Wealth

From Broke to Billionaire: Charlie Munger’s 4 Secrets to Investment Success

Charlie Munger passed away on November 28, 2023, at the age of 99.
Charlie Munger is known as a legend in the investment community.

Berkshire Hathaway, which he and Buffett run together, has become one of the four largest reinsurance companies in the world.

But in his early years, he once broke out of his family due to treating his children and fell into poverty.
How does a penniless boy grow into an investment guru?

Countless people are looking for the wealth code in Munger’s life. And this, Munger has already given the answer: first, focus on doing the present things well; second, invest in your own future.
Munger’s lifetime wealth is hidden in these investments.

1. Invest in your brain: There is not a single smart person from all walks of life I have met in my life who does not read every day—no, not one.
The famous Chinese investor Li Lu once had breakfast with Munger several times.

For every appointment, Munger would arrive early, take out a book or newspaper, and read quietly in his seat.
This has always been Munger’s habit.

Whether on a business trip or at a party, he always carries books with him. He believes: “As long as I have a book in my hand, I won’t feel that time is wasted.”

Munger is famous for his love of reading, and children laugh at him as “a book with two legs.”

He has dabbled in various types of books, including economics, investment, psychology, and biology. Knowledge in different fields has expanded his cognitive boundaries.

He likes to read biographies of famous people. He feels that he can benefit a lot from making friends with “dead greats” such as Adam Smith and Benjamin Franklin.

Such a wide range of reading allows Munger to gain insight into human nature and make investments from a higher standpoint.
In any industry, the final battle is knowledge.

How much time you spend on reading will be rewarded. Every page you turn is shaping a better version of yourself.

Every class jump in life is a superimposed effect brought by knowledge. Making money with knowledge is a shortcut that every ordinary person can take.

2. Invest in character: If you really want to learn something from me, remember my words: rules and reliability. All these traditional virtues will last a lifetime.

Writer Shui Muran mentioned a “law of conservation of wealth.”

Wealth is an external manifestation, “acquisition”; and our inner quality is “virtue”.
The essence of wealth is the realization of character.

Munger once acquired a company with his partner Glenn. At that time, two old ladies held bonds issued by the company. It would have been easy for them to acquire the bonds at prices well below their face value. But Munger insisted on giving them face value. Later, Glenn wanted to withdraw his shares and exchange them for cash because he wanted to invest in another project. Munger asked him how much he wanted. Glenn thought about it and said $130,000. Munger said, no, you made a mistake.

When Glenn heard this, he thought Munger thought his offer was too high. Just when he was feeling uneasy, he heard Munger say, “Your share is worth US$230,000.”

This is the business principle that Munger has always adhered to: take the right path, and the road will get wider and wider.
If a person wants to be steady and far-reaching, he must first be a person and then do things.

If you often take advantage of others, your customers will not dare to trust you; if you often dig holes for your colleagues, your colleagues will not dare to cooperate with you.
A tall building begins with a foundation, and character is the basis for establishing oneself.

People with bad character will eventually fall, no matter how high they climb or how far they go.

3. Investment mentality: I won’t spend too much time regretting the past. Once I learn a lesson, I won’t get stuck in it again.

One time, Munger was about to take a plane. For some unknown reason, when he was going through the security check, the detector kept beeping warnings.
In desperation, Munger turned back again and again to undergo security checks.
But with such a delay, he would miss his flight.

However, he neither cursed the staff endlessly nor got stuck in a bad mood. He immediately rebooked the flight and waited calmly in the terminal.

This is Munger’s mentality all the time: Don’t see yourself as a victim.

He has fallen to the lowest point in his life many times. He once watched his 7-year-old son take his last breath due to leukemia; he once lost his left eye due to a failed operation; he also experienced the world oil crisis and stock market crash, which he was asked to manage. Investment companies lost more than half.
Desperate situations again and again are enough to make people collapse.

But Munger never complained about himself. Instead, he poured out the resentment and bitterness in his heart and got out of the predicament step by step.

It is also because of this that Munger has encountered a turning point every time after reaching the bottom of his life, and his wealth has grown to a new level every time.

I can’t help but think of the two concepts mentioned by corporate consultant Liu Run – “brittleness” and “elasticity”.
If the vase and the ball fall to the ground at the same time, who will break first? The answer is obvious.

Sometimes we are like a vase, unable to withstand twists and turns and accidents.
Once you encounter setbacks, you will be stuck in a dead end and cannot get out.

When we train ourselves to be like a rubber ball, we can bounce back no matter how many times we are hit or how many difficulties we endure.

4. Investment ability: If you want to get something you want, the best way is to make yourself worthy of it.
Writer Peter Kaufman is an admirer of Munger.

He compiled hundreds of Munger’s speeches into a volume to study why Munger was so successful throughout his life.

He compared the difference between Munger and ordinary investors. I found that Munger’s biggest advantage is to continuously improve his professional level.

Munger can talk eloquently to various investment gurus. Not only is he familiar with their trading concepts and techniques, but he can also point out their advantages and disadvantages. Moreover, he did not fall into the trap of his predecessors and established his own investment system of “value judgment”.

He has developed a hundred mental models to deal with various problems that arise at work.
Peter once asked him: Why do you have to keep learning and learn so much?
Munger said: The future belongs to lifelong learners.

The world is progressing every second, and your stagnation is a kind of regression.

If you just think about fishing in troubled waters when you go to work, you will waste your martial arts skills and become more and more mediocre.

If you know how to concentrate on polishing your skills and become one of the few people in the upper reaches of the industry, your value will rise.

The Dreyfus brothers, American computer experts, once proposed a “Dreyfus model”: people’s proficiency in a professional skill can be divided into novices, advanced novices, competent, proficient and experts.
This society follows the 80/20 rule.

The difference between experts and novices is that the former may share 80% of the cake with a few people, while the latter may have to compete with the majority for 20% of the cake. If you want to make money, you must first make yourself valuable. For those who are capable, their ability is an iron rice bowl that cannot be taken away by others.

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