Charlie Munger’s 5 Key Life Investments for Building Wealth
The first thing you need to do is to make yourself worthwhile.
On November 28th, Charlie Munger passed away at the age of 99 years old.
Charlie Munger is known as a legend in the investment world.
The company he ran with Warren Buffett, Polkshire Hathaway, became one of the four largest reinsurance companies in the world.
In his early years, however, he had to pay for his children’s medical treatment, emptying his family into poverty.
How did a penniless kid become an investment guru?
Countless people are looking for Munger’s life in the wealth code.
Munger himself has long given the answer:
First, focus on doing a good job at the moment; second, to invest in their own future.
Munger’s lifetime wealth, are hidden in these five investments.
1.Investment Brain: I’ve met smart people in my life from all walks of life, and not one of them doesn’t read every day — no, not one.
The famous Chinese investor Li Lu had breakfast with Munger several times.
On each date, Munger would arrive early, take out a book or a newspaper, and read quietly in his seat.
This has always been Munger’s habit.
Whether on business trips or gatherings, he always carries a book with him, he thinks: “As long as I have a book in my hand, I don’t feel like I’m wasting my time.”
Munger is known for his love of books, and children laugh at him as “the book with two legs.
He has read all kinds of books, from economics and investment to psychology and biology, and his knowledge of different fields has broadened his cognitive boundaries.
He enjoys reading biographies of famous people, and feels that he has benefited greatly from making friends with “late greats” such as Adam Smith and Benjamin Franklin.
Such a wide range of reading gives Munger insight into human nature and allows him to invest from a higher standpoint.
In any industry, it is knowledge that counts in the end.
How much time you spend on reading, how much return you will get, turn over every page of the book, are shaping a better self.
Every leap in life is a superimposed effect of knowledge.
Knowledge to make money is a shortcut that every average person can take.
In the book “Poor Charlie’s treasure book”, the young entrepreneur asked Monger: What do I have to do, like you, live as a rich old man?
Monge smiled and said: It’s very simple, every day when you wake up, strive to be smarter than yesterday.
How can you be smarter than you were yesterday?
Indeed, if there is a “shortcut” to becoming smarter, I think it is reading.
2. Investing in character: If you really want to learn something from me, remember my words: discipline, reliability. All these traditional virtues will last a lifetime.
The writer Mizuki Ran mentioned a “law of conservation of wealth”.
Wealth is an outward manifestation, a “gain”, while our inner quality is a “virtue”.
The essence of wealth is the realization of character.
Munger once bought a company with a partner, Glenn.
At the time, two old ladies held bonds issued by the company.
Originally, it would have been easy for them to acquire these bonds at a price far below their face value.
But Munger insisted on paying them at par.
Then Glenn wanted to withdraw his shares for cash because he was investing in another project.
Munger asked him how much he wanted.
Glenn thought about it and said $130,000 dollars.
Munger said, “No, you’ve got the math wrong.
When Glenn heard this, he thought Munger thought he had overstated the price, and when he was worried, he heard Munger say, “Your share is worth $230,000”.
This is Munger has always been upholding the principle of business: take the right path, the wider the road.
If you want to be stable and far-reaching, you have to be a human being first, and then do things.
If you often worry about taking advantage of, customers do not dare to entrust you, if you often dig a pit for colleagues, colleagues do not dare to cooperate with you.
Ten thousand feet high building begins at the base, to character as the foundation of the establishment.
People with poor character, even if they climbed higher and farther, there will be a day of falling.
3. Investment Mentality: I don’t spend a lot of time regretting the past, and once I’ve learned my lesson, I won’t get stuck in it again.
Once, Munger to take a plane, for some reason, he was in the security check, the detector constantly beeping alarm.
He had no choice but to turn back again and again to go through the security check.
But with this delay, he would not be able to catch his flight.
But he didn’t yell at the staff or get stuck in a bad mood. He rebooked his flight and waited calmly in the terminal.
This has always been Munger’s mentality: don’t think of yourself as a victim.
He has fallen to many lows in his life, watching his 7-year-old son swallow his last breath from leukemia;
He has lost his left eye in a botched surgery;
He also experienced the world oil crisis and the stock market crash, which made the investment company he managed lose more than half of its value.
The desperate times are enough to make a normal person collapse.
However, Munger never felt sorry for himself, but poured out the grievances and bitterness in his heart, step by step out of the predicament.
Because of this, after the bottom of life, Munger can meet a turning point every time, every time the wealth will grow to a new height.
I can’t help but think of the two concepts mentioned by corporate consultant Liu Yun: “brittleness” and “elasticity”.
Who will break first when a vase and a ball are dropped on the ground at the same time?
The answer is obvious.
Sometimes we are just like vases, we cannot withstand the tossing and turning, we cannot withstand accidents.
Once we encounter a setback, we are stuck in a dead end.
When we train ourselves to be a ball, we can bounce back from the bottom no matter how many hammers we have taken or how many difficulties we have suffered.
4. Investability: The best way to get what you want is to make yourself worthy of it.
Author Peter Kaufman is an admirer of Munger.
He has compiled hundreds of Munger’s speeches into a book that examines why Munger has been so successful in his life.
He compared Munger to the average investor.
He found that Munger’s greatest strength was his ability to constantly improve his professionalism.
Munger can talk to all kinds of investment gurus, not only on their operating concepts, techniques, but also to point out their strengths and weaknesses.
Moreover, he didn’t fall into the mold of his predecessors, and established a set of “value judgment” investment system by himself.
He has developed a hundred thinking models to cope with all kinds of problems in his work.
Peter once asked him: Why do you keep learning so much?
Munger said, “The future belongs to lifelong learners.
The world is progressing every second, and your stagnation is a kind of regression.
If you go to work and try to fish in the water, you will waste your own martial arts and become more and more mediocre.
If you know how to polish your skills, so that you become a small group of people in the upper reaches of the industry, your value will rise.
American computer experts, the Dreyfus brothers, once proposed a “Dreyfus model”:
Proficiency in a professional skill can be achieved
through five steps:
beginner, advanced beginner, competent, proficient and expert.
This society follows the rule of Pareto principle.
The difference between an expert and a novice is that the former may share 80% of the cake with a few people, while the latter may have to compete with the majority for 20% of the cake.
The Pareto principle, also known as the 80/20 rule, is a theory stating that 80% of outcomes come from 20% of causes. Some key points about the Pareto principle:
- Originated from Italian economist Vilfredo Pareto’s observation that 80% of Italy’s land belonged to 20% of the population
- Applied in various fields now to suggest that the majority of results come from a minority of inputs
- For example, 20% of customers drive 80% of sales at many companies
- Helps guide business decisions — should focus efforts on the vital few inputs that yield the best results
- A common rule of thumb, though the distribution does not need to be strictly 80/20 every time
The key takeaway is that a small proportion of causes, inputs or effort tend to lead to a large proportion of results, outputs or rewards. By focusing efforts on that vital 20%, much more can be achieved.
In summary, the Pareto principle is the observation that in many systems, 20% of causes lead to 80% of effects. It helps identify the most impactful inputs to optimize overall outcomes.
If you want to make money, you have to make yourself worthwhile first.
For those who have the ability, their ability is the iron rice bowl that no one can take away.
5. Investing in the family: I am a practitioner of Confucianism in the United States, and we are both very family-oriented people.
Confucianism recognizes that there are “five relationships” between people, i.e., ruler and subject, father and son, husband and wife, brother and friend.
Of these five relationships, three are family relationships.
In the view of the Chinese, family harmony is the key to prosperity, and therefore family relationships are highly valued.
Munger agrees with this concept, he said at the Polkshire Hathaway shareholders meeting:
I’m a practitioner of Confucius’ thinking in the United States, and we’re both very family-oriented people.
He has a habit of sitting around the dinner table with his family, no matter how busy he is.
At the dinner table, Munger would tell stories and share anecdotes about his life in a colorful manner to enhance the relationship with his family.
When he travels alone, he always takes economy class for both business and personal trips.
But when he travels with his wife, Nancy, he takes his own private jet and gives them the utmost care.
He explains, “My wife has given me a lot in her life raising so many children, and she’s not well, so I have to take good care of her.”
Nancy was also touched by Munger’s care.
She worked hard to create a good family atmosphere for Munger and his children, so that Munger could devote himself to his career.
When people reach a certain age, they realize that running a good family is making money.
When you work overtime, you can stay for meals, when you are sad, you can be comforted, and when you are sick, you can be busy.
With such a solid backing, we can concentrate on doing a good job and making the business bigger.
Harvard University has conducted a 78-year experiment to study: what kind of people are most likely to become winners in life?
In the end, it was concluded that those who scored high in “close relationships” had a much higher average annual salary than those who scored low.
Family is good, career is good.
Having a partner who can help us through thick and thin is the greatest wealth in our life.
Munger said this: My sword is passed on to those who can wield it.
Anyone would like to take this sword.
But what kind of people can?
I think those who think about getting rich overnight will eventually miss it.
Only those who have invested their lives in themselves and cultivated themselves deeply can wield this sword.
