A Tribute to Charlie Munger

Lessons from a Life-Long Investor

Picture of by Dr David Phelps

by Dr David Phelps

Charlie Munger died November 28th at 99 years old, just short of the 100-year mark.

An investment sage and right-hand man/advisor/vice chairman of Berkshire Hathaway to Warren Buffett, Charlie Munger gave 99 years of wit and wisdom.

There are large volumes of videos, lectures, and books from Munger. Much to be learned from a gentleman like this and I want to share a few critical lessons that have had a tremendous impact on me and my investing philosophy.

The Most Precious Things in Life Are Relationships

Munger and I share similar themes in our lives. Munger dealt with the tragic loss of his son to leukemia at the tender age of nine.

My daughter also went through the travesty of dealing with leukemia. However, she was a survivor. My situation turned out for the better but we both learned the same principle.

Time passes quickly and the most precious thing in life is not financial success. It is relationships and the time you give to them.

In relationship with others, you find true purpose and meaning. It's easy to allow outside forces and society to dictate how we run our lives. But if we let those external forces be our north star, we will have regrets in life.

Charlie lived a life full of vibrancy, dedication, purpose, and meaning. He certainly demonstrated this to his very last day as he gifted his wisdom and shared his life experience in interviews in the week leading up to his passing.

I also know that Charlie, being an astute and wealthy investor, would take every penny of his wealth and trade it, if he could, to have more time with his son.

Investing Requires Patience

Charlie Munger was a precious asset to the entire world of investing but most directly to Warren Buffett and those invested in Berkshire Hathaway.

Both Charlie and Warren were very principled and disciplined. They realized that patience was one of the key characteristics of any good investor.

They also have attested to being good stewards of their minds, and what qualified as worthy to give their attention to.

They never once got caught up in some of the fad investments such as Bitcoin or meme stocks. They stayed in their lane the whole time.

“Waiting helps you as an investor and a lot of people just can't stand to wait. If you didn't get the deferred gratification gene you've got to work very hard to overcome that.” – Charlie Munger, “The Abominable No-Man”

Most of us lack that deferred gratification gene. It takes years of business and market exposure to be able to act contrarian to the rest of the world which practices impulsivity and the herd mentality.

This applies to both Wall Street and social norms. It's difficult to take a different path and not follow everybody simply because everybody else is going in one direction. We've seen this over and over again in business cycles.

Charlie and Warren had a real ability to stay the course. They knew the impact that patience has on their investments and the investments they brought forward and guided their investors through over the many years in Berkshire Hathaway.

Ingredients for Success: Opportunity and Experience

“Opportunity comes, but it doesn't come often. So seize it when it does come.” – Charlie Munger

But how can we spot these great opportunities? You either have the experience to spot them or find somebody with experience and learn through them.

If you were going to climb a mountain peak or traverse a river canyon for the first time, you wouldn't do it on your own. The wise thing to do would be to find guides to show you the way. Eventually, with enough experience, desire and commitment, you can become a guide yourself.

But having guides show you what those opportunities look like and how to stay away from the pitfalls, fads, and FOMO that many people get trapped into is critical to being a successful investor.

Everybody has opportunities presented to them in their life. But not everybody has the necessary experience to take advantage of that opportunity. It is paramount that you find people with experience if you want to succeed as an investor, a business owner, or any pursuit of yours.

Character and Discernment Must Be Present

“It takes character to sit with all cash and do nothing.” – Charlie Munger

It does take a lot of character (The definition of character here is strength and originality). There are many today who state “cash is trash” in response to our inflationary environment where our cash value or purchasing power is diminishing.

That bears some truth and does warrant some thought on what it means to sit on cash. But there is another truth to consider.

If we're in volatile and uncertain times, taking the greater known “hit” on the value of that cash deflating is more than likely better than taking the “hit” that the rest of the market in equity assets will take as we go through a deflationary period. I believe this is happening in our current economy.

There is risk on either side of where you allocate your capital (cash or assets) and by what amount. That amount must be decided on an individual basis.

Too many people today take an extremist position on either side and miss the mark. Success is about hedging and balance in your allocations depending on where you are in your life and the current market. 

This is something you must discern for yourself in your capital allocations. 

Becoming a Perpetual Student of Life

“I paid no attention to the territorial boundaries of academic disciplines. I just grabbed the big ideas that I could.” – Charlie Munger

So, how do we grab those big ideas?

School and educational academia do have their benefits (some major ones if you are a dentist) but at some point, we need to leave the guardrails that were designed to push us in one direction. 

You have to go out on your own frontier. Yes, it is best if you have guides and mentors that you trust and who have experiences that you don’t have.

But you must be willing to look for those big ideas outside of the academic guardrails to be successful as an investor and successful by your own definition.

Open your mind to the opportunities and wisdom in other places. It is so easy to be embroiled in busyness and trading time for dollars that we miss the big opportunities. This does not just apply to financial or investment success. 

Pulling back to see the bigger picture grants you the clarity to see what you’ve been missing. Gaining perspective, especially through a trusted and experienced mentor, allows you to see the opportunity you will miss if you just keep doing what the majority does.

I've learned this lesson the hard way. It was only the wake-up call of my daughter’s health that gave me the clarity and perspective I needed to change directions in my life. (This lesson does NOT need to be learned the hard way.)

Learning to Live a Better Life

Charlie Munger was a constant learner. Always learning and advocating for the pursuit of your own curiosity. AND of what leads you to live a better life.

Whether it's investing your money or being a better person, surrounding yourself with the right people is key. This goes back to the beginning, relationships.

I have a saying that I live by that highlights this principle. “Your network is your net worth.”

It is one of my favorite mantras.

Maybe, if I make it to 99, I will gain the amount of patience that Charlie demonstrated while he was with us.

This is my tribute to Charlie Munger, a man of great wit and wisdom. His legacy will endure in what he still teaches us today.

To your freedom!

– David


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