Charlie Munger's Poor Charlie's Almanack is a fantastic book that I cannot recommend highly enough. It is a book and there are many sections / highlights that I will re-read many times every year.
As I have (only half) jokingly mentioned to many friends, if someone were to hypothetically force me to pick between Warren Buffet and Charlie Munger, I will pick Munger in a heartbeat.
Both of them are very well-known for their excessive obsessive reading habits - clocking more than 8 hours a day. Their range of topics (history, biography, business, sciences) and authors are eclectic. Their extraction of lessons and application to their life and business ... well, the proof is Berkshire Hathaway, one of the most successful businesses of all time.
I have been a huge Munger fan and his book originally used to be only available in print and that to only via a custom form in his site. Since I have been slowly disposing off dead-tree books in the last 10 years, I hesitated getting a physical book. The price used to be a deterred long ago (about $75) but after reading more and more on Buffet / Berkshire and all about the annual meetings, I was more than happy to pay the tuition fee. The third important reason I held out was that I create lots of highlights when I read - and for such a book, all the more the reason I wanted it to be electronic. Lo and behold, my prayers were answered when Stripe press (yes, the payment company and its founders Collion brothers) took up formatting this book for a kindle version priced at $10. I couldn't order it fast enough and waited patiently for its December release. (previously planned for November 2023).
The book starts with a couple of Forewords - and Buffet cannot praise any highly. And in classic Munger's style, he writes a rebuttal to Buffet's praise. Then there is a biography of Munger. There is praise from his children (he has 8) and Peter Kaufmann who put together the book.
Chapter 4 is the creme de la creme of it all as it is a series of 11 talks that Munger has given over the years. Talk 11 is the longest and popular of them all - regarding Human Judgment. This is a collation of three talks (between 1992 and 1996 if I remember correctly). To think that he gave all these talks in the 1990s when he was in his 70s and that this knowledge has been with him for better part of 3 to 4 decades, is nothing short of mind-boggling and what a tremendous advantage he has had in business, in investing and in life. There are many small paragraphs topics here that by themselves have been full fledged books - taken by later professors / authors. To think that he was thinking about Psychology and Behavioral Economics way before it became cool topics shows his astute thinking. As the book quotes, “Charlie was espousing his well-reasoned views on behavioral finance before the term was even coined.”.
If you expected any quick investment tip or advice, you will surely be disappointed. But if you broaden the expectation, this book give you much more. Ideas for a better life. And for work.
Over the many chapters and talks, you will come across his vast repertoire of books and authors he has devoured and they form an amazing reading list for those interested. There is a "Recommended Reading" section at the end which lists the most popular books (this itself totals more than a few dozen). There is also a list of personalities that Charlie quotes all along and each one, their biographies and works are inspiring great follow ups too.
A poignant finish to his last talk in the last chapter with his famous line (from Berkshire meetings) "And I have nothing more to add".
As you can see, I am a huge fan boy and I cannot recommend this enough. Sometimes I feel like recommending this book is like giving out a secret - but then as Charlie himself says, that is one of the paradox of behavioral economics - that the more one knows of a phenomenon, the less it will be useful but it turns out it can still be a good thing. (as in the case of, good behavior is rewarded and expected ... etc).
Munger once even gave a talk of "What not to do" or how to be miserable. His favorite quote is "invert; always invert" (of the Mathematician Jacobi).
First, be unreliable.
My second prescription for misery is to learn everything you possibly can from your own experience, minimizing what you learn vicariously from the good and bad experiences of others, living and dead.
My third prescription to you for misery is to go down and stay down when you get your first, second, or third severe reverse in the battle of life.
My final prescription to you for a life of fuzzy thinking and infelicity is to ignore a story they told me when I was very young about a rustic who said, “I wish I knew where I was going to die, and then I’d never go there.”
How can you top that?
Then there is this great advice for young people starting out.
"What should a young person look for in a career? I have three basic rules—meeting all three is nearly impossible, but you should try anyway: Don’t sell anything you wouldn’t buy yourself. Don’t work for anyone you don’t respect and admire. Work only with people you enjoy."
My formal review / praise ends right about here. The following is more a "my favorite quotes" section. I don't want to spoil (for those who care) by just listing without the full context. But if you still want to, read along. Anyone would've read his famous quotes over many articles - or just search "Munger quotes" and you will be served with an all you can read/enjoy buffet. Here I will quote some of my favorites.
If you want to get smart, the question you have to keep asking is “Why, why, why?”
“The only way to win is to work, work, work, work, and hope to have a few insights.”
Stay within a well-defined circle of competence.
Acknowledging what you don’t know is the dawning of wisdom.
Resist the craving for false precision, false certainties, etc.
Munger's investing style: “sit-on-your-ass investing”
“Quickly eliminate the big universe of what not to do; follow up with a fluent, multidisciplinary attack on what remains; then act decisively when, and only when, the right circ*mstances appear.”
“a great business at a fair price is superior to a fair business at a great price.” (this is probably Buffet).
Avoid dealing with people of questionable character.
Insist upon proper compensation for risk assumed.
“Only in fairy tales are emperors told they are naked.”
Develop fluency in mental models from the major academic disciplines.
Think forward and backward: Invert, always invert. (quoting the Mathematician Jacobi).
fundamental philosophy of life: Preparation. Discipline. Patience. Decisiveness.
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This was so cool to see Charlie's disdain for Chiropractors (which I share too): You become the equivalent of a chiropractor, who, of course, is the great boob in medicine.
And also this:
What I personally hate most are systems that make fraud easy. Probably way more than half of all the chiropractic income in California comes from pure fraud.
He played the chain store game harder and better than anyone else. [Sam] Walton invented practically nothing. But he copied everything anybody else ever did that was smart—and he did it with more fanaticism and better employee manipulation.
Then there’s another model from microeconomics that I find very interesting. When technology moves as fast as it does in a civilization like ours, you get a phenomenon that I call competitive destruction.
So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose.
One of his favorites is the "lollapalooza effect" : when two or three or more forces are operating in the same direction.
Hard to swallow: So it’s much better to let some things go uncompensated—to let life be hard—than to create systems that are easy to cheat.
Part of what you must learn is how to handle mistakes and new facts that change the odds. Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much-loved hand.
Self-pity is always counterproductive. It’s the wrong way to think. And when you avoid it you get a great advantage over everybody else, or almost everybody else, because self-pity is a standard response. And you can train yourself out of it.
When you don’t know and you don’t have any special competence, don’t be afraid to say so.
I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.
After all, a competing product, if it is never tried, can’t act as a reward creating a conflicting habit. Every spouse knows that.
Like pilot training, the ethos of hard science does not say “Take what you wish” but “Learn it all to fluency, like it or not.”
Your mistaken professors were too much influenced by “rational man” models of human behavior from economics and too little by “foolish man” models from psychology and real-world experience.
Demosthenes noted, “What a man wishes, he will believe.”
Franklin’s observation in Poor Richard’s Almanack: “If you would persuade, appeal to interest and not to reason.”
Adam Smith was so good a thinker and so good a writer that, in his own time, Immanuel Kant, then the greatest intellectual in Germany, simply announced that there was nobody in Germany to equal Adam Smith. Well, Voltaire, being an even pithier speaker than Kant, which wouldn’t be that hard, immediately said, “Oh, well, France doesn’t have anybody who can even be compared to Adam Smith.”
Planck, the great Nobel laureate who found Planck’s constant, tried once to do economics. He gave it up. “It’s too hard. The best solution you can get is messy and uncertain.”
Keynes said, “It’s not bringing in the new ideas that’s so hard. It’s getting rid of the old ones.” And Einstein said it better, attributing his mental success to “curiosity, concentration, perseverance, and self-criticism.” By self-criticism, he meant becoming good at destroying your own best-loved and hardest-won ideas.
Confucius, too—is that the acquisition of wisdom is a moral duty.
Alfred North Whitehead correctly said at one time that the rapid advance of civilization came only when man “invented the method of invention.”
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.
Soviet communists to get their final result, as described by one employee: “They pretend to pay us, and we pretend to work.” Perhaps the most important rule in management is “Get the incentives right.”
The general antidotes here are: 1) Especially fear professional advice when it is especially good for the adviser, 2) learn and use the basic elements of your adviser’s trade as you deal with your adviser, and 3) double-check, disbelieve, or replace much of what you’re told, to the degree that seems appropriate after objective thought.
The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision.
If only one lesson is to be chosen from a package of lessons involving social-proof tendency and used in self-improvement, my favorite would be: Learn how to ignore the examples from others when they are wrong, because few skills are more worth having.
Let me end this quote with Charlie's own wish - take what you wish.
Sometimes I call it “take what you wish,” and sometimes I call it “Kiplingism.” And when I call it Kiplingism, I’m reminding you of [Joseph Rudyard] Kipling’s77 stanza of poetry, which went something like this: “When Homer smote his blooming lyre, he’d heard men sing by land and sea, and what he thought he might require, he went and took, the same as me.”
READ THIS BOOK! READ AGAIN! APPLY IT TO LIFE!
