Thank you, Charlie
Charlie Munger died this week, and there’s a hole in the investment world that will never be filled.
It can be strange to mourn someone you never knew personally. It often feels disingenuous. But in this case, I’m hard-pressed to think of another person, outside of my immediate circle of family and friends, who has had more influence on my way of thinking.
In our corner of the world, Munger’s passing was a seismic event. Despite his 100th birthday looming this coming New Year’s Day, it still came as a shock. Sharp until the very end, he was the kind of larger than life figure who seemingly could have cheated death for many more years. And not because he optimized his diet or took daily ice baths; rather, it was because he was fully engaged in life, loving what he did every day and connecting with others who shared his passion. I'm pretty sure that’s the key.
For so many of us, the image of Munger, seated to the left of Warren Buffett at the Berkshire Hathaway annual meeting, or holding court at the Daily Journal meeting, is akin to the feeling of returning home after a long journey. Because no matter how crazy or irrational the world may have become, Charlie and Warren were always there to remind us of the fundamental things that remain true.
After many years - nay, decades - of following them, it always seemed obvious what they would say. And yet somehow, we still listened. They recalibrated us. Refocused us. Ensured our compasses continued to point north.
Charlie in particular, brought a “don’t give a fuck” attitude to the proceedings. A few weeks ago I compared him to Keith Richards, and I stand by that. Charlie answered to no one. He was a badass. A rock star. The GOAT.
Charlie said the things the rest of us wanted to say. He called people out - not because they disagreed with him, but because they were disingenuous, simple-minded, or both. He told the truth, and had the platform to do it very publicly. In that sense I’m not sure who can ever replace him.
My financial education
After discovering Buffett in university, I read everything I could get my hands on. I printed out a stack of Berkshire Hathaway annual letters, noting Warren’s frequent references to “Charlie.” As I ventured further down the rabbit hole, reading annual meeting summaries and transcripts, I realized that I preferred Charlie’s acerbic wit and dry sense of humor to Warren’s more sanitized and diplomatic approach.
Poor Charlie’s Almanack dropped at just the right time for me. Having completed a gauntlet of professional designations, I had finally turned my attention to reading outside of the sphere of finance. I spent time with some classic novels and studied a bit of religion and philosophy, and that’s the moment this heavy tome fell into my lap, opening my eyes to the power of expanding your circle of knowledge. In the words of Munger, it was about building a “latticework of mental models,” where knowledge in one area strengthens understanding in other areas.
The world of finance is full of estimates, projections, and false precision. Linear extrapolations, observed correlations, and hockey stick growth charts. A CFA program that indoctrinates us to believe in a world of formulas that bear no relation to reality. And to top it all off, a system of incentives that too often encourage us to ignore common sense.
Charlie affirmed my belief that it was all indeed bullshit. That the things that matter in the investment world are the same things that matter in the real world and in the business world we all inhabit.
What’s the bottom line?
What are the incentives?
Where are the competitive advantages?
What human biases are we exploiting or falling victim to?
In writing this piece, I have also come to realize that Charlie’s spirit was with me when I wrote Low Risk Rules.
Telling the truth
Ultimately, Charlie taught us that one’s hard-earned ideas and opinions have value, and that we shouldn’t be afraid to express them. One of my favourite ideas of his is that you have to earn the right to have an opinion.
I never allow myself to have an opinion on anything that I don’t know the other side’s argument better than they do.
—Charlie Munger
For a long time I struggled with the idea of putting my investment philosophy in print. Not only because one’s investment approach inevitably evolves as it is informed by new experiences, but also because I would probably offend or annoy industry friends.
But I knew this topic cold. I had experience in the wealth management industry from all angles, and I felt that I had earned the right to express my opinion. And so I began to write.
Early drafts of my book quoted excessively from both Munger and Nassim Taleb (another strong voice unafraid to voice unpopular opinions), so much so that I found myself aggressively editing them out in order to allow other voices to be heard.
I decided that if I was going to put my name on a book, I couldn’t hedge the message. It might sell fewer copies (no big brokerages were going to be ordering this for their clients), but it had to be done. Because Charlie taught me that I shouldn’t be afraid to tell it like it is.
Charlie taught me to approach finance and wealth management as a skeptic.
He taught me to say what I believed without fearing the consequences.
He taught me the fundamental investment and life principle of avoiding mistakes above all else.
He taught me that a life well lived is one based on reflecting your true beliefs in a way that, hopefully, makes the world a better place.
Last month, when Jason Zweig asked Charlie what he’d like to see on his epitaph, Charlie replied “I tried to be useful.”
Mission accomplished.
Thank you, Charlie.