Charlie Munger: The Mental Discipline of Investors

Comprehensive from red and green.

Buffett once said: "Munger designed today's Berkshire Hathaway, which is his most important achievement. The blueprint he gave me is very simple, that is, 'Invest in an excellent company at a reasonable price, which is much better than buying an ordinary company at a cheap price...' In this way, Berkshire Hathaway was established according to Munger's blueprint. My role is the general contractor, while the CEOs of Berkshire Hathaway's subsidiaries are subcontractors."

As a meteorologist and lawyer by training, Munger never studied economics, marketing, finance, and accounting in college. How did he become the greatest business genius?

1. Investor's Mental Cultivation

1. Knowing what you don't know is more useful than being a smart person.

1. Admitting ignorance is the beginning of wisdom.

2. People try to become clever, but I just want to prove that I am not doing something stupid, which is much more difficult than many people imagine.

3. Using quantitative methods can find profitable trades. Once we break free from mental constraints and realize what might shock Graham, then we can start thinking about better investment opportunities.

5. My success comes from my long-term focus.

1. Patiently waiting will help you become an investor, but most people are impatient.

2. "You have to be very patient, you have to wait until something happens, and then you will find that the price you paid is worth it."

This statement goes against human nature, no one can sit idle all day just waiting. But this is easy for us because we have many other things to do.

However, for an ordinary person, can you imagine him sitting still for 5 years and doing nothing? You may feel that you are not proactive, have no value, and feel that you have done something foolish.

1. I believe investors need to face the actual situation of the company, even if you are unwilling; in fact, especially when you are unwilling to do so, you should do it.

2. There was a time when no one wanted to enter the market, but we started investing, and that feeling was really bad.

3. Successful investing requires both initiative and patience, and you need to be prepared to seize the opportunity when it arises, because in this world, opportunities do not last long.

4. Every century, the market will experience two or three declines of more than 50%. If you cannot face all this calmly, then you are not suitable to be an ordinary shareholder. Compared to those who are more magnanimous and calm about market fluctuations, you should get mediocre results.

5. When we were young, we didn't know what could expand our investment scope until we met Iscar. Iscar is the kind of company we would never consider buying when we were young. At that time, we only knew to look for suitable partners. This is a very remarkable business, everything is ready. We persistently learn, isn't it good? It's never too late to mend the fold after the sheep are lost 2. Misconceptions of Investors

6. Following the crowd will only bring you closer to the average.

7. Predictions have never been my strong suit, and I don't rely on accurate predictions to make money. We often just buy good companies and hold onto them.

3. Desiring overnight wealth is quite dangerous.

1. As an investor, Graham gained many experiences and lessons in the market. The major crashes and Great Depression that almost crushed him shaped his philosophy of evaluating companies and left him with lingering fears for the rest of his life. All his methods are aimed at getting rid of this feeling.

2. Trying not to make stupid mistakes, rather than trying to appear smart, is what long-term successful investors rely on to achieve unimaginable returns. As the old saying goes, "The river is deep because of the accumulation of water."

3. I admire diversified investments, I think this concept is too crazy.

4. From the failed business decisions I have seen in my life, excessive focus on tax savings is one of the main reasons for making stupid mistakes... From now on, my advice is to avoid participating in any tax-saving investment projects recommended to you.

5. As you can see in the operations of Berkshire Hathaway, we tend to take a conservative approach. We borrow money on more favorable terms and in smaller amounts. We are willing to reduce leverage. You may think we are wrong. Although this may make us earn less money, we are not bothered by it. We never feel distressed about missing out on certain opportunities. What's the problem if others are wealthier than you? Worrying about it is needless anxiety.

6. In the business world, if you have a group of analysts who lack common sense but are responsible for due diligence, then you are no different from being in hell.

7. Any place with high commissions is very likely to involve fraudulent activities.

3. Wisdom of Learning

1. This is my experience in life, if you can maintain the habit of thinking and reading, you won't need to work.

2. There is no single criterion for getting rich through investment. You need to understand a lot about business, human nature, and numbers. Don't expect a magical system to do this work for you.

1. In any past year, if you haven't overturned your favorite idea even once, then that year is considered wasted.

2. At the end of each day, strive to be wiser than when you woke up in the morning. Be loyal and excellent in fulfilling your duties, progress a little every day. Eventually, if you live long enough, most people will receive the rewards they deserve.

3. Master valuable ideas in important subject areas and use them frequently. Remember to use them in a comprehensive manner, rather than just utilizing a part of them.

4. I like people who can openly admit their foolishness. I know that if I acknowledge my mistakes upfront, I will perform better. This is a great learning tip.

5. A person who never makes mistakes can lead a comfortable life, but this is unrealistic. In fact, a key to life is learning how to deal with mistakes. Failing to handle "psychological resistance" well is a common reason many people end up bankrupt

6. I most appreciate the way Charlie Munger views things. He believes that every missed opportunity in life is a chance for growth and learning. Instead of wallowing in self-pity, you should use these setbacks in a constructive way. This is a very valid point.

7. In my lifetime, every wise person I know is constantly learning. When you know the amount of reading Warren Buffett and I do, you will surely be amazed. My children mock me, they think I am just a walking book.

8. Warren Buffett is one of the most outstanding learning machines on this planet. After the age of 65, Warren Buffett's investment skills significantly improved. Looking at his entire investment career, I can tell you that if Buffett had stayed at his early level of knowledge, he would not have achieved the brilliant success he has today.

9. If you have the level of wisdom required by a mentally mature person, then you have the ability to surpass those who are smarter than you. By drawing the most crucial knowledge from all different disciplines, not just a few, you will be much smarter than them.

10. In life, I have seen many people achieve great success. Although they are neither the smartest nor the most hardworking, they are all good learners. They go to bed wiser every night than when they woke up, children, this is important, especially when you are facing the marathon of life.

11. Extreme specialization is the key to success. Most people are better at specializing in one aspect than understanding the whole world.

12. Look at this generation, they have electronic devices, can multitask, but I can still confidently say that they cannot compare to Buffett who focuses solely on reading. If you want wisdom, you have to calm down and read. This is the right way to gain wisdom.

13. We are always learning, correcting, and discarding our own ideas. The ability to promptly and decisively abandon your original ideas is one of the most valuable qualities. You must learn to put yourself in others' shoes.

14. If you cannot articulate your opponent's views more clearly than your opponent, then you cannot say you have a viewpoint to be proud of. This is an important mental exercise.

15. People with more experience than you may have their cognitive abilities affected by biases caused by motives or other similar psychological factors. In such cases, you need the courage to overturn their decisions. Of course, in some cases, you have to admit that you lack understanding of certain things, and the best approach is to trust the professionals.

16. I always keep my distance from certain people who do not truly understand the issues but are full of confidence when answering questions.

17. I believe that people who multitask pay a great price.

18. Take economics as an example, most people have received training in a single mode, trying to solve all problems with one method. There is a saying: "To a man with a hammer, everything looks like a nail." This way of problem-solving is foolish

19. I believe that extreme ideological systems will constrain people's minds, and this must be avoided.

IV. Life Experience

1. The most reliable way to get something you want is to make yourself deserve it.

2. Maintaining rationality is a moral commandment. Never be foolish when you shouldn't be.

1. Mozart's life, which was ruined by madness, is a good example. With unparalleled talent, his achievements were enough to overshadow others, yet his life was quite miserable from the beginning. He lived in financial difficulties, which made him suffer greatly.

2. I have never achieved great success in areas that I am not interested in. If you cannot generate interest in certain things no matter what, then even if you are very intelligent, it is difficult to achieve great success.

5. The best way to resist aging is to live well before getting old.

1. In marriage, you should not seek a partner with good looks and personality. You need to lower your expectations to find a partner.

2. Someone once asked me who contributed the most to my personal happiness in life, and I said, "It's simple, it's my wife's first husband."

3. I eat what I want without restrictions. I have never cared about my health or done any exercise that I didn't want to do. If I have any achievements, it is mainly because I persist in deep thinking... Some people believe that running or other exercises can help them progress and give them strength.

9. Three rules for a career: 1. Don't sell something you wouldn't buy yourself; 2. Don't work for people you don't respect and appreciate; 3. Only work with people you like.

1. The highest form of civilization is to form a seamless network full of strong trust - no need for processes, just reliable people trusting each other... In your own life, you will also long for such a network full of trust. If your marriage agreement is written on 47 pages, then I suggest you don't get married.

2. Oh, dealing with people you trust and keeping others away from your life is very useful. It should be seen as a guide to life... Smart people will avoid those who are like rat poison, after all, there are too many of these people in life!

3. I like you because you remind me of myself. Who wouldn't like to be stared at by their own image?

4. Remember Louis Vincenti's rule: "Tell the truth, and you won't have to keep track of all the lies you've told."

5. When I was very young, I had the best legal experience. I once asked my father, a lawyer, why he did so much work for a braggart rather than his best friend Grant MacFadden. My father replied, "The person you call the braggart is a rich mine who often gets into legal disputes; while MacFadden can quickly solve problems and treat people kindly, so he rarely encounters legal troubles."

6. Everyone works better when they receive the power of reinforcement, as psychologists call it. Even Buffett would react if he continued to receive rewards. Remember this, find the path to success by positively reinforcing those around you

7. When facing an unbelievable disaster, never let the disaster escalate into two or even three disasters due to a collapse of will.

8. In the long run, even great civilizations can be surpassed. You should understand how civilizations decline.

9. Life always hurts someone in some way, and helps others in some way. Faced with setbacks in life, everyone should actively respond. A man should face the ups and downs of life calmly. Don't always complain, and don't expect to solve problems by complaining.

10. As I age, I become more experienced. I seem to be like this person: jumping from a skyscraper, and when reaching the fifth floor down, saying, "So far, it's been a good journey."

11. If you have been investing with Buffett for 40 years, even if he is no longer useful to you, you have no right to complain.

12. If you are worried about inflation and don't need too many items, then one of the most effective protective measures is to not have too many absurd desires in life.

13. It's useless to spend time worrying about things you can't control. If you always feel that terrible things will happen when managing funds, then I suggest that you can choose to be a foolish optimist for the rest of your life.

14. Dean Kendall of the Michigan School of Music once told me a story. Kendall was in charge of running a candy stand when he was a child. His father saw him eating a piece of candy from the stand. Kendall said, "Don't worry, I will add another one."

His father said, "This way of thinking will ruin you. If every time you take everything you want and admit that you are a thief, it might be better for you."

1. Well, envy and jealousy are two of the Ten Commandments, right? For those who have raised children, run a school, managed a law firm, or an investment bank, do you know what envy means? I have heard Buffett mention many times: "It's not greed that drives the world forward, it's envy."