Charlie Munger was one of the brightest minds on Wall Street.
Worth about $2.6 billion at the time of his passing in November 2023, Munger ran Berkshire Hathaway along with Warren Buffett.
His investment advice was also predicated on the idea that the best opportunities are infrequent. In fact, as he once said, “Life is not just bathing you with unlimited opportunities.”
Munger also sought to cut out the bad ideas first, often noting, “It’s remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
Other than that, here are 5 other investment tips from Munger to always remember,
No. 1 — Avoid Crazy at All Costs
The 99-year-old billionaire also attributed much of his success to “Avoid crazy at all costs.”
“Crazy is way more common than you think,” once said Munger, as quoted by CNBC. “It’s easy to slip into crazy. Just avoid it, avoid it, avoid it.”
“My game in life was always to avoid all standard ways of failing,” he added. “You teach me the wrong way to play poker, and I will avoid it. You teach me the wrong way to do something else, I will avoid it. And, of course, I’ve avoided a lot because I’m so cautious.”
No. 2 – To Make Good Decisions, You Need a Latticework of Mental Models
By having a variety of mental models, you can approach problems from different perspectives and avoid relying on limited thinking.
As Munger noted in 1994, as quoted by Forbes.com:
“What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try to bang ’em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.”
“You’ve got to have models in your head . . . You’ve got to have multiple models—because if you just have one or two that you’re using, the nature of human psychology is such that you’ll torture reality so that it fits your models, or at least you’ll think it does . . . 80 or 90 important models will carry about 90 percent of the freight in making you a world-wise person.”
No. 3 – Don’t Work for Anyone You Don’t Respect and Admire
The last thing we should do is work under someone we can’t admire, don’t want to be like or have a tough time trusting.
“I coped in my time by identifying people I admired and by maneuvering, mostly without criticizing anybody, so that I was usually working under the right sort of people. A lot of employers will permit that if you’re shrewd enough to work it out with some tact. Generally, your outcome in life will be more satisfactory if you work under people whom you correctly admire,” he said as quoted by CNBC.
No. 4 – Be Willing to Learn
Munger also viewed education as essential.
“I have said that in my whole life, I’ve known no wise person over a broad subject matter area who didn’t read all the time,” Munger said, adding that reading is critical for broad subjects such as investing, as noted by BankRate.com. “If you think you’re going to be good at it and not read all the time, you have a different idea than I do.”
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up, and, boy, does that help, particularly when you have a long run ahead of you,” he also said before this passing.
No. 5 — To get what you want, you have to deserve what you want
“To get what you want, you have to deserve what you want. The world is not yet a crazy enough place to reward a whole bunch of undeserving people.”
In short, if you want something bad enough, work for it.
Nothing will be handed to you if you don’t put in the time or the effort.
For more insights from Charlie Munger, Warren Buffett, and Berkshire Hathaway, here’s a detailed, long list of annual reports.
There’s also Poor Charlie’s Almanack: The Wit and Wisdom of Charlie T. Munger, which you can find here. And there’s Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway’s Vice Chairman on Life, Business, and the Pursuit of Wealth with Commentary.
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