Charlie Munger and Truths from the Bible
For those that may not know, Charlie Munger is the right-hand man of Berkshire Hathaway's Warren Buffett, who is considered one of the greatest investors of all time.
Munger isn't limiting to investing though, as he searches behind the discipline to discover many of elements of the psychological mindset needed to beat market trends over the long term, while focusing on a relatively few number of companies that have the greatest potential to generate extraordinary returns over a significant period of time.
In this article I'm performing an interesting experiment concerning what Munger has communicated over the years in regard to what he has learned in life and investing, and intersect it with the truths revealed in the Bible.
One thing I've learned myself during my time on earth is truth is the truth, and when a person learns real wisdom, it aligns with the truths written in the Bible.
I believe you'll enjoy many of the nuggets of wisdom where Charlie Munger meets the God of the Holy Scriptures.
How You Get the Best Results
Maybe the most important piece of wisdom Charlie Munger has learned and taught is in relationship to developing the discipline of strategic waiting and patience. He said this:
"You have to be very patient, you have to wait until something comes along, which, at the price you’re paying, is easy. That’s contrary to human nature, just to sit there all day long doing nothing, waiting. It’s easy for us, we have a lot of other things to do. But for an ordinary person, can you imagine just sitting for five years doing nothing? You don’t feel active, you don’t feel useful, so you do something stupid."
One of the more relevant verses in the Bible that reinforces that is in the book of Hebrews.
Let us labour therefore to enter into that rest, lest any man fall after the same example of unbelief.
I have always found the wording of the above Scripture very interesting because of the apparent contradiction in laboring in order to attain to rest. What it's really saying is it takes a lot of work to achieve rest. If you doubt that, try forcing yourself to hold back on something you want or want to do. Don't allow yourself to get it or do it.
The inner pressure that comes with the waiting is what the Bible refers to in laboring to enter into that rest. Once you develop that discipline, which will take a long time, you've positioned yourself to participate in the rewards of opportunities that arise at the right time and that give you the most benefit. This may be the biggest differentiator between the very successful, the moderately successful, and those that never succeeds; I'm not talking only money here either.
Here are a couple of more verses that talk about waiting and patience.
Rest in the Lord, and wait patiently for him: fret not thyself because of him who prospereth in his way, because of the man who bringeth wicked devices to pass.
Better is the end of a thing than the beginning thereof: and the patient in spirit is better than the proud in spirit.
Munger goes on with a few more quotes related to the value of waiting. His major point is that a lot of activity can give the impression of generating significant profits, but in fact they fall far short of those willing to sit and do nothing until tremendous opportunities unfold.
He's not looking for mediocre or average deals, he's looking and waiting for the best.
More from Munger:
"The big money is not in the buying and selling … but in the waiting."
"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."
"There are worse situations than drowning in cash and sitting, sitting, sitting. I remember when I wasn’t awash in cash – and I don’t want to go back."
"Quickly eliminate the big universe of what not to do, follow up with a fluent, multidisciplinary attack on what remains, then act decisively when, and only when, the right circumstances appear."
But they that wait upon the Lord shall renew their strength; they shall mount up with wings as eagles; they shall run, and not be weary; and they shall walk, and not faint.
One of the things meant by Isaiah is found in the word "wait" above. That word includes not just sitting idly around, but preparing and remaining ready - in a state of anticipation.
The point isn't to just sit around doing nothing, it's more like an active rest, such as a tiger hiding low in the grass waiting for its prey to get to the spot where it has the best chance to quickly take it down. This is why those that wait on the Lord can renew their strength and mount up with wings like eagles, without being weary or feint: they're not wasting their energy by being busy for the sake of doing something.
Thinking Things Through
"If any successes has come to me, it came because I insisted on thinking things through. That’s all I was capable of doing in life, was thinking pretty hard about trying to get the right answer, and then acting on it. I never learned to do anything else." ~ Charlie Munger
I can't think of any successful person I know or am aware of that doesn't say something similar to Munger concerning thinking carefully about things. The major difference is Munger and Buffett as well, simply do it better than most. Their record speaks for itself.
Notice how the Bible verses below confirm what Munger stated. You incline your ear to wisdom by listening to or reading what other wise people have to say; it's something to pursue and seek after.
Meditation is also an important part of the process. Not the emptying of yourself and engaging in some type of alleged mystical experience, but rather, thinking on various elements and sides of things in order to obtain the clearest view you can with the knowledge available.
So that thou incline thine ear unto wisdom, and apply thine heart to understanding;
My mouth shall speak of wisdom; and the meditation of my heart shall be of understanding.
The mouth of the righteous speaketh wisdom, and his tongue talketh of judgment.
The end result is shown above, where you can speak of wisdom and judgment because you have a grasp of the major elements surrounding specific issues.
Identifying and Embracing the Limits of Your Knowledge
"Some people are extraordinarily good at knowing the limits of their knowledge, because they have to be. Think of somebody who’s been a professional tightrope walker for 20 years – and has survived. He couldn’t survive as a tightrope walker for 20 years unless he knows exactly what he knows and what he doesn’t know. He’s worked so hard at it, because he knows if he gets it wrong he won’t survive. The survivors know. Knowing what you don’t know is more useful than being brilliant." ~ Charlie Munger
For I say, through the grace given unto me, to every man that is among you, not to think of himself more highly than he ought to think; but to think soberly, according as God hath dealt to every man the measure of faith.
Knowing and embracing our boundaries are an extremely valuable lesson to learn in life, and those that win that battle will outperform, over time, those that go beyond their expertise.
Being sober is another way of taking an honest inventory of yourself and your capabilities, and operating within those parameters. This in reality isn't limiting, but frees you up to be the big fish in whatever size pond you're swimming in.
"The game of investing is one of making better predictions about the future than other people. How are you going to do that? One way is to limit your tries to areas of competence. If you try to predict the future of everything, you attempt too much. You’re going to fail through lack of specialisation." ~ Charlie Munger
Only make bets on that which you know; in other words, not in areas you aren't competent in. This doesn't mean you shouldn't know parts of other areas of interest, only that you must maintain discipline when making key decisions. We must know what we're really good at and what is more like hobby interests.
"In nature vs. nurture, nature is way more important than people give it credit for. That’s not to say people can’t improve, but… You need to recognize where nature has been kind and play a game where nature has given you the greatest talent. Man is the prisoner of his talents. I’m afraid that’s the hand we’re given to play in life. If you’re 5’ 2’, I don’t think you want to play basketball." ~ Charlie Munger
I remember many years ago watching a special where it featured the story of a young man without legs that had the dream of playing major league baseball. There were people bold enough and brave enough to tell him that it wasn't something based in reality. While the young man believed they were attacking his dream, they were actually being very kind to him by telling the truth and setting him up to consider other talents he may have that he could realistically compete in. There are always outliers, for example, Muggsy Bogues, who played in the National Basketball Association at 5'3". Earl Boykins was another short man playing in the NBA, coming in at 5'5". Would you want to bet against those odds for yourself in any area of life?
Bezaleel and Aholiab had skills received from God that they developed over time, and when the time came to use them, God and other leaders of Israel didn't go and get workers that weren't up to the task.
Then wrought Bezaleel and Aholiab, and every wise hearted man, in whom the Lord put wisdom and understanding to know how to work all manner of work for the service of the sanctuary, according to all that the Lord had commanded.
1 Corinthians 12:4-5
4 Now there are diversities of gifts, but the same Spirit.
5 And there are differences of administrations, but the same Lord.
All of us has some type of gifts and purpose, identifying them and keeping within the boundaries of those gifts is a key to long-term success and accomplishment. Attempting to go our of our level of competency will result in frustration, limited success, and most likely, outright failure.
Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger
One of the more interesting and compelling books on investing, finance and business is this 548 page giant called 'Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger.'
It includes much of what we focus on in this article, minus the Bible verses and focus, and much more. It's the type of book that deserves one good reading, and afterwards a ongoing snacking for a prolonged period of time. The quality and excellence depicted in the book has kept it among the favorites year-after-year.
The value of Munger's book in my opinion is how it digs into the why behind what drives Munger in the world of finance and investing, along with many other areas of life he comments on in the book.
One of the more interesting things he talks about is his “lattice of mental models” he recommends and uses in his life, where he sees the need to look at things from a variety of perspectives and outlooks. Being able to bring together various elements and build a workable and practical theory around it is another strength of the book. Unsurprisingly, at least to me, he also is able to communicate these things with clarity, in such as way that most people should be able to understand and apply it to their lives.
Munger is at his best in my opinion when he talks about the need to think deeply about things, and developing the discipline, as we talk about here, to continue to learn while waiting for those golden opportunities that only come around so often.
Munger is a man that has, over the years, tapped into a lot of the truth of the ages, and it's well worth the time and effort to read and contemplate on what he has to say about so many things.
There are few mentors or sages that offer the type of wisdom and wit Charlie Munger offers, so I would heartily recommend this book if things like you've read here are pertinent to your life.
No Shortcuts to Success: One Step at a Time
"I would argue that it started with a young man reading everything when he was 10 years old, becoming a learning machine. He started this long run early. Had he not been learning all this time, our record would be a mere shadow of what it is. And he’s actually improved since he passed the age at which most other people retire. Most people don’t even try this – it takes practice. So it’s been a long run, with extraordinarily concentrated power by a man who is a ferocious learner. Our system ought to be more copied than it is. The system of passing power from one old codger to another is not necessarily the right system at all." ~ Charlie Munger
"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." ~ Charlie Munger
9 Whom shall he teach knowledge? and whom shall he make to understand doctrine? them that are weaned from the milk, and drawn from the breasts.
10 For precept must be upon precept, precept upon precept; line upon line, line upon line; here a little, and there a little:
Whenever any us ask that question - whether verbally or internally, we're heading in the wrong direction. We're trying to find shortcuts that don't exist.
Having said that, it doesn't mean we can't or shouldn't see tools and tactics that can increase productivity. But you can't hurry up building knowledge, wisdom, faithfulness and expertise. You have to take it one step at a time, over a long period of time. The sooner we all learn that the quicker we'll be on the right road and destination.
As Munger notes, all those small steps add up over time, and they prepare for those few times in life where we face accelerated opportunities that help us outperform out competitors or peers. Munger has stated if you were to take away those times of spurts they saw and were aggressive with, they didn't do much better than any other investors.
Learning at a daily and consistent pace trains us to identify those opportunities when they come, no matter what we're trying to accomplish. That's why earlier it was mentioned that sitting around and waiting is positioning ourselves to take action, rather than a passive mentality that misses the best opportunities by creating an environment of lethargy.
Simplicity Versus Complexity
"We can make a lot of decisions about a lot of things very fast and very easily, and we are unusual in that. The reason is that there is such an enormous amount of things we don’t look at. If you don’t do start ups, you blot a lot of complexity out of your life. What we found out is that there are still a lot of things to look at and that are available, even if we filter out all those things." ~ Charlie Munger
What Munger says here is very instructive, as it goes back to the very early days of creation, according to the Bible, and tells us how the original mother of the human race was tempted and deceived. The Scriptures say this:
2 Corinthians 11:3
But I fear, lest by any means, as the serpent beguiled Eve through his subtilty, so your minds should be corrupted from the simplicity that is in Christ.
According to Munger, what allowed them to make swift moves when those rare investment opportunities became available, was that they eliminated many of those types of companies that were time-consuming and difficult to evaluate.
What that did was free them up to focus on the companies they understood. This, again, was what they did consistently and daily, and why they could make quick decisions at the right time.
When talking about the mind of Eve corrupted from the simplicity of Christ, it was a reference to pure devotion to Him. It didn't mean they weren't to learn and grow in knowledge, only that they were to remain within the boundaries God had given them.
When Munger talks of eliminating certain types of companies, such as startups from their circle of research, it freed them up to do what they were best at: finding undervalued companies.
Many times complexity can give the impression of wisdom and knowledge, when in reality it obscures it and can deceive people into thinking they're smarter and wiser than they actually are.
Munger and Buffett dealt with it by not allowing themselves to focus on companies that were very hard to understand. To think the human race is where it's at because of Eve moving outside the boundaries God had given her, while Adam apparently sat by watching it happen.
Complexity is a cruel mistress that takes our eyes off of our circle of competence and authority, and places it on something that lifts us up with pride, before we crash and burn because we are deceived into thinking we understand something we didn't.
"I don't invest in what I don't understand." ~ Charlie Munger
After King David died and Solomon was about to rein, he had an encounter with God, where God asked Solomon what he wanted. Here is part of his response:
1 Kings 3:9
Give therefore thy servant an understanding heart to judge thy people, that I may discern between good and bad: for who is able to judge this thy so great a people?
1 Kings 3:9
Give therefore thy servant an understanding heart to judge thy people, that I may discern between good and bad: for who is able to judge this thy so great a people?
Charlie Munger says he won't invest in anything he doesn't understand, and in the case of Solomon, he knew he lacked the understanding to rightly judge the people of Israel. So asking for and seeking the ability to discern between good and evil concerning God's people, was the primary concern of Solomon. It should be ours too in whatever we set our hands to do in this world.
I have more understanding than all my teachers: for thy testimonies are my meditation.
Through thy precepts I get understanding: therefore I hate every false way.
While Munger's sphere was stock investing, it didn't take away from the fact he viewed companies he didn't understand in a similar way Solomon did with understanding how to judge the people.
We again see how Solomon meditated on God's testimonies and precepts (laws), and that brought him more understanding and wisdom than his teachers and peers. Munger, for the most part, is the same in the discipline he competes in.
To not have competence or understanding about any matter is not much different than throwing the dice or spinning a roulette wheel. This is why Munger and the Bible encourage people to learn things on a steady basis, rather than try to force feed it to ourselves and end up fat with disappointment and failed actions.
Maintaining Our Reputation
"Getting a good reputation in life can have remarkably favorable outcomes…" ~ Charlie Munger
A good name is rather to be chosen than great riches, and loving favour rather than silver and gold.
Our reputations can be lost in a moment, after carefully building and keeping it for a long time. Not only that, as Munger says, a reputation can provide "favorable outcomes," even though that's not the foundational reason behind it.
This is why Proverbs 22:1 says a good name or reputation should be chosen ahead of great riches. Why? Because if you have your reputation intact you can also build yourself back up financially if you lose everything, or suffer heavy losses. If you have a bad reputation, it makes it difficult or not impossible to find friends or colleagues that will want to help you, beyond the necessities of life.
If you retain your reputation and good name, it provides you with favor among people. That favor can be leveraged to rebuild your wealth if we choose to go that route. Or to put it another way, we have more options available to us. A person that has damaged their name or reputation have very few ways to turn things around in their lives. It can be done, but it makes it much harder for a person or business. It also means a person must be willing and able to make the changes needed to build trust in their name again. That's a prolonged process.
But as Munger states, not only is it a defensive measure for us, but it is also an economic offensive measure in that people want to do business with us.
I remember one time hearing Warren Buffett and Charlie Munger talking about buying a business from Wal-Mart, and Buffett told the interviewer he didn't even perform and significant due diligence, because he knew how Wal-Mart did business. He added that when they checked the business afterwards, it was exactly what Wal-Mart said it was. That's the power of reputation and a good name. It shouldn't be underestimated, and also should be protected at all costs.
I was going to do a lot more of these intersections between Charlie Munger and the Bible, but these, in my estimation, are among the best quotes and truths he discovered and lived throughout his life. I didn't want to turn it into a small book; which I could have.
The most instructive thing from my point of view in all of this is truth is always the truth, and it's extraordinary to see things that were learned, lived and communicated thousands of years ago, remaining relevant and effective to our day. One thousand years from now and beyond, that will remain true.
There are times when we need to look at men of integrity and accomplishment to remind ourselves of this, while following their example.
It's also valuable to read and devour those that have a lot of wisdom in various areas of life, and then measure them against what the Bible says. You don't have to be Jewish or a Christian to do this. As I've shown in this article, foundational truths are forever, and when we find them, follow them, and use them in our lives, they will help us to accomplish that which we've set out to do.