One of Charlie Munger (Trades, Portfolio)'s idols is Benjamin Franklin. As I read through his biography, I have found that his principles can prove beneficial for us as investors and in our lives in general. I will lay out the principles and then comment on each one and its application in investing.
- Temperance: Eat not to dullness and drink not to elevation.
- Silence: Speak not but what may benefit others or yourself. Avoid trifling conversation.
- Order: Let all your things have their places. Let each part of your business have its time.
- Resolution: Resolve to perform what you ought. Perform without fail what you resolve.
- Frugality: Make no expense but to do good to others or yourself: i.e. waste nothing.
- Industry: Lose no time. Be always employed in something useful. Cut off all unnecessary actions.
- Sincerity: Use no hurtful deceit. Think innocently and justly; and, if you speak, speak accordingly.
- Justice: Wrong none, by doing injuries or omitting the benefits that are your duty.
- Moderation: Avoid extremes. Forebear resenting injuries so much as you think they deserve.
- Cleanliness: Tolerate no uncleanness in body, clothes or habitation.
- Chastity: Rarely use venery but for health or offspring; never to dullness, weakness, or the injury of your own or another's peace or reputation.
- Tranquility: Be not disturbed at trifles, or at accidents common or unavoidable.
- Humility: Imitate Jesus and Socrates.
How can these be applied to investing:
- Temperance: Paraphrasing Kipling, treat failure and success, those two impostors, the same. The most important thing is to achieve a correct reasoning.
- Silence: The ability to be on our own just thinking can create great advantages over the long run. Prioritize hard data over opinions.
- Order: By assigning our most important asset, time, in a correct way, we become more efficient and leave time to build our criteria.
- Resolution: If we are determined to succeed, we need to plan and act accordingly.
- Frugality: By living below our means, we are able to save money, invest and gradually achieve independence.
- Industry: Since time is all we really have, allocating it in useful projects and thinking about opportunity costs is very important.
- Sincerity: If we are sincere, most importantly with ourselves, we will be able to learn from mistakes and earn the trust of people.
- Justice: Dealing fairly with people is a characteristic of trust-deserving investors.
- Moderation: Keeping a cool head at all times is critical to minimize investing mistakes.
- Cleanliness: A messy room is a reflection of a messy mind. By reducing noises and establishing fluid processes, we can avoid mental errors.
- Chastity: Focusing on the good and not the bad in others is likely to provide us great peace of mind and better use of our time.
- Tranquility: Investing is likely to encounter errors. To learn from them is critical, but these should not reduce our peace of mind.
- Humility: Investing requires humility to recognize that one could be wrong. Being willing to learn for the benefit of better future decisions is very important.
What do you think?
