Charlie munger quotes

Great investing requires a lot of delayed gratification.

If you buy something because it's undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. That's hard. But if you buy a few great companies, then you can sit on your ass. That's a good thing.

The game is to keep learning, and I don't think people are going to keep learning who don't like the learning process.

Spend each day trying to be a little wiser than you were when you woke up. Day by day, and at the end of the day-if you live long enough-like most people, you will get out of life what you deserve.

The game of life is the game of everlasting learning. At least it is if you want to win.

The big money is not in the buying and selling ... but in the waiting.

If you don't keep learning, other people will pass you by. Temperament alone won't do it - you need a lot of curiosity for a long, long time.

The best thing a human being can do is to help another human being know more.

Obviously, consideration of costs is key, including opportunity costs. Of course capital isn't free. It's easy to figure out your cost of borrowing, but theorists went bonkers on the cost of equity capital. They say that if you're generating a 100% return on capital, then you shouldn't invest in something that generates an 80% return on capital. It's crazy.

Chris Davis [of the Davisfunds] has a temple of shame. He celebrates the things they did that lost them a lot of money. What is also needed is a temple of shame squared for things you didn't do that would have made you rich. Forgetting your mistakes is a terrible error if you are trying to improve your cognition. Reality doesn't remind you. Why not celebrate stupidities in both categories?

I never allow myself to have an opinion on anything that I don't know the other side's argument better than they do.

The idea of caring is that someone is making money faster [than you are] is one of the deadly sins. Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley?

It’s not greed that drives the world, but envy.

Look at those hedge funds - you think they can wait? They don't know how to wait! I have sat for years at a time with $10 to $12 million in treasuries or municipals, just waiting, waiting...As Jesse Livermore said, 'The big money is not in the buying and selling...but in the waiting.'

It never ceases to amaze me to see how much territory can be grasped if one merely masters and consistently uses all the obvious and easily learned principles.

Tthe first rule is that you can't really know anything if you just remember isolated facts and try and 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 may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life.

If the same family were always on the bottom, then you'd have big resentments. But if DuPonts go down and Pampered Chef up, [that's good]. That much churn makes people think the system is fairer. Buffett: We don't like churn now, but we liked it more 30-40 years ago.

Knowing what you don't know is more useful than being brilliant.

Size will hurt returns. Look at Berkshire Hathaway - the last five things Warren has done have generated returns that are splendid by historical standards, but now give him $100 billion in assets and measure outcomes across all of it, it doesn't look so good. We can only buy big positions, and the only time we can get big positions is during a horrible period of decline or stasis. That really doesn't happen very often.

The number one idea is to view a stock as an ownership of the business and to judge the staying quality of the business in terms of its competitive advantage. Look for more value in terms of discounted future cash-flow than you are paying for. Move only when you have an advantage.

A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past.

Darwin paid particular attention to disconfirming evidence. Objectivity maintenance routines are totally required in life if you're going to be a great thinker.

Intelligent people make decisions based on opportunity costs.

I did not succeed in life by intelligence. I succeeded because I have a long attention span.

It takes character to sit there with all that cash and do nothing. I didn't get to where I am by going after mediocre opportunities.

A lot of people with high IQs are terrible investors because they've got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success

I think that, every time you saw the word EBITDA, you should substitute the word "bullshit" earnings.

Everybody engaged in complex work needs colleagues. Just the discipline of having to put your thoughts in order with somebody else is a very useful thing.”

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.

[In picking stocks] You really have to know a lot about business. You have to know a lot about competitive advantage. You have to know a lot about the maintainability of competitive advantage. You have to have a mind that quantifies things in terms of value. And you have to be able to compare those values with other values available in the stock market.

Three rules for a career: 1) Don’t sell anything you wouldn’t buy yourself; 2) Don’t work for anyone you don’t respect and admire; and 3) Work only with people you enjoy.

Your life must focus on the maximization of objectivity.

Investing is where you find a few great companies and then sit on your ass.

We believe that almost all really good investment records will involve relatively little diversification. The basic idea that it was hard to find good investments and that you wanted to be in good investments, and therefore, you'd just find a few of them that you knew a lot about and concentrate on those seemed to me such an obviously good idea. And indeed, it's proven to be an obviously good idea. Yet 98% of the investing world doesn't follow it. That's been good for us.

When you borrow a man's car, always return it with a tank of gas.

Warren is one of the best learning machines on this earth. The turtles who outrun the hares are learning machines. If you stop learning in this world, the world rushes right by you.

Those who keep learning, will keep rising in life

Berkshire was built on the eternal verities: basic mathematics, basic horse sense, basic fear, and basic diagnosis of human nature to make predictions regarding human behavior. We stuck to the basics with a certain amount of discipline and it has worked out quite well.

Another thing I think should be avoided is extremely intense ideology because it cabbages up one's mind. You see it a lot with T.V. preachers (many have minds made of cabbage) but it can also happen with political ideology. When you're young it's easy to drift into loyalties and when you announce that you're a loyal member and you start shouting the orthodox ideology out, what you're doing is pounding it in, pounding it in, and you're gradually ruining your mind. So you want to be very, very careful of this ideology. It's a big danger.

And, partly, I had found that theory-structure was a superpower in helping one get what one wanted. As I had early discovered in school wherein I had excelled without labor, guided by theory, while many others, without mastery of theory failed despite monstrous effort. Better theory I thought had always worked for me and, if now available could make me acquire capital and independence faster and better assist everything I loved.

A lot of our respected financial institutions are just casinos in drag.

It's been my experience in life if you just keep thinking and reading, you don't have to work.

Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things.

Even bright people are going to have limited, really valuable insights in a very competitive world when they're fighting against other very bright, hardworking people. And it makes sense to load up on the very few good insights you have instead of pretending to know everything about everything at all times.

The secret to happiness is to lower your expectations. ...that is what you compare your experience with. If your expectations and standards are very high and only allow yourself to be happy when things are exquisite, you'll never be happy and grateful. There will always be some flaw. But compare your experience with lower expectations, especially something not as good, and you'll find much in your experience of the world to love, cherish and enjoy, every single moment.

I'd rather throw a viper down my shirt front than hire a compensation consultant.

For years I have read the morning paper and harrumphed. There's a lot to harrumph about now.

I do not think you can trust bankers to control themselves. They are like heroin addicts.

A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.

...People need to ask, "How do I play the hand that has been dealt me?" The world is not going to give you extra return just because you want it. You have to be very shrewd and hard working to get a little extra. It's so much easier to reduce your wants. There are a lot of smart people and a lot of them cheat, so it's not easy to win.

The more hard lessons you can learn vicariously rather than through your own hard experience, the better.

The safest way to get what you want is to deserve what you want.

We regard using [a stock's] volatility as a measure of risk is nuts. Risk to us is 1) the risk of permanent loss of capital, or 2) the risk of inadequate return. Some great businesses have very volatile returns - for example, See's [a candy company owned by Berkshire] usually loses money in two quarters of each year - and some terrible businesses can have steady results.

Any year that you don't destroy one of your best-loved ideas is probably a wasted year

I like people admitting they were complete stupid horses' asses. I know I'll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.

Some people seem to think there's no trouble just because it hasn't happened yet. If you jump out the window at the 42nd floor and you're still doing fine as you pass the 27th floor, that doesn't mean you don't have a serious problem. I would want to address the problem right now.

We believe there should be a huge area between everything you should do and everything you can do without getting into legal trouble. I don't think you should come anywhere near that line. We don't deserve much credit for this. It helps us make more money. I'd like to believe that we'd behave well even if it didn't work. But more often, we've made extra money from doing the right thing. Ben Franklin said I'm not moral because of it's the right thing to do - but because it's the best policy.

To finish first you have to first finish. Don't get in a position where you go back to go. What's interesting is that some guy whose grandfather was a lawyer and a judge-hurriedly going to Harvard Law with a wave of veterans-I was willing to go into so many different businesses. I was constantly going right into the other fellow's business and doing better than the other fellow did. The reason it was possible? Self-education- developing mental discipline, big ideas that really work.

Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.

Our experience tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing some simple and logical thing, will often dramatically improve the financial results of that lifetime.

To the man with only a hammer, every problem looks like a nail.

Those who will not face improvements because they are changes, will face changes that are not improvements.

Our biggest mistakes, were things we didn't do, companies we didn't buy.

When you locate a bargain, you must ask, 'Why me, God? Why am I the only one who could find this bargain?'

There’s no way that you can live an adequate life without many mistakes. In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke.

If we've been a little more successful than other people, is because we always realised that the school of life was always open, and if you were not learning more you are falling behind.

There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested - there's never any cash. It reminds me of the guy who looks at all of his equipment and says, 'There's all of my profit.' We hate that kind of business.

You need to have a passionate interest in why things are happening. That cast of mind, kept over long periods, gradually improves your ability to focus on reality. If you don't have the cast of mind, you're destined for failure even if you have a high I.Q.

In my whole life, I have known no wise people who didn't read all the time - none ... ZERO.

We don't like trading agony for money

It is 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.

A lot of share-buying, not bargain-seeking, is designed to prop stock prices up. Thirty to 40 years ago, it was very profitable to look at companies that were aggressively buying their own shares. They were motivated simply to buy below what it was worth.

Remember that reputation and integrity are your most valuable assets - and can be lost in a heartbeat.

A different set of incentives from rising in an economic establishment where the rewards system, again, the reinforcement, comes from being a truffle hound. That's what Jacob Viner, the great economist called it: the truffle hound - an animal so bred and trained for one narrow purpose that he wasn't much good at anything else, and that is the reward system in a lot of academic departments.

All I want to know is where I’m going to die, so I’ll never go there

Opportunity cost is a huge filter in life. If you've got two suitors who are really eager to have you and one is way the hell better than the other, you do not have to spend much time with the other. And that's the way we filter out buying opportunities.

A great business at a fair price is superior to a fair business at a great price.

We get these questions a lot from the enterprising young. It's a very intelligent question: You look at some old guy who's rich and you ask, 'How can I become like you, except faster?' 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.

Why should it be easy to do something that, if done well, two or three times, will make your family rich for life?

'Crowd folly', the tendency of humans, under some circumstances, to resemble lemmings, explains much foolish thinking of brilliant men and much foolish behavior - like investment management practices of many foundations represented here today. It is sad that today each institutional investor apparently fears most of all that its investment practices will be different from practices of the rest of the crowd.

The investment game always involves considering both quality and price, and the trick is to get more quality than you pay for in price. It's just that simple.

Hard work, honesty, if you keep at it, will get you almost anything.

The average result has to be the average result. By definition, everybody can't beat the market. As I always say, the iron rule of life is that only 20% of the people can be in the top fifth. That's just the way it is.

To me, it's obvious that the winner has to bet very selectively. It's been obvious to me since very early in life. I don't know why it's not obvious to very many other people.

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.

If you get into the mental habit of relating what you're reading to the basic structure of the underlying ideas being demonstrated, you gradually accumulate some wisdom.

This is a good life lesson: getting the right people into your system is the most important thing you can do.

Go to bed smarter than when you woke up.

One metric catches people. We prefer businesses that drown in cash. An example of a different business is construction equipment. You work hard all year and there is your profit sitting in the yard. We avoid businesses like that. We prefer those that can write us a check at the end of the year.

I think it is undeniably true that the human brain must work in models. The trick is to have your brain work better than the other person's brain because it understands the most fundamental models- ones that will do most work per unit.

We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.

Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.

You must force yourself to consider opposing arguments. Especially when they challenge your best loved ideas.

Most people are too fretful, they worry to much. Success means being very patient, but aggressive when it's time.

No wise pilot, no matter how great his talent and experience, fails to use his checklist.

The wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don't. It's just that simple.

The ethos of not fooling yourself is one of the best you could possibly have. It's powerful because it's so rare.

Show me the incentive and I will show you the outcome

The iron rule of nature is: you get what you reward for. If you want ants to come, you put sugar on the floor.

What do you want to avoid? Such an easy answer: sloth and unreliability. If you're unreliable it doesn't matter what your virtues are. You're going to crater immediately. Doing what you have faithfully engaged to do should be an automatic part of your conduct. You want to avoid sloth and unreliability.

Never, ever, think about something else when you should be thinking about the power of incentives.

Organized common (or uncommon) sense -- very basic knowledge -- is an enormously powerful tool. There are huge dangers with computers. People calculate too much and think too little.

Whenever you think something or some person is ruining your life, it's you. A victimization mentality is so debilitating.

It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.

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 the king hired the guy to look at the sheep guts.

I try to get rid of people who always confidently answer questions about which they don't have any real knowledge.

Determine value apart from price; progress apart from activity; wealth apart from size.

I'm right, and you're smart, and sooner or later you'll see I'm right.

If you're going to be an investor, you're going to make some investments where you don't have all the experience you need. But if you keep trying to get a little better over time, you'll start to make investments that are virtually certain to have a good outcome. The keys are discipline, hard work, and practice. It's like playing golf - you have to work on it.

There are worse situations than drowning in cash and sitting, sitting, sitting. I remember when I wasn’t awash in cash — and I don’t want to go back.

Forgetting your mistakes is a terrible error if you are trying to improve your cognition.

I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, "My God, they're purple and green. Do fish really take these lures?" And he said, "Mister, I don't sell to fish." Investment managers are in the position of that fishing tackle salesman.

Move only when you have an advantage. It's very basic. You have to understand the odds and have the discipline to bet only when the odds are in your favor.

All intelligent investing is value investing - acquiring more that you are paying for. You must value the business in order to value the stock.

The only way to win is to work, work, work, work, and hope to have a few insights

People always underestimate the ability of earth to increase its carrying capacity.

Acknowledging what you don't know is the dawning of wisdom.

If you skillfully follow the multidisciplinary path, you will never wish to come back. It would be like cutting off your hands.

Bull markets go to people's heads. If you're a duck on a pond, and it's rising due to a downpour, you start going up in the world. But you think it's you, not the pond.

Opportunity comes to the prepared mind.

Stock-picking is like gambling: those who win well, seldom bet, but when they do, they bet heavily.

Well the open-outcry auction is just made to turn the brain into mush: you've got social proof, the other guy is bidding, you get reciprocation tendency, you get deprival super-reaction syndrome, the thing is going away... I mean it just absolutely is designed to manipulate people into idiotic behavior.

It's a good habit to trumpet your failures and be quiet about your successes.

I got at a very early age, the idea that the safest way to try and get what you want, is to try and deserve what you want. It’s such a simple idea, it’s the golden rule so to speak. You want to deliver to the world what you would buy if you were on the other end.

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.