull me out of Graham’s theory! Charlie broadened my horizons.”
17. Compared to Buffett, Charlie has broader interests, for example, he has a strong interest and extensive research in almost all fields of science and social sciences, and through synthesis, he has constructed the original Munger thought system.
18. Charlie said, “All my life, what I have wanted is to be integrated into life, not to be isolated.”
19. Charlie said, “As long as I have a book in my hand, I don’t feel that I’m wasting time.”
20. Charlie has spent his life studying the reasons for human failure, and therefore has a deep understanding of the weaknesses of human nature. He believes that one must be strict with oneself and continuously improve one’s character throughout life to overcome the inherent weaknesses of human nature.
For Charlie, this way of living is a moral obligation. To outsiders, Charlie may seem like an ascetic, but to Charlie, this process is actually “rational and joyful,” enabling one to live a successful and happy life.
21. Charlie’s success is primarily due to investing, and the success of his investments is primarily due to “self-cultivation” and learning.
22. Charlie is willing and good at teaching others and never tires of it. He greatly admires Confucius, especially the teaching spirit of Confucius in enlightening and resolving doubts.
23. Today, we may no longer need to be entangled in the debate between Chinese and Western learning, but simply need to calmly learn and accept all useful knowledge from around the world, while also peacefully anchoring our hearts in the moral value system that the Chinese people have collectively honored and upheld for thousands of years.