Charlie Munger (Trades, Portfolio) is Warren Buffett (Trades, Portfolio)'s right-hand man at Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) and also one of the most prominent thinkers in the investment world. In fact, Munger is better known for his views on life, psychological principles and talks on how to succeed at life than he is for his investing success. Whenever Munger speaks, it always pays to listen, and we're tremendously lucky to have him as part of the investment community.
Some quotes from a speech Munger gave towards the end of last year at the University of Michigan Ross School of Business exemplify his philosophy. This talk covered many topics, but towards the end of the interview, Munger was asked for his most important piece of advice for young students looking forward into their futures. Here's his answer:
"It's amazing how if you just get up every morning and keep plugging and have some discipline and keep learning and it's amazing how it works out okay, and I don't think it's wise to have the ambition to be president of the United States or a billionaire or something like that because the odds are too much against you. Much better to aim low. I did not intend to get rich I wanted to get independent. I just overshot.
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And by the way, while you're clapping some of the overshooting was accidental. You can be very deserving and very intelligent very disciplined, but there's also a factor of luck that comes into this thing, and the people that the outcomes that seem extraordinary are the people who have discipline, and intelligence, and good virtue plus a hell of a lot of luck.
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Why wouldn't the world work like that, so you shouldn't give credit for the unusual? A friend of mine said about a colleague of his in his fraternity he says old George was a duck sitting on a pond and they raised the level of a pond. There are a lot of people would just walk into the right place and rise and then and there are a lot of very eminent people who have many advantages, and they've got one little flaw or one bit of bad luck, and they're mired in misery all their lives but, that makes it interesting to have all this variation."
To put it another way, Munger's secret to success is daily hard work and a little bit of luck. This is not difficult to replicate, but it does require commitment, something most people, unfortunately, do not have. There's no shortcut to getting rich or succeeding in life; you have to put in the hard work.
Another interesting takeaway from the talk is Charlie's response when asked how he managed to convince Warren Buffett (Trades, Portfolio) to "stop buying the bad apples and start buying the good apples?" or to put it another way, how did Munger convince Buffett to move away from deep value to buying quality companies at attractive prices? Here's his response:
"Warren gave me credit, but he was going to learn it anyway. He just made so much money in this other stuff, and he'd been taught it [value investing] by Ben Graham, it was hard for him to quit when he was just clearing money. But he saw the point, and well you couldn't scale that business and it was kind of scroungy and unpleasant when you're firing people...so we just went out and bought better businesses, and we've been doing it ever since. Coming to business not as business school graduates but as people who had owned portfolios or securities, we thought like capitalists because we were always in the shareholder mindset. A lot of people running these businesses think like careerists...it also helps to look at the business strategy problems as though you're an owner. So my advice to you is you don't ever get to be a careerist so much you don't see it from the owners point of view. That's what General Motors did they had a bunch of careers, and an owner would have seen immediately that situation was hopeless and they just romped through it with many denials...Of course, they went bankrupt. The mightiest company in the world went bankrupt, and none of those hotshot executives thought like an owner...it was hopeless."
Disclosure: The author owns no shares mentioned.
