I’ll be the first to say it, Charlie Munger is one of the greatest minds of our time. Period. In my mind, one of his greatest accomplishments is to still be working hard, not just sloughing off, at over 90 years old! His other accomplishments include:
- 2015 Estimated Net Worth: $1,300,000,000 (That’s 1.3 BILLION, with a B)
- Ran an investment partnership on his own from 1962-1975 and generated compound returns of 19.8% when the DOW had an annual appreciation rate of 5%
- Howard Buffett, Warren Buffett’s eldest son once said, “My father (Warren) is the second smartest person I know, Charlie is the first.”
- Warren Buffett’s right hand man (although to me, they’re on equal footing)
- At one time was Chairman of Wesco Financial Corporation (You can find the Annual Shareholder Letters here) a corporation eventually purchased by Berkshire Hathaway and at it’s peak held a concentrated equity portfolio of $1.5 Billion.
- Gave the largest gift ever received by the University of Michigan in the amount of $110 Million
There’s many more stats I could regurgitate but I’ll save you. Just know he’s a man worthy of your attention.
One of Charlie’s hero’s is Benjamin Franklin. Mr. Franklin is known for many things, but one of which is his annual almanack known as Poor Richard’s Almanack. In the spirit of Mr. Franklin, Charlie with the help of Peter Kaufman put together a MASSIVE coffee table book (seriously this thing is heavy) about various things Charlie Munger has done and said over the years. It also contains people close to Charlie, including but not limited to Warren Buffett, Louis Simpson (President of Geico), Bill Gross (PIMCO), and Bill Gates (you know him).
The book is very different from others you may find. It has a very loose structure, although it’s much more structure than it may look (could be similar to Charlies though process) and brushes over nearly every aspect of Charlies life from birth to present day.
A common word found throughout Poor Charlies Almanack is:
The Lollapalooza Effect is is a combination of factors, filtered through multidisciplinary models, that lead to an outstanding result. So what does that mean? Let me give you some examples of Lollapalooza effects, because spotting these is one of the biggest and best parts of the book:
Tupperware manufactures and sells products related to food storage. In 2012 it had an annual sales of around 2.6 billion dollars. Tupperware is an MLM where you can signup with tupperware to host a party, have friends attend the party. Why? In the party, several tupperware products will be available for sale, which your friends will buy. Depending on the sales you get a sales commission. Several psychological factors combine together, which helps to sell the products. These factors are:
- Reciprocation– Games are played when the party starts. Prizes are given to the winners. Those who did not win also gets to reach a grab bag. Everyone has received a gift before the buying begins. This allows them to start feeling good about the product.
- Commitment – Each participant describes publicly about the uses and the benefits of tupperware products they already own.
- Social Proof – Everyone is buying the product. So the product has to be good.
- Liking – Your friend purchases the product because of you.
These factors combine to create a LOLLAPALOOZA Effect (say that 10 times fast.)
The monster of a book also contains various speeches that Charlie has given. You may be thinking, “Can’t I just find these on YouTube?” Well no, you can’t, I’ve looked. And the speeches are filled with so much you can learn from. It’s like you’re sitting down with Charlie and he’s just spewing the knowledge he’s acquired over his many years on this planet. To not take the time to learn would be foolish.
Charlie is a very quotable man. He seems reserved, especially in Berkshire Hathaway Shareholder Meetings, but when he does decide to open his mouth, outside of the often said, “I have nothing left to add,” you can be sure gold will be shared.
Some of my favorite quotes from the book just scanning through include but are not limited to:
- “Read all the time”
- “Be prepared, act promptly, in scale, on a few major opportunities.”
- Jessy Livermore, “Big money is made in the waiting”
Munger then goes on to explain that he would sit on 10-20 million at a time in T-Bills just waiting.
- “It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities”
- “There are worse situations than drowning in cash and sitting, sitting, sitting. I remember when I wasn’t awash in cash and I don’t want to go back. – Munger
- On Coumpound Interest:
- “Compound interest is the eighth wonder of the world” – Einstein
- “Never interrupt it unnecessarily” – Munger
- “…’tis the stone that will turn all your lead into gold…Remember that money is of a prolific generating nature. Money can beget money, and its offspring can beget more” – Benjamine Franklin
- “Generally speaking, envy, resentment, revenge and self-pity are disastrous modes of thoughts. Self-pity gets fairly close to paranoia, and paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity. … Self-pity will not improve the situation.” – Munger
- “Wisdom acquisition is a moral duty. It’s not something you do just to advance in life. Wisdom acquisition is a moral duty. As a corollary to that proposition which is very important, it means that you are hooked for lifetime learning. And without lifetime learning, you people are not going to do very well. You are not going to get very far in life based on what you already know. You’re going to advance in life by what you learn after you leave here.” – Munger
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.” – Munger (This is my personal favorite)
- “Our game is to recognize a big idea when it comes along, when it doesn’t come along very often. Opportunity comes to the prepared mind.” – Munger
That’s a lot of quotes and isn’t even close to 1/1000000000 of the knowledge you’ll gain from this book. So, do yourself a favor, spend the $50 to improve your future. Like I always say, you can go out and spend this money on things that will pass, or you can spend it on improving your self and learning. Something that only the grave can take away.
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