Charlie Munger Quotations

Gold is a great thing to sew into your garments if you're a Jewish family in Vienna in 1939, but I think civilized people don't buy gold, they invest in productive businesses.

A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it.

When someone takes their existing business and tries to transform it into something else - they fail. In technology that is often the case. Look at Kodak: it was the dominant imaging company in the world. They did fabulously during the great depression, but then wiped out the shareholders because of technological change.

There's more honor in investment management than in investment banking.

Wall Street has too much wealth and political power.

Everyone has the idea of owning good companies. The problem is that they have high prices in relations to assets and earnings, and that takes all of the fun out of the game.

People are trying to be smart - all I am trying to do is not to be idiotic, but it's harder than most people think.

The perfect example of Darwinism is what technology has done to businesses.

There's danger in just shoveling out money to people who say, 'My life is a little harder than it used to be.' At a certain place you've got to say to the people, 'Suck it in and cope, buddy. Suck it in and cope.'

I'm proud to be associated with the value system at Berkshire Hathaway; I think you'll make more money in the end with good ethics than bad.

I believe Costco does more for civilization than the Rockefeller Foundation. I think it's a better place. You get a bunch of very intelligent people sitting around trying to do good, I immediately get kind of suspicious and squirm in my seat.

I'm used to people with very high IQs knowing how to recognize reality, but there's a huge human tendency where it may be instructive to think that whatever you're doing to succeed is all right.

If all you needed to do is to figure out what company is better than others, everyone would make a lot of money. But that is not the case. They keep raising the prices to the point when the odds change.

Step by step you get ahead, but rarely in fast spurts.

The best thing a human being can do is to help another human being know more.

Over the long term, it's hard for a stock to earn a much better return that the business which underlies it earns. If the business earns six percent on capital over forty years and you hold it for that forty years, you're not going to make much different than a six percent return - even if you originally buy it at a huge discount. Conversely, if a business earns eighteen percent on capital over twenty or thirty years, even if you pay an expensive looking price, you'll end up with one hell of a result.

A few public hangings will really change behavior. One of our Presidents said if he could execute three people each year for no cause, it would make it a lot easier to govern. When someone said that's not enough, he said, "Oh yes it is, because I'd publish the list of people under consideration."

Stock-picking is like gambling: those who win well, seldom bet, but when they do, they bet heavily.

I did not succeed in life by intelligence. I succeeded because I have a long attention span.

In my whole life, I have known no wise people who didn't read all the time - none ... ZERO.

Whenever you think something or some person is ruining your life, it's you. A victimization mentality is so debilitating.

Some people seem to think there's no trouble just because it hasn't happened yet. If you jump out the window at the 42nd floor and you're still doing fine as you pass the 27th floor, that doesn't mean you don't have a serious problem. I would want to address the problem right now.

People have always had this craving to have someone tell them the future. Long ago, kings would hire people to read sheep guts. There's always been a market for people who pretend to know the future. Listening to today's forecasters is just as crazy as when the king hired the guy to look at the sheep guts.

When you locate a bargain, you must ask, 'Why me, God? Why am I the only one who could find this bargain?'

The big money is not in the buying and selling ... but in the waiting.

I believe in the discipline of mastering the best that other people have ever figured out. I don't believe in just sitting down and trying to dream it all up yourself. Nobody's that smart.

If you don't keep learning, other people will pass you by. Temperament alone won't do it - you need a lot of curiosity for a long, long time.

There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested - there's never any cash. It reminds me of the guy who looks at all of his equipment and says, 'There's all of my profit.' We hate that kind of business.

I do not think you can trust bankers to control themselves. They are like heroin addicts.

The safest way to try to get what you want is to try to deserve what you want. It's such a simple idea. It's the golden rule. You want to deliver to the world what you would buy if you were on the other end.

Well the open-outcry auction is just made to turn the brain into mush: you've got social proof, the other guy is bidding, you get reciprocation tendency, you get deprival super-reaction syndrome, the thing is going away... I mean it just absolutely is designed to manipulate people into idiotic behavior.

The model I like to sort of simplify the notion of what goes on in a market for common stocks is the pari-mutuel system at the racetrack. If you stop to think about it, a pari-mutuel system is a market. Everybody goes there and bets and the odds change based on what's bet. That's what happens in the stock market.

Any year that you don't destroy one of your best-loved ideas is probably a wasted year

An idea or a fact is not worth more merely because it's more available to you.

Determine value apart from price; progress apart from activity; wealth apart from size.

We try more to profit from always remembering the obvious than from grasping the esoteric.

People calculate too much and think too little.

You have to have a temperament to grab ideas and do sensible things. Most people don’t grab the right ideas or don’t know what to do with them.

You need to have a passionate interest in why things are happening. That cast of mind, kept over long periods, gradually improves your ability to focus on reality. If you don't have the cast of mind, you're destined for failure even if you have a high I.Q.

It's natural that you'd have more brains going into money management. There are so many huge incomes in money management and investment banking - it's like ants to sugar. There are huge incentives for a man to take up money management as opposed to, say, physics, and it's a lot easier.

Spend each day trying to be a little wiser than you were when you woke up.

I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me that's not optional; that's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you're a jerk.

All I want to know is where I’m going to die, so I’ll never go there

Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.

If (investing) weren't a little difficult, everybody would be rich.

We're the tortoise that has outrun the hare because it chose the easy predictions.

Go to bed smarter than when you woke up.

Well, the questioner came from Singapore which has perhaps the best economic record in the history of developing an economy and therefore he referred to 15% per annum as modest. It's not modest-it's arrogant. Only someone from Singapore would call it modest.

Most people are too fretful, they worry to much. Success means being very patient, but aggressive when it's time.

Rationality is not just something you do so that you can make more money, it is a binding principle. Rationality is a really good idea. You must avoid the nonsense that is conventional in one's own time. It requires developing systems of thought that improve your batting average over time.

All the equity investors, in total, will surely bear a performance disadvantage per annum equal to the total croupiers' costs they have jointly elected to bear. This is an inescapable fact of life. And it is also inescapable that exactly half of the investors will get a result below the median result after the croupiers' take, which median result may well be somewhere between unexciting and lousy.

Common stock investors can make money by predicting the outcomes of practice evolution. You can't derive this by fundamental analysis - you must think biologically.

Berkshire has the lowest turnover of any major company in the U.S.The Walton family owns more of Wal-Mart than Buffett owns of Berkshire, so it isn't because of large holdings. It's because we have a really unusual shareholder body that thinks of itself as owners and not holders of little pieces of paper.

You're not going to get very far in life based on what you already know. You're going to advance in life by what you're going to learn after you leave here.

You must have the confidence to override people with more credentials than you whose cognition is impaired by incentive-caused bias or some similar psychological force that is obviously present. But there are also cases where you have to recognize that you have no wisdom to add - and that your best course is to trust some expert.

Remember that reputation and integrity are your most valuable assets - and can be lost in a heartbeat.

Those who will not face improvements because they are changes, will face changes that are not improvements.

The safest way to get what you want is to deserve what you want.

We get these questions a lot from the enterprising young. It's a very intelligent question: You look at some old guy who's rich and you ask, 'How can I become like you, except faster?' 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.

I try to get rid of people who always confidently answer questions about which they don't have any real knowledge.

No wise pilot, no matter how great his talent and experience, fails to use his checklist.

You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long, time.

It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.

Recognize reality even when you don't like it-especially when you don't like it.

We have a high moral responsibility to be rational

A lot of our respected financial institutions are just casinos in drag.

It's in the nature of stock markets to go way down from time to time. There's no system to avoid bad markets. You can't do it unless you try to time the market, which is a seriously dumb thing to do. Conservative investing with steady savings without expecting miracles is the way to go.

A lot of people think if you just had more process and more compliance -- checks and doublechecks and so forth -- you could create a better result in the world. Well, Berkshire has had practically no process. We had hardly any internal auditing until they forced it on us. We just try to operate in a seamless web of deserved trust and be careful whom we trust.

Understanding how to be a good investor makes you a better business manager and vice versa.

In the corporate world, if you have analysts, due diligence, and no horse sense, you've just described hell.

The world of derivatives is full of holes that very few people are really aware of. It's like hydrogen and oxygen sitting on the corner waiting for a little flame.

The game of life is the game of everlasting learning. At least it is if you want to win.

Forgetting your mistakes is a terrible error if you are trying to improve your cognition.

You have to know accounting. It's the language of practical business life. It was a very useful thing to deliver to civilization. I've heard it came to civilization through Venice which of course was once the great commercial power in the Mediterranean. However, double entry bookkeeping was a hell of an invention.

We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.

All intelligent investing is value investing - acquiring more that you are paying for. You must value the business in order to value the stock.

A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.

Mimicking the herd invites regression to the mean.

Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.

Deliver to the world what you would buy if you were on the other end.

Those who keep learning, will keep rising in life

The whole concept of dividing it up into 'value' and 'growth' strikes me as twaddle. It's convenient for a bunch of pension fund consultants to get fees prattling about and a way for one advisor to distinguish himself from another. But, to me, all intelligent investing is value investing.

You must value the business in order to value the stock.

Your life must focus on the maximization of objectivity.

Over the very long term, history shows that the chances of any business surviving in a manner agreeable to a company's owners are slim at best.

What's fascinating . . .is that you could now have a business that might have been selling for $10 billion where the business itself could probably not have borrowed even $100 million. But the owners of that business, because its public, could borrow many billions of dollars on their little pieces of paper- because they had these market valuations. But as a private business, the company itself couldn't borrow even 1/20th of what the individuals could borrow.

I have what I call an iron prescription that helps me keep sane when I naturally drift toward preferring one ideology over another and that is: I say that I'm not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people who support it. I think only when I've reached that state am I qualified to speak. This business of not drifting into extreme ideology is a very, very important thing in life

Berkshire's whole record has been achieved without paying one ounce of attention to the efficient market theory in its hard form. And not one ounce of attention to the descendants of that idea, which came out of academic economics and went into corporate finance and morphed into such obscenities as the capital asset pricing model, which we also paid no attention to. I think you'd have to believe in the tooth fairy to believe that you could easily outperform the market by seven-percentage points per annum just by investing in high volatility stocks.

The idea of excessive diversification is madness.

I think the notion that liquidity of tradable common stock is a great contributor to capitalism is mostly twaddle. The liquidity gives us these crazy booms, so it has as many problems as virtues.

The interesting thing is the field is so big - it's enormous. One thing a modern civilization needs is energy.

It takes character to sit there with all that cash and do nothing. I didn't get to where I am by going after mediocre opportunities.

Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group then to hell with them.

Of course I'm troubled by huge consumer debt levels - we've pushed consumer credit very hard in the US. Eventually, if it keeps growing, it will stop growing. As Herb Stein said, "If something cannot go on forever, it will stop." When it stops, it may be unpleasant. Other than Herb Stein's quote, I have no comment. But the things that trouble you are troubling me.

Part of that, I think, is being able to tune out folly, as distinguished from recognizing wisdom. You've got whole categories of things you just bat away so your brain isn't cluttered with them. That way, you're better able to pick up a few sensible things to do.

...by regularly reading business newspaper and magazines I am exposed to an enormous amount of material at the micro level.. I find that what I see going on there pretty much informs me about what's happening at the macro level.

It's not a competency if you don't know the edge of it.

...the cost of being a publicly traded stock has gone way, way up. It doesn't make sense for a little company to be public anymore. A lot of little companies are going private to be rid of these burdensome requirements....

Any time anybody offers you anything with a big commission and a 200-page prospectus, don't buy it. Occasionally, you'll be wrong if you adopt "Munger's Rule". However, over a lifetime, you'll be a long way ahead-and you will miss a lot of unhappy experiences.

Move only when you have an advantage. It's very basic. You have to understand the odds and have the discipline to bet only when the odds are in your favor.