Poor Charlie’s Almanack
This will be my summary notes of Poor Charlie’s Almanack by Charlie Munger. He is the right-hand man of Warren Buffet and one of the wealthiest individuals
- “My children laugh at me. They think I’m a book with a couple of legs sticking out.”
- “Physics-like problem solving was to become a passion for Charlie and is a skill he considers helpful in framing the problems of life.”
- The short biography of his life shows that he had a drive, he didn’t think he had enough. In particular, this was related to earning money, I wonder where this comes from. (in the same paragraph it’s also mentioned that he was aware of not spending too much and focus on the tasks at hand).
- Key to success in one word? “rational”
- Warren Buffet on Charlie Munger: “there
is honesty and integrity, and always doing more than his share and not complaining about what the other person does. - “I would say everything about Charlie is unusual. I’ve been looking for the usual now for forty years, and I have yet to find it. Charlie marches to his own music, and it’s music like virtually no one else is listening to. So, I would say that to try and typecast Charlie in terms of any other human that I can think of, no one would fit. He’s got his own
mold .” - On the strategy of Berkshire Hathaway, “they have a spectacular track record of identifying undervalued companies and then either buying large stakes in the public markets or acquiring them outright.”
- He learned a lot by studying the great people from history, he would make them his ‘friends’ and read many biographies during his lifetime.
- “Franklin used his self-made wealth to achieve financial independence so he could concentrate on societal improvement. Charlie admires that trait in his mentor and strives to emulate Franklin.” I hope to one day be in this category of people and/or to combine working and giving.
- Munger was heavily influenced by Cicero. Some lessons are around check-and-balances in society, about the value of being lost in thought, life-long learning, and of having your own point of view.
- “Cicero counsels that the study of philosophy, in a life-long search for basic causes, is an ideal activity, usually serviceable for old people all the way to the grave.”
- “To Cicero, if you live right, the inferior part of life
is the early part.” - He also argues against complaining, like so many do, and to look at a positive aspect of everything. E.g. when getting old you lose sexual vigour but also have less attraction to others who aren’t your partner. This reframing is very much in line with Stoic thought.
- When returning a car he had bought, he was sure to top it up, even when in a hurry. Always do good unto others who help you. I like this very much and makes me think of a friend who is always very attentive.
- “Do the job right the first time.”
- Buy things that are durable (e.g. clothes).
- What I think is the biggest difference in thinking between Charlie and me, is that he can be single-minded and focus on just one thing. I have those moments sometimes but I would like to have that state of mind more often. I guess that I do have a very good skill
of combining different areas of thought. But the Deep Work part of it could be better. - “Find out what you’re best at and keep pounding away at it.”
Chapter 2: The Munger Approach to Life, Learning, and Decision Making
- “Take a simple idea and take it seriously.”
- When thinking about business, and comparing it to evolution, the riches are in the niches.
- “You must know the big ideas in the big disciplines and use them routinely-all of them, not just a few. Most people are trained in one model-economics, for example-and try to solve all problems in one way. You know the old saying: ‘To the man with a hammer, the world looks like a nail.’ This is a dumb way of handling problems.”
- “Just as multiple factors shape almost every system, multiple models from a variety of disciplines, applied with fluency, are needed to understand that system.”
- Mungers uses complex models that eventually lead to simplicity, not the other way around.
- As an analogy to baseball, only hit things in your striking range. Don’t try and go for things outside it. Hit those in the middle very hard. Don’t swing when others would have. This way you will have the energy/money to swing hard when you need to.
- I guess the same goes for time investment and how to live your life. Focus on the things that you know you can do (and thus even expand your circle in which you can hit). Don’t go out on different adventures (e.g. affair), but strengthen what you have (e.g. close friends, sports you already do, etc).
- “All I want to know is where I’m going to die, so I’ll never go there.”
- “A scientific theory should be as simple as possible, but no simpler.”
- An idea he took from The Intelligent Investor is that the market/humans are rational (at times), but also very irrational, knowing how that works is of utmost value.
- With regards to his investment choices, he also stays within what he can understand, so no to pharma or IPO’s.
- Identify your circle of competence by not only being able to recite what you know, but to answer the next question too.
- Companies are not only assessed on the basis of their financials (this is just the start), one of the main things is the ‘moat’, the competitive advantage they have over their competitors.
- He practices: “extreme patience combined with extreme decisiveness.”
- Sometimes companies/people/species win by outcompeting, at other times they win by outcooperating.
- See page 73 (87) for an investment checklist (The Checklist Manifesto)
- Charlie is also known for his integrity and honesty. “If you tell the truth, you don’t have to remember your lies. So we try and keep it simple by telling it like it is at all times.”
- How to get rich: 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.
Alright that is it for the notes for now. There are many letters at the end, and I will read them, probably, some day.