1. 1-Sentence-Summary:
1.1. Charlie Munger teaches you the investment approach and ideas about life from Warren Buffett’s business partner and billionaire Charlie Munger, which the two have used for decades to run one of the most successful companies in the world.
2. Favorite quote from the author:
2.1. "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." - Charlie Munger
3. 3 lessons:
3.1. Good investors stick with what they know and stay inside their circle of competence.
3.1.1. If a stock analyst tries to sell you on Facebook one week, a pharmaceutical company the next, and a car manufacturer after that, all kinds of alarm bells should ring in your head.
3.1.1.1. Every single industry on this planet is incredibly complex and hard to understand by now, so there are very few people who are knowledgeable about more than one.
3.1.1.2. Also, the financial nature of any single investment is pretty complicated too, so an “expert” might often try to sell you on something she herself doesn’t even fully understand.
3.1.2. At Berkshire Hathaway, Charlie and Warren take Benjamin Graham’s value investing approach of waiting for a great company to trade at a price that’s below what it should be.
3.1.2.1. Only if they understand the core business, the company’s values and what management is up to, do they invest.
3.1.3. The model is simple, but not easy.
3.1.3.1. It leaves them with only three buckets for potential investments.
3.1.3.1.1. In, Out, and Too Tough
3.1.3.1.2. The first two are self-explanatory, the third one is for investments that might be good choices in the future, but aren’t understood well enough by Charlie and Warren right now.
3.1.4. Don’t try to invest in anything that moves.
3.1.4.1. Stick with what you know and be patient in letting the right companies find you.
3.2. Don’t just do something, stand there!
3.2.1. This model requires one thing above all else: patience.
3.2.1.1. When it comes to investing, the classic saying: “Don’t just stand there, do something!” is bad advice.
3.2.1.2. The companies that fit Charlie’s and Warren’s investment criteria are far and few between, so he likes to say the opposite: “Don’t just do something, stand there!”
3.2.2. In investing as in life, a lot of your time will (and in this case should) be spent waiting.
3.2.2.1. Kind of like waiting for a bus – you never know when the next one’ll show up, but you have to be ready.
3.2.3. Wait and reap all the profits to be had from just a few trades per year, as long as they’re the right ones.
3.3. Build worldly wisdom by learning from a wide range of disciplines.
3.3.1. Charlie tries to accumulate something he calls worldly wisdom, which is really just a set of mental models he built for himself, coming from a vast variety of different disciplines and fields.
3.3.2. Psychology, economics, mathematics, history, biology, physics, philosophy all take a different look at the world.
3.3.3. What unites them is that there’s wisdom to be found in them.
3.3.3.1. If you take them as different lenses to view the world through, you can take the right one at the right time, and even combine them, if you have to.
3.3.3.2. This can be an advantage over other people’s assessment of any given situation.
3.3.3.3. But to do so, you have to go beyond merely studying facts and figures.
3.3.3.3.1. Look at the core questions, answers and ideas of each discipline.
3.3.3.3.2. Things like why people study these topics, how they structure what they learn and how they use it.
3.3.4. Have a few core principles at the ready, and reason your way to the answers to many complex questions, by relating important ideas from different fields to one another and seeing the world as it really is, instead of just from one, limited, narrow point of view.