Charles Munger’s Worldly Wisdom
Posted in Investing, Life and Thoughts on Oct 11, 2008
This article by Charles Munger titled “A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business” is such a great read that I would definately call it the read of the day if I had to.
Charles Munger has been the right man of Warren Buffet in managing Berkshire Hathaway since the old days when Berkshire was still in the textile industry. In this article, it gives great insights on what people like him have in mind and how he views the world in his own lens.
Points and comments that I’ve found interesting were on topics such as:
1. To learn and have multiple models
2. Generalize or go specific (applies to studies, business, investments etc)
3. Scalability
4. Business models and sorts of business (and management!) that Berkshire invests in
5. Invest in stocks as if you can only have 20 choices in your whole lifetime.
6. Horse Betting and how it relates to investing
7. His comments about Warren Buffet
Perhaps point 3 and 4 were more insightful to me. Not all business models are profitable and not all businesses that earn money are scalable. Investing in a company with good management is better in the long term then to invest in business where there’s currently a hot demand (such as the mining industry).
Let me know if you have the discipline to read and digest the whole article. It’s quite long, but a seriously good read. Judging by the financial crisis that’s currently going on, reading this might just keep you sane and think logically.
I love Charlie Munger’s mental framework. That speech he gave at USC guides me in my investing. Steve Jobs gave a speech at Stanford which guides my entrepreneurship. You can find the speech Steve Jobs gave on YouTube - I’m so glad someone in the crowd had a video camera.
Hi Allan,
It was actually through your article The Pareto Principle for Careers that I’ve found out about the Charlie’s Munger Latticework Model.
And yes, I share the same view as you do.
Thats really helpful especially in times like this. It is really wise to invest in a company with a good management.
I wonder how many so called web 2.0 startups will survive this crisis. No wonder Warren and Charlie says it out loud that they never invest in technology related stocks.
Buffett and Munger do not invest in technology companies because they are wise enough to know what they don’t know. That does not mean that technology is not a good investment. If you have grown up with technology and understand it well, you should be able to make a call on which technology companies have a bright future.
You should also check out Steve Jobs’ commencement speech at Stanford. It will inspire you from an entrepreneurial point of view.
David, where are you located?
Well said, well said. Not saying that tech companies aren’t good investment but find some people don’t really know what they are investing in and overly optimisitc when it comes to tech. My limited knowledge tells me that tech companies such as Oracle, Apple, Cisco, Nintendo and Sun are still good investment. Google is good too but judging by the price (even though it has dropped significantly recently), it looks like it would only be a worthwhile investment if only you had started investing in it during the IPO.
I’m currently residing in Perth, Australia.
You may enjoy “The Four Filters Invention of Warren Buffett and Charlie Munger.” It explains and honors the intellectual partnership of two brilliant men. The genius of Buffett and Munger’s four filters innovation was to “capture all the important stakeholders” in one “multi-variable” four step process.
http://www.amazon.com/dp/0615241298
Bud - I thought I had collected every book on Warren Buffett and Charlie Munger. I’ve never come across your book before. You ought to really build you own blog and promote your book. I’m offering to help.
Allan - I think Bud’s official webpage can be found here http://www.frips.com and probably needs a bit of facelift. FYI, Bud didn’t subscribe to replies from these comments, and I doubt he’ll will know what we’re chatting about here.
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