What Charlie Munger taught me about life

I was lucky enough to be dragged to Omaha (twice) with my father to attend the Berkshire Hathaway annual general meeting and witness Warren Buffett and his trusted sidekick Charlie Munger in action.

The experience was one I’ll never forget, not because I picked up some tips on how to invest like the best. I didn’t.

Rather, I appreciated how Buffett and Munger had melded their passion for picking stocks into a framework for being smarter, more worldly, better at making decisions, and more content with themselves and their lot in life. Munger, who passed away in California this week about a month shy of his 100th birthday, knew this better than most. He left behind a trove of wisdom that is invaluable for all of those who embrace the pursuit of investing, regardless of the size of their capital.

While Munger is best known as an astute investor, he was also a philosopher and social scientist. In a quest to avoid his own mental biases, he immersed himself in the field of behavioural psychology.

His insights ranged from the power of incentives to our tendency to ignore faults in things we like while ignoring virtues in things we don’t, and how an aversion to loss outweighs the satisfaction of gains.

Others on the list are our tendencies to make relative judgments rather than absolute ones; to react in extreme ways when stressed and rush to apply things we’ve learnt; to follow the orders of authoritative figures and the actions of those around us; and to distort facts until we can bear them.

Overcoming these biases allows us to make better decisions.

‘‘People are trying to be smart – all I am trying to do is not to be idiotic, but it’s harder than most people think,’’ Munger said.

Munger was also adamant that investing, and life, were not about being better than others or getting richer than others, but seeking contentment.

‘‘If you’re comfortably rich and someone else is getting richer faster than you by, for example, investing in risky stocks, so what?’’ Munger said.

‘‘Someone will always be getting richer faster than you. This is not a tragedy.’’

His scourge was envy, and Munger was ruthless in eliminating toxic influences in his life that were not worth his time and energy. This gave him total immunity to the FOMO [fear of missing out] that has driven so many investors to destruction.

Take cryptocurrencies, for example. Munger had an absolute disdain for crypto and had no regrets amid surging prices.

Even if he was wrong, the rising price had absolutely no bearing on his mental health. In a 2022 interview with CNBC, he described digital assets as ‘‘partly fraud and partly delusion’’.

Another of Munger’s traits – and one that he said made him a better investor – was his endless pursuit of knowledge. Munger believed we tend to overstate our intelligence.

But he also believed that if we are curious about the world around us, and passionate in trying to understand why things are happening, we can attain valuable wisdom. He encouraged his followers to read as much as they could and to take time out to think.

Much of Munger’s wisdom related to living a contented life. One of his commonly cited snippets of advice is to have low expectations that can easily be exceeded.

He credits his long and happy marriage to the fact that his wife was previously married to an alcoholic, so he had a low bar to clear.

Munger also appreciated that the world does not owe us anything. The way to get what you want is to ‘‘try to deserve what you want’’.

What I realised after my two trips to Omaha was that Munger was not going to tell people how to be better investors. And he certainly wasn’t going to tell them how to make more money.

He was going to tell you what he thought, and how you should think.

Munger and Buffett had no secrets. They held their meetings in a giant stadium so they could share what they had learnt with anyone willing to listen.

Those who travelled from every part of the world to Omaha each year did so because they enjoyed sharing tips and experiences with other investors.

If there is a secret to investing success, it is not about replicating a process or a style or searching for securities with certain characteristics. But it is a deeply personal pursuit of self-improvement, knowledge and humility.

As Munger said: ‘‘The game of life is the game of everlasting learning. At least it is if you want to win.’’ SI