Tao of Charlie MungereBook - 2017
From the critics
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Only a single quote at goodreads this morning!!!
# 2 CIRCLE OF COMPETENCE – “Knowing what you don’t know is more useful than being brilliant.”
# 5 EASY SHOOTING – “My idea of shooting a fish in a barrel is draining the barrel first.”
# 7 GRAHAM’S ERROR – “Ben Graham had a lot to learn as an investor. His ideas of how to value companies were all shaped by how the Great Crash and the Depression almost destroyed him. . . . It left him with an aftermath of fear for the rest of his life, and all his methods were designed to keep that at bay.”
# 10 ANALYSTS – “In the corporate world, if you have analysts, due diligence, and no horse sense, you’ve just described hell.”
# 11 A MISPRICED GAMBLE – “You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.”
# 19 PATIENCE … The intense focusing skills it takes to become a lawyer or a doctor are the same skills it takes to become a great investor.
# 21 EBITDA – “I think that, every time you see the word EBITDA, you should substitute the word ‘bullshit earnings.’ ”
# 23 OVERCONFIDENCE – “Smart people aren’t exempt from professional disasters from overconfidence.”
# 25 WAITING – “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait.” – Blaise Pascal, the seventeenth-century French mathematician, said, “All of humanity’s problems stem from man’s inability to sit quietly in a room alone.”
# 31 OWNERSHIP OF A BUSINESS – “View a stock as an ownership of the business and judge the staying quality of the business in terms of its competitive advantage.” … If the company is worth a lot more than its market valuation, it is a potential buy.
# 33 NOT BEING STUPID – “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying: ‘It’s the strong swimmers who drown.’ ”
# 36 FINANCIAL DEMENTIA – “There is more dementia about finance than there is about sex.” – Very true; the financial disasters of today are almost completely forgotten in a year or two.
# 50 TOO BIG TO FAIL – “Capitalism without failure is like religion without hell.”
# 52 FREE-MARKET FOLLY … A lot of people think that if an ax murderer goes around killing people in a free market it’s all right.”
# 71 CORPORATE MERGERS – “When you mix raisins with turds, you still have turds.”
# 78 MARKET DECLINES – “If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations.”
# 83 MASTER PLANS – “At Berkshire there has never been a master plan. Anyone who wanted to do it, we fired because it takes on a life of its own and doesn’t cover new reality. We want people taking into account new information.” … Whenever I think of “master plans,” I remember Nebraska Furniture Mart’s founder, Mrs. B., who, in response to a question about having a business plan, replied in her thick Russian accent, “Yeah, sell cheap and tell the truth.” She was a business genius.
# 85 ENRON – “The people who carry the torch in accounting are in a noble profession, yet these people also gave us Enron.” – Enron was an energy, commodities, and transmission company that posted revenues of $111 billion in the year 2000. Fortune magazine had named Enron the nation’s most innovative company six years in a row. In 2001 it came out that one of Enron’s greatest innovations was creatively planned accounting fraud.
# 92 ONE STEP AT A TIME – “Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. 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.”
# 101 NOT WORKING – “It’s been my experience in life, if you just keep thinking and reading, you don’t have to work.”
# 103 OUT WITH THE OLD – “Any year that passes in which you don’t destroy one of your best loved ideas is a wasted year.” … In a mere seventy years the United States went from no electricity to the entire country being electrified. That completely destroyed candle making, gas lighting, and the kerosene lamp businesses, all great enterprises in the eighteenth and nineteenth centuries. In 1930 there weren’t any televisions in people’s homes. By 1960 just about every American home had one, and the home radio business, the Internet of the 1920s, pretty much died. …
# 106 BEING FRUGAL … If you don’t need something, you don’t have to buy it—so who cares if it goes up in price? Do you really think Charlie has ever lost sleep over the ever-increasing price of a new Ferrari?
# 108 IDEA DESTRUCTION – “We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.” – This sounds easy, but it is very difficult to put into practice. People don’t like to give up long-held ideas. Doing so makes them uncomfortable and fills them with fear. And change usually requires an enormous amount of work.
# 112 SECRET TO WISDOM – “Look at this generation, with all of its electronic devices and multitasking. I will confidently predict less success than Warren, who just focused on reading. If you want wisdom, you’ll get it sitting on your ass. That’s the way it comes.”
# 114 GETTING OLDER – “I’m getting more experienced at aging. I’m like the man who jumped off the skyscraper and at the 5th floor on the way down says, ‘So far this is not a bad ride.’ ” – Charlie has never had a prostate exam or PSA test, because he doesn’t want to know if he has prostate cancer. He figures that since most men eventually have prostate problems, why worry? Nor does he worry about California earthquakes. All the things that are inevitable he refuses to worry about. That’s made for an almost stress-free life and may be the reason he is now pushing ninety-three.
# 116 INCENTIVE-CAUSED BIAS – “You must have the confidence to override people with more credentials than you whose cognition is impaired by incentive-caused bias or some similar psychological force that is obviously present. But there are also cases where you have to recognize that you have no wisdom to add—and that your best course is to trust some expert.” ... George Bernard Shaw once said, “All professions are a conspiracy against the laity.”
# 117 NARROW-MINDEDNESS – “Most people are trained in one model—economics, for example—and try to solve all problems in one way. You know the saying: ‘To the man with a hammer, the world looks like a nail.’ This is a dumb way of handling problems.”
# 118 LIVING WELL – “The best armor of old age is a well-spent life preceding it.”
# 119 MARRIAGE ADVICE – “In marriage, you shouldn’t look for someone with good looks and character. You look for someone with low expectations.” – A high-expectations spouse is never pleased, and you will spend your life being miserable trying to jump through hoops to please him or her. So unless you want to spend your life living with someone who is never happy, a low-expectations spouse is probably the way to go. However, the opposite is true in business: if you have low expectations for an employee or a management team, they will never rise to the occasion or learn to excel at their craft or profession. Why isn’t this true for marriage? Because marriage isn’t a job.
# 123 READING – “In my whole life, I have known no wise people who didn’t read all the time—none, zero. You’d be amazed at how much Warren reads—and how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
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