Dedication Rebuttal, Munger on Buffett Introduction by Peter D Kaufman Chapter 1 A Portrait of Charles T Munger By Michael Broggie Praising Old Age Remembering, The Children on Charlie And Bill Gates has to Say: Chapter 2 The Munger Approach to Life, Learning, and Decision Making Chapter 3 Mungerisms : Charlie Unscripted Highlights from Recent Berkshire Hathaway and Wesco Financial Annual Meetings By Whitney Tilson Chapter 4 : Eleven Talks Harvard School Commencement Speech A Lesson on Elementary, Worldly Wisdom as It Relates to Investment Management and Business A Lesson on Elementary, Worldly Wisdom, Revisited Stanford Law School Practical Thought About Practical Thought? The Need for More Multidisciplinary Skills from Professionals: Educational Implications Investment Practices of Leading Charitable Foundations Philanthropy Roundtable The Great Financial Scandal of 2003 Academic Economics: Strengths and Faults after Considering Interdisciplinary Needs USC Gould School of Law Commencement Address The Psychology of Human' Misjudgment Charlie Munger's Recommended Books Dedication For Charles T Munger who, in his own words, would tell you: “Acquire worldly wisdom and adjust your behavior according. If your new behavior gives you a little temporary unpopularity with your peer group... then to hell with them." Rebuttal, Munger on Buffett I think there's some mythology in the idea that I've been this great enlightener of Warren. He hasn't needed much enlightenment. I frankly think I got more credit than I deserve. It is true that Warren had a touch of brain block from working under Ben Graham and making it ton of money. It's hard to switch from something thats worked so well. But if Charlie Munger had never lived, the Buffett record would still be pretty much what it is. It's hard to believe that he's getting better with each passing year. It won't go on forever, but Warren is actually improving. It's remarkable: Most men in their seventies are not improving. but Warren is. Berkshire is drowning in money-we have great businesses pounding out money. When Warren is gone, the acquisition side of Berkshire will not do as well, but the rest will do well. And the acquisition side will do just fine. I think the top guy' won't be as smart as Warren. But it's silly to complain, "What kind of world is this that gives me Warren for forty years and then some bastard comes along who's worse?" Introduction by Peter D Kaufman Throughout the book, Charlie reveals his intellect, wit, values, and no end of rhetorical flair. His encyclopedic knowledge allows him to cite references from classical orators to eighteenth- and nineteenth-century European literati to pop culture icons of the moment. Where else would you find Demosthenes and Cicero juxtaposed against Johnny Carson or today's investment managers set against Nietzsche, Galileo, and a "one-legged man in an ass-kicking contest"? Or how about Ben Franklin versus Bernie Cornfield in a battle of worldly wisdom? Using self deprecation and imagination to great effect, Charlie cheerfully compares himself to a counting horse, proposes "Glotz's sugared, caffeinated water" as a marketing-bereft label for Coca-Cola, and attests, "At least when I was young I wasn't a total klutz." In one talk (Practical Thought About Practical Thought?), Charlie even takes on the challenge of building, from scratch, a two-trillion-dollar business, and then walks us through his diverse mental models to accomplish that mighty feat. The quotes, talks, and speeches presented here are rooted in the old- fashioned Midwestern values for which Charlie has become known: lifelong learning, intellectual curiosity, sobriety, avoidance of envy and resentment, reliability, learning from the mistakes of others, perseverance, objectivity, willingness to test one's own beliefs, and many more. But his advice comes not in the form of stentorian admonishments; instead, Charlie uses humor, inversions (following the directive of the great algebraist, Jacobi, to "Invert, always invert"), and paradox to provide sage counsel about life's toughest challenges. Charlie also employs historical and business case studies to great effect. In these presentations, he makes his points with subtlety and texture, often using a story-like context instead of abstract statements of theory. He regales his audience with humorous anecdotes and poignant tales, rather than with a blizzard of facts and figures. He well knows, and wisely exploits, the traditional role of the storyteller as purveyor of complex and detailed information. As a result, his lessons hang together in a coherent "latticework" of knowledge, available for recall and use when needed. It is clear throughout these talks and speeches that Charlie places a premium on life decisions over investment decisions. His mental models, drawn from every discipline imaginable, recur repeatedly and, in no way, focus on "business portfolio strategy" or "beta" or "Cap M." Rather they center on fundamental truth, human accomplishment, human foibles, and the arduous path to wisdom. Charlie once said, "i wanted to get rich so I could be independent, like Lord John Maynard Keynes." Independence is the end that wealth serves for Charlie, not the other way around. About the Book: We open with a "portrait" biography that chronicles Charlie's progress from a modest Omaha childhood to prodigious financial success. New to the second edition, Charlie then offers us his reflections on aging, inspired by Cicero's Discourse of Old Age. Next, we summarize the Munger approach to life, learning, decision making, and investing. This section details both Charlie's unconventional way of thinking and his extraordinary work ethic- the twin fonts of his amazing success. Our "Mungerisms: Charlie Unscripted" section presents a collection of the trenchant remarks he has made at past Berkshire Hathaway and Wesco Financial annual meetings. In the balance of the book, Charlie speaks to his audience via speeches and talks he gave over a twenty-year period. In this expanded third edition of the book, we have added a new talk Charlie delivered at the USC Gould School of Law Commencement on May 13th, 2007. So the original "Ten Talks" have grown to become a not-so-round "Eleven Talks." These speeches and addresses cover a wide spectrum of Charlie's interests, ranging from how one acquires worldly wisdom, to how his "Multiple Mental Models" can be applied to business, so how the investment strategies used by charitable foundations can be improved. The eleventh talk is a special edition of "The Psychology of Human Misjudgment" that Charlie created especially for this book. Each talk is well worth our time not only for the enjoyment it will provide you, but also for what you can absorb from the rich assortment of ideas and practices that Charlie relies on. You will probably never find a better opportunity to learn from someone so smart-and so forthright. In his talks, Charlie simply opens up and tells it like it is. A special note: Charlie's redundancy in expressions and examples is purposeful: for the kind of deep "fluency" he advocates, he knows that repetition is the heart of instruction. A word about the style and layout of the book: Charlie is enormously curious about nearly everything he bumps into in life. Accordingly, as we ourselves bumped into people, places, and subjects mentioned by Charlie in his talks, we supplemented his text with related information, photographs, and other graphics. The "sidebars" peppered throughout the talks, for example, serve to explain concepts, add a supporting voice, or emphasize an important Munger idea. We hope these sidebars will not only inform, but also amuse and even encourage you to further pursue these subjects on your own. I wish you good reading and an appreciation of the brightness and dry humor that those of us who know Charlie Munger have come to treasure and expect from him. Chapter 1 A Portrait of Charles T Munger By Michael Broggie "The next thing most like living one's life over again seems to be a recollection of that life, and to make that recollection as durable as possible by putting it down in writing." - Benjamin Franklin Behind the extraordinary story of Berkshire Hathaway are two financial geniuses: the widely acclaimed Warren Buffett and his "silent partner," Charlie Munger, who relishes his obscurity. Charlie is Warren's friend, lawyer, adviser, devil's advocate (Warren once called him the "abominable no-man"), and one of the largest stockholders in one of the most successful publicly traded companies in American business history. Since 1964, when Warren, and some years later, Charlie, assumed management of Berkshire, its market value has increased an astonishing 13,500 times, from $10 million to roughly $135 billion, without much of an increase in outstanding shares. Such phenomenal growth is the singular achievement of these two unassuming Mid-westerners, who combine their synergistic abilities to recognize and seize opportunities other businessmen consistently overlook. According to Charlie, his boss’s staunch anti socialist attitude was manifested in his rule requiring the boys to present two pennies at the end of their shifts to cover the cost of the new Social Security Act, In return, they received a $2 daily wage along with the admonition that socialism is inherently evil. While Warren is one of the most admired and publicized business leaders in the country Charlie has purposefully sidestepped the limelight, choosing relative anonymity instead. To better understand this complex and highly private businessman, we must start at the beginning. Charles Thomas Munger was born on January 1, 1924, in America's heartland, Omaha, Nebraska. Many notables share his Midwestern roots: Will Rogers, Henry Fonda, John Pershing, Harry Truman, Walt Disney, Ann Landers, Gerald Ford-and, of course, Warren Buffett. Charlie initially crossed paths with the Buffett family during the formative years of his life when he worked at Buffett and Son, an upscale grocery store in Omaha, about six blocks from the Munger household. The boss and part-owner was Warren's grandfather, Ernest. A strict disciplinarian, he scheduled his young workers for twelve-hour shifts with no meals or breaks. According to Charlie, his boss’s staunch anti socialist attitude was manifested in his rule requiring the boys to present two pennies at the end of their shifts to cover the cost of the new Social Security Act, In return, they received a $2 daily wage along with a considerable lecture about the evils of socialism. The arduous working conditions in the Buffett grocery store had a lasting influence on both Charlie and Warren. Warren, six years younger, served his hard times under Grandpa Ernest several years after his future business partner had moved on. Charlie's formal education began at Dundee Elementary School where he and his younger sisters, Nancy and Carol, were indoctrinated with ethical homilies. Charlie's teachers remember a smart kid who was also incline to be a bit of a wiseacre. he enjoyed challenging the conventional wisdom of teachers and fellow. students with his ever-increasing knowledge gained through voracious reading, particularly biographies. Today he can't remember the first time he was exposed to the aphorisms of Benjamin Franklin, but they fledged an ineffaceable admiration for eclectic and eccentric statesman/inventor. Charlie's parents, Al and Florence Munger, encouraged reading and gave each of their children several books at Christmas, usually devoured by that night. At the nearby home of the Mungers' close friends, the Davises, Charlie often read the medical journals belonging to Dr. Ed Davis, who was both his father's best friend and a family physician. Charlie's early exposure to Dr. Davis's medical library spawned a lifelong interest in science. By the time he was fourteen, the precocious learner also became one of the doctor's best friends. Charlie became so interested in medicine that he watched motion Pictures of Dr. Davis, a urologist, performing surgery and became fascinated with the statistical outcomes of similar procedures in the field. At home, Charlie developed a fondness for raising hamsters and periodically traded them with other children.