Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe

Summary
  1. Lowe details Charlie’s life through his early career as a lawyer, later partnership with Buffett to form Berkshire Hathaway, his family, his hobbies and outlook on life
Key Takeaways
  1. Warren, Charlie are very similar and make an amazing team. They are both from Omaha but didn’t meet until 1959
  2. Very eclectic reader – hundreds of biographies
  3. Wanted wealth because it grants independence
  4. Loves complex ideas and detailed analysis
  5. Credits his success to self-education, mental discipline, deeply understanding big ideas
  6. Always act as honorably as possible
  7. Star Island is his secluded family getaway
  8. Family was very smart, hard working and loving. Father taught him power of Tao – love of doing small things excellently
  9. Poker helps with business decisions – when to fold early and when to back heavily
  10. Somewhat arrogant but his opinions are not set in stone
  11. Divorced “Nancy 1” and soon after remarried to “Nancy 2”
  12. Tended to do a task himself or totally delegate it (usually delegated)
  13. Saw advantage of high quality businesses (easy decisions) early on and helped Buffett see the benefit of paying a fair price for high quality businesses
  14. Made first real money in real estate in California
  15. Able to look at facts and come up with new, insightful conclusions
  16. Great at analyzing businesses quickly and saying no if it falls outside his circle of competence
  17. Can zero in on what is truly important
  18. Must think correctly AND independently
  19. To become truly wealthy, need ownership in a business
  20. Simply easier to be ethical, rational and honest. Hard work and honesty gets you almost anything
  21. If Charlie trusts someone, he trusts them completely
  22. Blue Chip float lead to purchases in See’s Candy, Precision Steel
  23. Typically make one major decision every 3 years. Extreme patience with extreme decisiveness
  24. Must only deal with quality people
  25. Want to be in sectors that tend towards natural monopolies
  26. Bought Buffalo Evening News in 1977. At the time was nearly 25% of BRK net worth
  27. Foresaw savings and loan debacle and moved Wesco away from thrift
    1. “Our experience in shifting from savings and loan operation to ownership of Freddie Mac shares tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing simply and logical things, will often dramatically improve the financial results of that lifetime…A few major opportunities clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past.”
  28. Remember the obvious rather than grasping the esoteric
    1. “Most geniuses—especially those who lead others—prosper not by deconstructing intricate complexities but by exploiting unrecognized simplicities.” — Andy Benoit
  29. “Our rule is pure opportunism”
  30. Look for integrity, intelligence, experience and dedication. Look to create the best business environment anywhere through evaluations without extensive meetings, capital access, focused compensation, and freedom to do one’s best
  31. Don’t confuse simplicity with ease
    1. “People underrate the importance of a few simple big ideas. And I think to the extent Berkshire Hathaway is a didactic enterprise teaching the right systems of thought, the chief lesson is that a few big ideas really work. I think these filters of ours have worked pretty well because they are so simple.”
  32. In the mid ’90s, BRK transitioned to owning more companies outright and became the buyer of first resort
  33. Munger admires Costco so much he violated his rule and joined their Board
  34. Avoid the mistake of not buying great, undervalued businesses when the stock has appreciated
  35. Tell the truth, tell it fully, tell it fast
  36. Giving time, talent, risking reputation as important as contributing money
  37. Many people specialize too early. Must deeply learn subjects you can’t live well without (psychology, math, physics, engineering)
  38. Paranoid self pity, the “victim mindset” is the most destructive frame of mind
    1. Every time you think about someone or something ruining your life, it’s in fact just you
  39. A few really big ideas carry most of the weight
  40. “To those whom much is given, much is expected. Always live below your financial means so that you will have money to invest. Invest in such a way so as to avoid the possibility of falling into a negative position – primarily, by limiting the amount of debt you use…If you want to get smart, the question you have to keep asking is “why, why, why?” And you have to relate the answers to a structure of deep theory. You’ve got to know the main theories. And it’s mildly laborious, but it’s also a lot of fun…From physics, Munger has learned to solve a problem by seeking the simplest, most direct answer. The easiest way invariably is the best way. From mathematics Munger learned to turn problems upside down or to look at them backward – invert, always invert.”
  41. If he taught finance, would look at about 100 companies who have thrived or failed
  42. Take a simple, basic idea and take it very seriously
  43. Truth is hard to assimilate in any mind when opposed by interest
  44. 5 best practices for thinking, problem solving, decision making
    1. Simplify by answering the big “no brainer” questions first
    2. Gain numerical fluency
    3. Invert problems
    4. Must use elementary and multidisciplinary thinking
    5. Lollapalooza effects come only from a combination of a large number of factors
  45. Pilot training should be implemented into different fields
    1. Formal education wide enough to cover practically everything useful
    2. Wide base of knowledge raised to practical fluency
    3. Ability to think forwards and backwards (concentrate on what you want to avoid as much as what you want to happen)
    4. What is most important gets the most attention
    5. Checklist routines are always used
    6. Forced into a special knowledge maintenance routine
What I got out of it
  1. Interesting read on Charlie Munger’s life, career, though process. Multidisciplinary thinking, inverting problems, always act honestly key topics, take a simple, basic idea and take it very seriously