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Insights from Charlie Munger's fireside chat: Lessons on investing, irrationality, and more

I stumbled upon this amazing fireside chat between Charlie Munger and Todd Combs, recorded in April 2022 for the ‘Singleton Prize for CEO Excellence’. You can listen to the full conversation here or read the transcript.

Munger talked about a range of great topics such as lessons from Henry Singleton, irrationality, investing and more.

Here are my 5 key highlights from Munger’s conversation with Combs.

Charlie Munger with a serious face during the fireside chat with Todd Combs
Source: Reuters

1. Intelligence vs temperament

Munger points out that it is helpful to have a high IQ, but it is not essential for success in investing. Munger argues that the most important thing for an investor is to be patient and disciplined.

Warren used to say, “You really don't need to be very smart to be a very successful investor.” And I think Warren was right. It's a field where the temperament is, it's good to have the extra mental horsepower that Henry Singleton had. That is helpful, but it's perfectly possible to do splendidly well if you have the right temperament. Just go at it over a long time.

2. You just need one or two great businesses

It is better to find one or two great businesses than many mediocre ones. It is a reminder that it is better to focus on quality than quantity when it comes to investing.

But I think the people who tend to get the best results are these fanatics who just keep searching for the great businesses. And the best of them don't expect to find 10 or 20 or 30. They find one or two. And that's the right way to do it — but all you need are one or two. I know the guy who invests with the banker that backed the Costco copy which was Home Depot. He also backed Eli Lilly very early. He has several billion dollars between those two investments. He didn't need any more. And in a lifetime of investment banking, that's what he got: two. I regard that as a successful life. That isn't what they teach in our educational institutions.

3. On inflation

Inflation is bad for most people because inflation erodes the value of money, making it harder for people to afford goods and services. It is caused by politicians printing too much money. This can happen when governments spend more money than they collect in taxes, or when they borrow money to finance their spending.

I don’t think most people are going to do really well with inflation. I think most people are going to be way better off, at least the people that have any money will be way better off, if there weren't any inflation. And so it's just a question of how most of them aren’t going to profit. Most people are going to suffer. The idea is to suffer as little as you have to from it. But I think it's the nature of things that a bunch of democratically-elected politicians will eventually print too much money.

4. Half the secret of life

It is important to be able to focus and to be persistent, even if you are not naturally brilliant. Success does not come easy, but it is possible if you are willing to put in the time and effort.

I'm not a polymath. I am a guy who has been able to take moderate obsession and a long attention span and turn them into pretty good results. A long attention span will help you a lot, if you're reasonably smart.
If you're reasonably obsessed with something, even if it's intermittent, and you have a long attention span, you keep working over the serious problems, you’ll stumble into an answer. That’s half the secret of life.

5. Munger’s life changed at age 7

Be aware of your own irrationality. Munger's story is a reminder that we all have the potential to be irrational, even geniuses. This is why it is crucial to be aware of our own biases and to be mindful of our decision-making process.

My father had a great friend whose father had been the chief mathematician at the University of Nebraska, and he played the violin. He was mechanically gifted. He was an enormously talented man. But he’d been very poor, because in those days, a mathematics professor of a university got paid practically nothing. And this man had conquered poverty all those years of scholarship, working 90-hours weeks. I loved him and admired him. His house was an alternative house for me. I went back and forth because he had children my age. And one day, the man got a leak in his house that caused some extra cost. And he practically went berserk. All that power he had, he took extra care of the home. Things like leaks — Of course, a surgeon would be very fanatic about leaks, too. Anyway, he went berserk. And I thought God Almighty, here's this genius going berserk. A world where even geniuses are that nuts, I have a chance...

The fireside chat between Charlie Munger and Todd Combs reveals key insights: success in investing requires patience and discipline, focusing on a few great businesses is more beneficial than many mediocre ones, inflation negatively affects most people due to excessive money printing by politicians, persistence and focus can lead to success even without exceptional intelligence, and being aware of our own biases is crucial. Munger's wisdom highlights the importance of temperament, quality over quantity, self-awareness, and persistence in achieving investment success.


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