Five Powerful Lessons From Charlie Munger You Can’t Miss
Charlie Munger started off his career working in a grocery store. Today, he is worth billions of dollars. Over several decades, Charlie Munger managed to become one of the most respected investors in the world. When he speaks, people listen. The wonderful thing is that his wisdom is not only geared towards investing but can be applied in any walk of life. Let’s talk about my five favorite lessons from Charlie Munger.
Charlie Munger is one of the greatest business minds of the past century.
He is the vice chairman of Berkshire Hathaway and right hand man of Warren Buffett. Throughout his career, Charlie Munger played a key role in Buffet’s success. Over the years, he has provided countless insights that entrepreneurs from all corners of the business world should keep close. An interesting thing about Charlie Munger is he became one of the world’s most revered businessmen without taking a single class in business, economics, marketing, finance, or anything else of that nature. His formal education included meteorology at Cal Tech and law at Harvard.
Bill Gates said of him: “He is truly the broadest thinker I have ever encountered.”
How does such an extreme result happen? How is such an original and unduly capable mind formed? In the case of Charlie Munger, it’s clearly a combination of unusual genetics and an unusual approach to learning and life. While we can’t have his genetics, we can try to steal his approach to rationality. There’s almost no limit to the amount one could learn from studying the Munger mind, so let’s at least start with a rundown of some of his best ideas.
What helped Charlie Munger achieve this success was his principles, persistence, confidence and the strength to become a man from a no man.
His insights into business and life are unique, rare, and correct with unusual consistency. It’s no wonder he has gained so much recognition and fame. This takes us to learn the most profitable lessons of life. Let’s find out!
Charlie Munger Lessons #1: Be a Continuous Learning Machine
Charlie Munger believes that reading is the fundamental key to his success. When he has a book in his hand, he never feels like he is wasting time. For Charlie Munger, reading has been an everyday habit that he applies without thinking. The way to become smarter is by always learning.
Books are an amazing resource full of knowledge.
If you learn to always have a book by your side, then you are way ahead of most people. While they are posting selfies on social media, you are soaking up the wisdom of thousands of different authors on a variety of subjects. Always have a book on your nightstand. Even if you had a busy day, try to read at least one page every day. I have found that once you get into the habit of reading, then you are doing it constantly. I have several books on my table, and every night I read a few chapters.
I’ve come to believe that every single day is an opportunity to become smarter and more aware of the world around you.
As the business world is constantly changing and evolving, this is an especially important mindset to have as an entrepreneur. Otherwise, growth is simply not possible. Fortunately, there are many daily habits to help cement the student mindset. Start your mornings by taking 30 minutes or so to read up on the trending blog posts. Another thing you can do is keep a journal at the end of each day and write down two to three new tidbits or insights you picked up. If you can commit to this, it will become natural to think like a student throughout the day.
Learning goes way beyond the classroom.
If you can properly foster this mindset and remain open to new ideas and approaches, your business will reap the benefits. You should both learn from your past mistakes and learn from books and studies. Charlie Munger is a voracious reader. He has long recommended that people keep reading and learning throughout their lives and that they do not restrict themselves to any single topic. He has spoken often about how various disciplines intersect and inform one another.
Charlie Munger is famous for using a “latticework of mental models” in his head.
What he does, is he studies all the big ideas from fields outside of finance and outside of law — engineering, physics, history, philosophy, etc. — and he uses those big ideas and applies them to new situations and new problems he faces. The bottom line is that lifelong learning is essential to all of us, but especially so for leaders. Leaders are, primarily, teachers. Your role as a leader is to nurture, strengthen and inform, creating a culture that enables your team to move forward on their career pathway. A leader who embraces all that lifelong learning has to offer will be able to demonstrate an innovative, relevant, thoughtful and expedient leadership style that will benefit everyone they come into contact with.
Charlie Munger Lessons #2: Lear to Unlearn
A smart person changes their mind all the time. If something doesn’t work, or if there is a better argument, then you need to adapt. This is part of what Charlie Munger calls the rapid destruction of your ideas. You always need to consider the arguments of both sides. For Munger, “it’s bad to have an opinion you’re proud of if you can’t state the arguments for the other side better than your opponents.”
Keep an open mind. Always remind yourself that you could be wrong.
When you can apply this, you become a better thinker. You are also open to different ideas and ways of solving problems. If you have a closed off mind, you will always solve problems in a one dimensional way. To the man with a hammer, every problem tends to look pretty much like a nail. This type of mindset will often misfire on you. That’s why you need to keep an open mind, consider different arguments, and generally have the ability to change your mind when better evidence shows up.
When you look at the most successful business leaders in the world, perhaps the most common pattern is they brought something new to the table; whether it was through innovation or disruption.
In a digital world, where people have access to just about every piece of information, there is a fine line between true innovation and adding to the noise. A huge part of Munger’s messaging deals with breaking norms and avoiding the average. The ability to move away from the average label is dependent on the ability to diverge. Ultimately, it doesn’t matter what your product or service is, there is always room for divergence. Your ability to find this special something and add a new twist is the key to success.
If you do what everyone else does, you’re going to get the same results that everyone else gets.
This means that, taking out luck (good or bad), if you act average, you’re going to be average. If you want to move away from average, you must diverge. You must be different. And if you want to outperform others, you must be different and correct. As Munger would say, “How could it be otherwise?” The illiterate of the future are not those who can’t read or write but those who cannot learn, unlearn, and relearn.
Unlearning is challenging and deconstructing things that are embedded in your way of thinking, acting and reacting.
Unlearning can be a real shift and can change a person’s perspective entirely. Someone who grew up on the mantra of breakfast is the most important meal of the day learns about intermittent fasting, and suddenly they question absolutely everything about the habits they have developed around eating. That world needs people that can question things, wear opinions lightly, be open to change, and be prepared to detach themselves from ideas and behaviors if the prevailing winds of evidence and enquiry turn against them. Or maybe behaviors get thrown out because they just don’t fit who we are at that point in our lives.
Charlie Munger Lessons #3: Learn How to Handle Your Mistakes
Charlie Munger prides himself on being able to handle his mistakes and said he learned how to let go and cut his losses. He says that regardless of how much you can learn, making mistakes is unavoidable. What matters, according to Munger, is how you react to these mistakes. High-performance leaders are different from the average leader because they aren’t afraid of mistakes. They recognize that being at the leading edge means that sometimes stuff happens.
When you focus on learning from the mistake, it accelerates growth.
It’s the losers limp if you play it so safe that you can’t possibly make a mistake and learn from it. Throughout history, every great mind never got it right the first time. Mistakes mean you are moving. No movement means stagnation, which eventually leads to obliteration. If you don’t learn from the mistake — well that will lead to extinction too! When mistakes happen, focus on how you are going to remedy the situation, both for the long and short term. No one is immune to making mistakes — we are human, after all! We can gain so much knowledge from our mistakes, and all it takes is the willingness to learn from them. We get to know what works and what doesn’t from each error we come across. Without mistakes, we lose countless opportunities to gain valuable knowledge and learn lessons.
Furthermore, mistakes help us learn to be resilient.
We get to understand that adversity is needed to overcome challenges in life. We know then that being flexible is important, as we can’t move forward if we stay in the same place. Without making mistakes, we would stay in our comfort zone, which leads us to inflexibility when things don’t work the way we want them to. The more we can embrace failure, the more we will be able to open to it and the more confident and resilient we will become. We become a stronger person each time we acknowledge our mistakes and move on to do better next time. We come to understand that being brave is all about admitting to our faults and growing from them.
Charlie Munger agrees that in order to succeed, it is crucial to learn from mistakes.
As he points out, “One of the best ways to learn from mistakes is to learn from the mistakes of others. Learning from others’ mistakes is cost-free. Other investors lose money as well, so you don’t have to learn the same lessons with your own money.” Similarly, he has talked about learning from his past mistakes and changing his investment strategies throughout the years. The important thing is to learn from the mistakes, so that you don’t make them in the future. It is good to learn from your mistakes. It’s better to learn from other people’s mistakes.
Moving away from an improving mindset and into an expansion mindset is a point that people commonly miss.
When you make a mistake, stop viewing your ultimate success as perfecting one skill, and embrace a larger perspective of living a fulfilling life by expanding all of your knowledge. To do this, look at your mistakes through a perspective that views the larger vision that you have for your life. This will help you see your mistakes in a more realistic proportion — which is likely not as big of a deal as you initially believed. This will help you let go of the loss, reaffirm your vision, and keep pushing forward. While you can’t change the mistakes that you have made, you can choose how you will respond to them. It is important to recognize that mistakes are inevitable and living by trial and error is part of our natural evolution. Growth will start as soon as you recognize and admit your mistake and make the appropriate efforts to uncover what went wrong.
Charlie Munger Lessons #4: Pursue Your Interests
It took Charlie Munger himself many years to finally land in a career that capitalized on all of his talents. Prior to his start at Berkshire Hathaway, he co-founded his own law firm. But while he was there, he watched his clients make investment decisions that he believed could be better. Knowing your talents and advantages also helps in choosing individual investments. He and Warren Buffett only invest in businesses they understand, have a knack for and have advantages in.
You’re more likely to be really good at something if you have a natural interest in it.
According to Charlie Munger, an intense interest in the subject is indispensable if you are really going to excel. Munger says he “could force myself to be fairly good in a lot of things, but I couldn’t be really good in anything where I didn’t have an intense interest.” So you want to drift into doing something in which you really have a natural interest. Why would you want to play a competitive game in a field where you have no advantage — maybe a disadvantage — instead of in a field where we have a clear advantage or deep interests?
Very often, career interests align closely with your strengths.
Choosing a career that uses your best skills prevents a situation where hard work only leads to frustration. What you’re required to do in a job is not always what you’re best at, even if you eventually succeed. Often, people know what they’re good at but never utilize the opportunity to apply those skills. With the importance of being passionate about your work, it seems a lot easier to grow your passion by succeeding and being good. Selecting a job that you will enjoy doing, ultimately lets you simply follow your interests in pursuing a career path.
You’ll be most successful where you’re most intensely interested.
An intense interest of the subject is indispensable if you are really going to excel. You could force yourself to be fairly good in a lot of things, but you couldn’t be really good in anything where you didn’t have an intense interest. So to some extent, you’re going to have to follow that simple yet powerful rule. If at all feasible you want to drift into doing something in which you really have a natural interest. If enthusiasm and passion are present, people tend to be more resilient when encountering obstacles. People who are passionate about what they do, rather than just “in it for the money,” tend to be people who have more positive outlooks and can overcome difficulty through problem-solving.
Whether an individual is considering starting a small business or changing career paths, passion must be factored into the equation.
While characteristics such as strong values, talent, ambition, intellect, discipline, persistence, and luck all contribute to business and career success, following your passion can often make the most significant difference of all. Success is better defined as an achievement of a desired aim or purpose. More than money or fame, most people desire to align their own passions with their work while making a sustainable income. Money brings diminishing returns the more you make, which makes it an elusive definition of success.
Charlie Munger Lessons #5: Discipline Equals Freedom
Charlie Munger’s investment strategy says to be persistent on one’s goal. Whatever be the challenge, an individual shall always face it as an experience to learn from and to become better with. Challenging times do not challenge the ability, it challenges the personality — whether a winner or loser. And in the stock market, there is only one personality that wins — it is a winning personality!
Honesty, discipline, and ethics make the three pillars of investment principles by Charlie Munger.
One who follows an honest and disciplined routine in an ethical manner of business will definitely empower a huge amount of wealth in any terms — money, knowledge, structure, etc. This is why an individual whether a trader or an investor has to discipline himself/herself in a manner that shall provide abundant peace despite odd and off conditions in the stock market. We like quick solutions that don’t require a lot of effort. We’re drawn to the modern equivalent of an old hustler selling an all-curing tonic. However, the world does not work that way.
Acquiring knowledge is hard work. It’s reading and adding to your knowledge so it compounds.
It’s going deep and developing fluency, something Darwin knew well. Discipline is the bridge between you and your success. You will often hear that success comes with determination, passion, and perseverance. Success happens when you really want it to happen. And yes, this is true. Still, no matter how hard you want something, or how motivated you are to reach a goal, it will all be in vain if you don’t have one main thing that stands between you and your success. That one thing that you need to have, despite all the other traits, is your discipline.
No personal success, achievement, or goal, can be realized without self-discipline.
It is singularly the most important attribute needed to achieve any type of personal excellence, athletic excellence, virtuosity in the arts, or otherwise outstanding performance. To possess self-discipline is to be able to make the decisions, take the actions, and execute your game plan regardless of the obstacles, discomfort, or difficulties, that may come your way. If we are to be masters of our own destiny, we must develop self-discipline and self-control. By focusing on long-term benefits instead of short-term discomfort, we can encourage ourselves to develop of self-discipline. Ultimately our health and happiness depend on it.
We are the product of our decisions and choices.
And this is why self-discipline is important; because life isn’t a level playing field. Certainly, there are factors that can both ease and inhibit our chances for success, and some people start out in life with more advantages than others. Self-discipline is a choice. Depending on your upbringing and personal struggles, you may have to work harder to become self-disciplined, but the good news is, self-discipline can be learned. Anytime you can put some areas of your life on autopilot, you’re freeing up time and energy to do the hard things. When you create habits, you’re building self-discipline into your life. Habits make it easy to stay on track, and self-discipline creates habits.
Charlie Munger is a true inspiration, whether you are in the business world or not. The wisdom he has shared throughout his illustrious career can be applied to all walks of life. As an entrepreneur, the ability to rationalize, innovate, stay humble and retain a student mindset are some of the most important ingredients to achieving long term success.
Charlie has said again and again that life time learning is crucial for success.
He does agree that it is not the IQ that determines a person’s success in life, but the person’s dedication to life time learning. Charlie Munger says that if you go to bed every night knowing something more than what you knew the day before, you’d come out far ahead in life. You’re not going to get very far in life based on what you already know.
Charlie Munger’s sharp mind, irreverent, outspoken outlook, and commonsense-thinking are legendary.
People who choose to react as victims surrender themselves to feelings of being betrayed or taken advantage of. The resulting anger, repulsion, fear, guilt, and inadequacy are futile. Feeling like a victim is a perfectly disastrous way to go through life. If you just take the attitude that however bad it is in anyway, it’s always your fault and you just fix it as best you can … he thinks that really works.
Inversion is a counterintuitive way of thinking that we were never taught in school, yet it is crucial for solving difficult problems in a unique way and making good decisions consistently.
The most powerful benefit of using the inversion technique is that it will help you to avoid the bad decisions preventing you from achieving your goals. By simply thinking about what you want to avoid or the opposite of what you want to achieve, you can plan effectively to prevent failure. Combined with forward thinking, backwards or inversion thinking could help you to unlock solutions to difficult problems that may have been holding you back for years.
You don’t always need to be the best. Master the best of what other people have already figured out.
This post hardly scratches the surface of the wisdom Charlie Munger has to offer. If you haven’t read up on his words to live by, do yourself a favor and Google his name. Are there any topics you wish we discuss in my upcoming blogs? Feel free to let me know in the comments below 😉
Digital Dandy. Hacker From Heart. Workaholic. Coding Artist. Self-made.