 Speaking at last week's annual meeting of the Daily Journal Charlie Munger invited shareholders to remain sane and rational, and not only with regard to share selection, but in all aspects of life.
I've transcribed his words: Part of the reason that some of the companies I’ve been affiliated with that have been successful, it’s not that we’re so smart, it’s that we stayed sane. A lot of what goes on is absolutely nuts. One of my favourite tricks is the inversion process. To give an example: When I was a meteorologist in WW2 they told me how to draw weather maps and predict the weather. But what we were actually doing is to clear pilots to take flights. And I just reversed the problem, I inverted. I said suppose I wanted to kill a lot of pilots, what would be the easy way to do it? I soon concluded that the only easy way to do it was to get so much ice on the planes that they couldn’t handle it or to get the pilot to a place where he’d run out of fuel before he could safely land [He was stationed in Alaska]. So I made up my mind I was gonna stay miles away from killing pilots by either icing or getting them sucked into conditions where they couldn’t land. I think that helped me be a better meteorologist – I just reversed the problem. And if somebody hired me to fix India I would immediately say, ‘what could I do if I really wanted to hurt India?’ I’d figure out all the things that would most easily hurt India and then I’d figure out how to avoid them. Now, you’d say it’s the same thing, just in reverse. It works better to frequently invert the problem…You can help India best if you really understand what will really hurt India the easiest and worst. Every great algebraist inverts all the time because the problems are solved easier. Young [people] should do the same thing in the ordinary walks of life. You don’t think of what you want, you think of what you want to avoid. When you’………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
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Charlie Munger, the billionaire investor, friend and colleague of Warren Buffett, gave sage advice to help investors, and more normal folk, last week at the 2020 AGM of the Daily Journal Annual Meeting. Here is a some of it:
Value investing and fishing Question: In investing, I’m curious to know how you weigh the quality of the horse versus the odds offered on the horse. Charlie's answer: Both are important. Basically, all investment is value investment in the sense that you’re always trying to get better prospects than you’re paying for. But you can’t look everywhere at once anymore than you can run a marathon in 12 different states at once. And so, you have to have some system for picking some place to look, which is your hunting ground. But you’re looking for value in every case. I think the strongest companies are Chinese. It really helps if you know which hunting ground to look in. In fact, we all do better if we hunt where the hunting is easy. I have a friend who is a fisherman. He says, ‘I have a simple rule: fish where the fish are’. You want to fish where the bargains are, that’s simple. If the fishing is lousy where you are, you’ll look for somewhere else to fish. Immediate gratification is the way to ruin. Deferred gratifiers do better over the long pull than these impulsive children that have to spend money on Rolex watches or some other folly. ... If you want to read more of this article or more articles follow my newsletter here. Charlie Munger, Warren Buffett’s business partner, now aged 96, gave some brilliant advice to investors when speaking last week at the 2020 AGM of the Daily Journal Annual Meeting (he is the chairman).
Don’t play in game where you are stupid Q. How do you research companies? A: Of course, if it’s complicated technologically I tend to leave it to others. There may be an occasional variation in that. But basically, I just don’t do it. I want to think about things where I have an advantage over other people. I don’t want to play a game where the other people have an advantage over me. If you have a pharmaceutical company, and you’re trying to guess what new drug is gonna be invented, I’ve got no advantage. Other people are better at that than I am. I don’t play in a game where the other people are wise, and I’m stupid. I look for a place where I’m wise and they’re stupid. And, believe me, it works better! God bless our stupid competitors. They make us rich. That’s my philosophy. I think you have to know the edge of your own competency; you have to kinda know that this is too tough for me, I’ll never figure this out. I’m very good at knowing when I can’t handle something. Do well by doing good I’ve never be associated with a company that works harder than Costco to make sure the customers are served well. I just love success that occurs that way. I hate success where you are deliberately trying to cheat people or sell them something that’s not good for them. I would choose that approach even if it made less money. In fact, I think you make more. It reminds me of Warren Buffett’s favourite saying, ... If you want to read more of this article or more articles follow my newsletter here. |
Glen ArnoldI'm a full-time investor running my portfolio. I invest other people's money into the same shares I hold under the Managed Portfolio Service at Henry Spain. Each of my client's individual accounts is invested in roughly the same proportions as my "Model Portfolio" for which we charge 1.2% + VAT per year. If you would like to join us contact Jackie.Tran@henryspain.co.uk investing is about making the right decisions, not many decisions.
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