Tribute to Charlie Munger

The absence of Charlie Munger was palpable at yesterday’s Berkshire Hathaway Annual Meeting. I felt the pangs every time Warren slipped up and called Greg Abel, Charlie. Happening upon Buffett and Munger at age fifteen was pure luck and the greatest gift. Perhaps there’s no better way to pay him tribute than recounting the life wisdom gleaned over the decades.

Here are the top ten Charlie wisdoms that have impacted my life the most:

1. “Never self pity.” Many know that Charlie’s first marriage ended around the same time that he lost his nine-year-old son to leukemia. Even during those dark days, Charlie’s adage was “never self pity.” When a failed cataract surgery left him blind in one eye at age 52, Charlie didn’t even skip a beat and took up braille. Stoicism and Winston Churchill echoed similar sentiments, but none so clearly and succinctly as Charlie’s “never self pity”. Regardless of misfortunes or injustices, I’ve never once let myself wallow. “Whenever you think something or some person is ruining your life, it’s you. A victimization mentality is so debilitating.” “Assume life will be really tough, and then ask if you can handle it. If the answer is yes, you’ve won.”
2. “Recognize reality even when one doesn’t like it; indeed, especially when one doesn’t like it.” A previous job gave me the opportunity to work for Jamie Dimon. Besides the best education on balance sheet and credit possible, the one saying I’ll always remember from Jamie, “I always tell my kids this: get used to reality quickly.” Charlie’s warning on this human tendency to lie to ourselves: “failure to handle psychological denial is a common way for people to go broke.” “It’s stupid the way people extrapolate the past. And not slightly stupid, but massively stupid.”
3. “Invert, always invert.” (originally by Carl Gustav Jacob Jacobi). One of Charlie’s many musings is “tell me where I’m going to die, so I won’t go there.” Avoiding misjudgments and toxic people, are equally important if not more so, as the big swings on the positive side. “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.”
4. “If you mix raisins with turds, you still get turds.” Charlie had a penchant for quips. Many of us were drawn to junk due to low valuations. I quickly learned that when it comes to ANY businesses involving balance sheets, trust, I had to think through the secondary tertiary ramifications of possible turds. The importance of trust also extends to the ability to recruit the best people — the intangible asset of every high-tech startup.
5. “Being rational is a moral imperative. You should never be stupider than you need to be.” “Really big effects, lollapalooza effects, will often come only from large combinations of factors.” Reading about Charlie’s hyper-rationality in my teenage years gave me a head start, and has been extremely helpful navigating boom-bust cycles, and thinking through multi-factorial events. I’ve been called Spock, Seven of Nine, and questioned if I have emotions. I certainly have emotions, just not emotional reactions.
6. Not merely IF something works, but HOW it works. In the 4min tribute video, Warren mentioned one of the few differences between them was that Charlie cared about HOW something worked, not merely IF it worked. It’s this curiosity to understand how the systems work that made Warren call Charlie the “architect” of Berkshire. This insatiable thirst for knowledge reminds me of another one of my heroes, Vinod Khosla. Interestingly, both have a proclivity for architecture and designing their buildings and furniture.
7. Know the edge of your circle of competence, but continue expanding it. “Knowing what you don’t know is more useful than being brilliant.” “It’s not a competency if you don’t know the edge of it.” “If you have competence, you know the edge. It wouldn’t be a competence if you didn’t know where the boundaries lie. Asking whether you’ve passed the boundary is a question that almost answers itself.” “Acknowledging what you don’t know is the dawning of wisdom.”
8. Multidisciplinary. “I had an early and extreme multidisciplinary cast of mind. I couldn’t stand reaching for a small idea in my own discipline when there was a big idea right over the fence in somebody else’s discipline. So I just grabbed in all directions for the big ideas that would really work.” “When I urge a multidisciplinary approach — that you’ve got to have the main models from a broad array of disciplines and you’ve got to use them all — I’m really asking you to ignore jurisdictional boundaries. And the world isn’t organized that way … If you want to be a good thinker, you must develop a mind that can jump the jurisdictional boundaries.” “Only an interdisciplinary approach will correctly deal with reality.” “The models have to come from multiple disciplines — because all the wisdom of the world is not to be found in one little academic department.”
9. Read all you can about your heroes. You are the average of the five people closest to you, applies to your thoughts, not merely time spent with people. Charlie’s hero was Ben Franklin. While they didn’t live in the same century, Charlie was heavily influenced by Franklin because Charlie read everything he could on Franklin. “If it is wisdom you’re after, you’re going to spend a lot of time on your ass reading.” “Intense interest in any subject is indispensable if you’re really going to excel in it.” “If you don’t keep learning, other people will pass you by. Temperament alone won’t do it. You need a lot of curiosity.” “In my whole life, I have known no wise people … who didn’t read all the time.” “My children laugh at me. They think I’m a book with a couple of legs sticking out.”
10. “Show me the incentive and I will show you the outcome”. “I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes but I get some surprise that pushes my limit a little farther.” “If all you have is a hammer, the world looks like a nail.”

Thank you, Charlie.