Charlie Munger

Who

Charlie Munger was a lawyer in Los Angeles who became Warren Buffett’s partner and, from 1978, vice chairman of Berkshire Hathaway. He also chaired Wesco Financial and the Daily Journal Corporation. His talks were collected in Poor Charlie’s Almanack. He died in 2023, a few weeks before his hundredth birthday.

Operating rules

Invert, always invert. He borrowed the idea from the mathematician Carl Jacobi. Instead of asking how to succeed, ask what would guarantee failure, then stay away from those things. It is a humble method. It does not need brilliance, only honesty about how things usually go wrong.

Build a latticework of models. He argued that a few big ideas from many fields, such as psychology, economics, biology and engineering, beat deep knowledge of only one. A person who owns only a hammer sees every problem as a nail.

Pay a fair price for a wonderful business. He pushed Buffett away from buying poor businesses just because they were cheap, and toward buying great businesses at sensible prices. The purchase of See’s Candies in 1972 is often cited as the turning point.

Sit still when there is nothing to do. He believed most of the gains in investing came from patience, and from acting firmly on the rare occasions when the odds were clearly in your favor.

What I borrowed

Inversion is the root of my pre-mortems and my anti-goals. Before a project starts, I write down how it could fail, then plan against that list. His latticework is also why my reading list wanders far outside buildings and engineering.

What I won’t copy

His bluntness. He could afford to say exactly what he thought in public. Most of my work depends on keeping people willing to tell me when I am wrong.