Today, 1st Jan is Charlie Munger’s birthday and he turns 98! He is the Vice-Chairman of Berkshire Hathaway. But, so what? Why is he special?

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Many years ago, I heard a speech of his, delivered at a graduation ceremony. And graduation ceremony speeches are boring. Usually the chief guest makes a long and lengthy speech and not one of the graduating students pays attention. I don’t even remember who our Chief Guest was and I am sure neither would he.

However, what makes this speech remarkable was that Charlie Munger said “I don’t care what your cause of self pity is. Your child could be dying of cancer but self-pity is not the answer“. And I thought to myself: what a heartless thing to say…granted that it is a graduation speech and not many would pay attention, but still. What does he know about losing a child to cancer?

Turns out, he does know about it. In his 20s, he was broke, his marriage was falling apart and one of his children died of leukemia. So if he was saying self pity is no good, I thought I ought to pay more attention.

Over the years as I read more about Charlie Munger, the more I saw the same pattern of not wasting time on self-pity. I think he was in his 50s when he was told he could go blind and so he did the most rational thing- learn Braille.

Likewise, in the 2021, Daily Journal annual meeting somebody sought career advice on his skill sets becoming redundant. Charlie’s answer was the same no-nonsense no self-pity answer. If it is fixable, fix it. Else, make peace with it.

Question: What advice would you give to someone who is trying to stay within their circle of competence but finding that the pace of technical technological innovation is rapidly reducing that circle?

Charlie Munger: Well, of course, if they bring in a brand new technology you don’t understand at all, you’re at something of a disadvantage. And my advice would be if you have a fixable disadvantage, remove it. And if it’s unfixable, learn to live without it. What else can you do? You fix what you can fix, and what you can’t fix, you endure.

Daily Journal Annual Meeting, 2021

Lesson. Bad things are going to happen anyway. Don’t waste time in self-pity. More philosophically: pain is inevitable; suffering is optional.

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Investing in stocks is like buying low and selling high, right? If you can’t sell high, the next best thing to do would be to just sell, right? I mean, how hard could it be? And what is all this wisdom BS that all these investors keep talking about? What has wisdom got to do with picking stocks? And why read books just to pick stocks?

Both Charlie and Warren spend a majority of their time reading. Not tweeting. Not texting. Not sharing videos. Not appearing on webinars. Not appearing on TV debates. Reading good books leads to good ideas. Good ideas help make good decisions (financial and non financial). And good decisions can lead to a better life. A better life does not mean a pain-free life; may be one with less suffering.

If you read books on behavioral psychology you will appreciate that humans are likely to make convenient choices. Businesses that make the life of their customers convenient are going to enjoy this advantage and if they invest in making it more convenient then the advantage is going to accumulate even more. If you read books on micro economics, you will appreciate the importance of a free and unregulated marketplaces and how they are convenient to both the buyer and seller. If you read books on technology you will appreciate how technology can scale almost infinitely at minimal costs. And if you find a technology driven marketplace…oh boy, that is a combination of behavioral psychology, micro-economics and technology! It’s what Charlie Munger calls a Lollapalooza effect…the combination of many things that come together to create magic.

Lesson: Be a learning machine. The more you learn, the more would be your advantage. Try to go to bed smarter than you were when you woke up.

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When I started on the investing journey I was lucky enough to meet two exceptional people very early on. One is Anshul Khare who has written hundreds of articles for Safal Niveshak; the other person wishes to remain unnamed. These people are exceptional thinkers and I am sure my joining their group lowered the average IQ, but it helped me improve my own thinking. Through them I have come to meet other exceptional thinkers. The common thing about all of them is that they are all hungry to learn new ideas.

What I have narrated is nothing new or unique. Warren has said that associating with people smarter than him has helped him improve. Charlie has said that make friends with the eminent dead. One of Charlie Munger’s heroes is Ben Franklin. And Charlie like Franklin has been diligent, conscientious, thrifty and curious.

Yesterday, I was talking to the unnamed friend and he mentioned he many never be able to drive on a National Highway because of his migraine and he felt sad. But then he said: I can still do other 9,999 things and if 1 thing didn’t work out it wasn’t so bad. If Charlie Munger could hear these words, he would be so proud.

This is what happens when you associate with smart and wise people. Their thoughts become your thoughts and your thoughts your action. Also, do note the recurring pattern of pain is inevitable but suffering is optional.

Lesson: You are the average of the 5 people you spend time with. Choose the 5 wisely. And some of those 5 could be the eminent dead.

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In one of my previous blogs, I wrote about Nyaya and Niti. Nyaya is legal obligation whereas Niti is moral obligation. Nyaya is following the rule in letter but Niti is following it in letter, spirit and more.

Both Warren and Charlie have tried to be more than fair to their shareholders and their business partners. In some deals, they have paid more than what the other party asked for, because it was Niti or the right thing to do.

What Susan says about Sally says more about Susan than about Sally. When I read Warren Buffett appreciating their CEOs who shared the windfall gains with their employees (those CEOs didn’t have to according to Nyaya but they still did according to Niti), it says more about Warren and Charlie and the kind of people they are.

Lesson: Take the moral high road.

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One of Charlie Munger’s favorite quotes which got turned into a book is “All I want to know is where I am going to die, so that I don’t go there“. What does it even mean and while it sounds nice, does it even have anything to do with investing?

For most of my life I only thought of what I need to do. Rarely did I think of what not to do. And this is what Charlie is saying…it’s easier to avoid stupidity than to be smart. It’s easier to avoid cigarettes than to fight all its effects. It’s easier to avoid drugs than to get into rehab and de-addiction. It’s easier avoid getting into accidents than to go through insurance claims or trauma or worse. It’s easier to avoid financial blunders like investing with borrowed money than it is to find the next multi-bagger.

It is also easier to have low expectations than it is to deal with disappointments. In fact one of the ways to be miserable for sure is to have high expectations. And therefore one of the ways to avoid that misery is to have low or no expectations. This is hard to do because we live in a society where hair fall restoration is promised and belly fat reductions come with guarantees. That is why it is such a refreshing change to see Rajeev Thakkar, CIO of PPFAS Mutual Fund, stand up and say “this (bull market) too shall pass”. Investors don’t want to know that this bull market will be over. They want fund managers to tell them that this party is going to go on forever. Therefore, it’s probably bad for business but the right thing to say. New investors with high expectations are going to learn old lessons on disappointment.

Lesson: Work on avoiding stupidity. Avoid high expectations.

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While, there are many lessons from Charlie’s life, I’ll stop here because it’s a blog and not a graduation speech.

So, you see 1st Jan is a good day to remember Charlie, his teachings and how he has conducted himself. And despite starting out broke, Charlie is a multi-billionaire! He got here while being fair, honest, diligent and hardworking. If he wasn’t a billionaire, no one would’ve taken him seriously. Kind of like what Buffett once said in a different context though: a gun and a kind word is more effective than a kind word alone. LOL!

Since today is 1st Jan let me end with a funny video of Warren and Charlie.

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A very happy birthday, Charlie. Thank you, my life is all the more richer because of you.