Charlie Munger on Patience, Wisdom, and the Power of Changing Your Mind

An announcement before I begin today’s post.

I have opened admission to the August 2024 cohort of my Online Value Investing Workshop, which has already been taken by 1800+ students ever since I launched it two years ago. Here is what you get when you sign up for this workshop – 

• 30+ hours of pre-recorded lectures and Q&A videos
• 60+ questions answered in the Q&A
• Live Q&A session of 3 hours on Sunday, 25th August 2024 (7 PM IST Onwards)
• One-year unrestricted access to the entire content
• 7 readymade screens to filter high quality stocks (and avoid the bad ones)
• Bonus 1: Stock analysis spreadsheet (otherwise priced at ₹1999)
• Bonus 2: Rethinking Financial Freedom Masterclass + The Art of Investing Masterclass (otherwise priced at ₹1998)

I am accepting 100 students for this cohort, and the first 30 can claim a special early bird discount on the registration fee. Click here to read the details of the workshop and sign up.

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Welcome to the latest issue of ‘The Journal of Investing Wisdom’, where I delve into the thoughts, reflections, and readings that have recently captured my attention. This journal serves as a window into my contemplations and the resources that inspire and inform my journey as an investor. I hope you like what you read below. If you are new here, and wish to get insights and ideas like these straight into your inbox, please click here to become a member.

What I’m Reading

Wit and Wisdom of Charlie Munger

I am a loner and have worked alone for almost the whole of my time at Safal Niveshak, which is for the past 13 years, but I understand the importance of having the right partner. For me, that partner is my wife. 🙂

But if you are looking to find a good partner for work, you may want to look into the 60-year long partnership of Warren Buffett and Charlie Munger, which sadly ended late last year with the passing away of Charlie.

As this article mentions –

It was a special relationship.

At age 35, Munger was introduced to the then-29-year-old Buffett in Omaha, Nebraska. The two started working together and ended up transforming Berkshire Hathaway from a small textile mill into a $785 billion multifaceted juggernaut. The journey to their unparalleled success was full of learning, experience and laughter, but never an argument.

“Charlie and I have never had an argument,” Buffett said in 2014. “We’ve disagreed on a lot of things. And it’s just never led, and never will, lead to an argument. We argue with other people.”

In his 2022 letter, Warren shared a few thoughts from Charlie under the title ‘Nothing Beats Having a Great Partner’. He wrote –

Charlie and I think pretty much alike. But what it takes me a page to explain, he sums up in a sentence. His version, moreover, is always more clearly reasoned and also more artfully – some might add bluntly – stated.

He then shared a few of Charlie’s wonderful one-liners, which are often called as ‘Mungerisms’. These contain some great lessons on investing, decision making, and living a good life. Here they are, verbatim, as Warren wrote in his letter –

• The world is full of foolish gamblers, and they will not do as well as the patient investor.
• If you don’t see the world the way it is, it’s like judging something through a distorted lens.
• All I want to know is where I’m going to die, so I’ll never go there. And a related thought: Early on, write your desired obituary – and then behave accordingly.
• If you don’t care whether you are rational or not, you won’t work on it. Then you will stay irrational and get lousy results.
• Patience can be learned. Having a long attention span and the ability to concentrate on one thing for a long time is a huge advantage.
• You can learn a lot from dead people. Read of the deceased you admire and detest.
• Don’t bail away in a sinking boat if you can swim to one that is seaworthy.
• A great company keeps working after you are not; a mediocre company won’t do that.
• Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.
• Ben Graham said, “Day to day, the stock market is a voting machine; in the long term it’s a weighing machine.” If you keep making something more valuable, then some wise person is going to notice it and start buying.
• There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice.
• You don’t, however, need to own a lot of things in order to get rich.
• You have to keep learning if you want to become a great investor. When the world changes, you must change.
• Warren and I hated railroad stocks for decades, but the world changed and finally the country had four huge railroads of vital importance to the American economy. We were slow to recognize the change, but better late than never.
• Finally, I will add two short sentences by Charlie that have been his decision-clinchers for
  decades: “Warren, think more about it. You’re smart and I’m right.”

For more such lessons, read my Charlie Munger manifesto on life, and on investing.

Read Warren’s 2022 letter here.

And if you haven’t, read all the letters that Warren has written to shareholders of Berkshire Hathaway. In my view, there is no better education in finance and investing than the one contained in these letters.

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The Sustainable Path is the Only Path

I have always seen investing as a very personal endeavour. What works for me may not work for someone else, and vice versa. So, the real work is not to look for a magic switch to flip for instant success as an investor, but in finding what works for you long-term and actually fits who you are as a person.

Same goes for any big change in life. It’s all about those small, consistent moves you can keep up day after day. The trick is to pick habits that feel natural to you, not some cookie-cutter plan that works for everyone else. When you find those actions that click with your personality and values, that’s when things start to shift.

Nick Maggiulli of Of Dollars and Data wrote about this subject in his latest post titled The Sustainable Path is the Only Path –

If you can’t find a sustainable way to add to your investments and stick with those investments over time, then you’ll have problems down the road. You might stop investing altogether or you might quit on your investments at the worst possible time. Moving to cash during a panic is one example of this, but I can think of many others.

Ultimately, the path to lasting success in any area of your life isn’t in quick fixes or temporary solutions. It’s about finding the actions that you can maintain and that also align with who you are. Once you’ve done that, then you can truly transform your life…one sustainable choice at a time.

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What I’m Thinking

Financial FOMO (fear of missing out) is the silent wealth killer. While everyone is chasing the next big thing, the patient investor builds a diversified portfolio that weathers market storms and comes out stronger on the other side. Resisting the urge to jump on every trending investment is often more profitable than trying to time the market.

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Before making an investment, consider its impact in 10 years. This mental time travel helps cut through short-term noise and keeps your focus on long-term financial health. It’s a simple trick to align your choices with your future self’s best interests.

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Work on a “narrative-financial alignment” analysis. Compare a company’s public narrative (from annual reports, earnings calls, and other public documents) with its financial statements. Look for discrepancies or overly rosy interpretations of the data. Companies whose narratives closely match their financials often demonstrate more integrity and are less likely to have nasty surprises lurking in their books.

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Quotes I am Reflecting On

The idea that the future is unpredictable is undermined everyday by the ease with which the past is explained.

– Daniel Kahneman

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In the moment, public market investors have no ability to control investment outcomes, but they can control and improve their own processes… We believe that by remaining focused on following a well-conceived process, we will make good risk-adjusted, long-term investments. And we know that if we do that, we will indeed earn good returns over time.

– Seth Klarman

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That’s all from me for today.

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Thank you for your time and attention.

~ Vishal