The Secrets to Charlie Munger’s Success | Mint

The Secrets to Charlie Munger’s Success

Charlie Munger in 2019 at his home in Los Angeles. PHOTO: MICHAEL LEWIS FOR THE WALL STREET JOURNAL
Charlie Munger in 2019 at his home in Los Angeles. PHOTO: MICHAEL LEWIS FOR THE WALL STREET JOURNAL

Summary

The Berkshire Hathaway vice chairman was known for his straightforward advice to business leaders at a ‘Friday lunch club.’

Business and financial leaders made frequent pilgrimages to Los Angeles to hear Charlie Munger’s thoughts as he held court while peering through thick eyeglasses over high, rosy cheekbones.

Among the attendees at his weekly “Friday lunch club" and periodic dinners were John and Patrick Collison, founders of the online payment firm Stripe; Bobby Kotick, chief executive of videogame company Activision Blizzard; Pradeep Khosla, chancellor of the University of California, San Diego; Maria Pope, chief executive of Portland General Electric, Oregon’s largest utility; and Howard Marks, co-founder of investment firm Oaktree Capital Management.

Munger died Tuesday at the age of 99.  His weekly lunch guests came largely to hear him him talk about the “latticework" of “mental models" that he said helped explain his success and that of Berkshire Hathaway, where he was vice chair:

Invert, always invert.

As a military meteorologist during World War II, Munger didn’t ask what would keep pilots safe. Instead, he pondered what could kill them, then focused all his effort on trying to predict snow, ice or fog—and ignored everything else. 

Know your circle of competence. 

Munger often said he and Buffett were quick to throw potential investments into a “too-hard" pile. If they couldn’t understand it, they just moved on. 

Keep a list of “asininities" and avoid them. 

Munger wrote a long essay, “The Psychology of Human Misjudgment," summarizing 25 types of cognitive errors. 

Think in multiple dimensions. 

Munger told how, as a lawyer, he more than doubled the appraised value of a client’s property by realizing that it wasn’t just the acreage, but also its changes in altitude, that made it desirable.

“Over, under and kapow!" 

In artillery training, Munger noted, recruits learn to bracket the target by overshooting, undershooting and then hitting it. He estimated investment values the same way, deliberately oversizing, undersizing, then landing in the middle.

Embrace your mistakes. 

“I like people admitting they were complete stupid horses’ asses," Munger said in 2017. “I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn."

“Destroy your own best-loved ideas." 

Being good at that is “part of the reason I’ve been a little more successful than most people," he told the Journal in 2019. “I’m pleased when I can destroy an idea that I’ve worked very hard on over a long period of time."

Become a learning machine. 

“We all start out stupid and we all have a hard time staying sensible, and you have to keep working at it," Munger told an audience at the University of Redlands in California in 2020. That requires reading constantly—and not just in your own area. “I never liked [specialization]," he said. “I like romping over a whole field."

Justin Baer contributed to this article.

Write to Jason Zweig at intelligentinvestor@wsj.com

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