The Tao of Charlie Munger - David Clark

• He decided that each day he would devote one hour of his time at the office to work on his own real estate projects (90/60/1 rule)
• I succeeded because I have a long attention span
• I think that, every tiem you see the word EBITDA, you should substitute the word “bullshit earnings.” … Charlie considers interest, depreciation, and taxes to be very real expenses that have to be paid.
• If you want accurate numbers from financial companies, youre in the wrong world
• Derivates hide risks
• never set aside any reserves to cover its losses
• risk exposure
• Charlies lessno here is that a combination of supersmart people and large amounts of leverage often ends in disaster.
• The economic reality of the hedge fund business model makes it madness for hedge funds to do anything but leverage up and throw the dice.
• “All of humanitys problems stem from mans inability to sit quietly in a room alone.
• Waiting, for most investors, is no tan easy thing to do.\
• Applies to mutual and hedge fund managers, hey are driven to produce quarterly results.
• When Charlie and Warren say that they intend to hold an investment forever, they mean forever
• View a stock as an ownership of the business and judge the staying quality of the business in terms of its competitive advantage.
• it it has a durable competitive aadvantage, he will keep an eye on it in the hope that at some future date it will be selling at a bargain price or even a fair price.
• Companies that have manufactured the same product or provided the same service for fifty or more years.
• Its the strong swimmers who drown
• Strong swimmers are the ones who swim way out and potentially get themselves in trouble. Weaker swimmers stay close to shore, where it is safe.
• How do we know when the stock market is too high? When the financial press starts writing articles about how Charlie and Warren have lost their Midas touch.
• Thats contrary to human nature, just to sit there all day long doing nothing, waiting. … For an ordinarz person, can you imagine just sitting for five years doing nothing? You dont feel active, you dont feel useful, so you do something stupid.
• Greedy bankers: Mortgage lending became a dirty way to make money. You take people that cant handle credit and try to make very high returns by abusing and encouraging their stupidity - thats not the way I want to make money in banking. You should try to make money by selling people things that are good for the customer. … In the old days banks kept home mortgages on their own books, so they were very careful whom they loaned money to. But then the business model changed and banks started selling the mortgages they wrote to other companies. It no longer mattered whom they loaned money to, because they were oing to sell off the mortgage as soon as they wrote it.
• I dont think anyone should buy a bank if they dont have a feel for the bankers. Banking is a business that is a very dangerous place for an investor. Without deep insight, stay away
• As Warren says, if you get into a card game and you cant figure out who is the patsy, you are the patsy.
• Inflation is the friend of people who own assets. Inflation is also he enemy of the people who own cash or bonds.
• It wasnt greed that drove our grandparents to work so hard, it was the fear that they wouldnt be able to pay the rent and their family would go gunfray. Today that fear is gone. It has been replaced with a sense of entitlement that demands that health care be free, that a college education be free, that freee food and housing be provided if one is out of work.
• I do not think you can ttrust tbankers to control themselves. They are like heroin addicts.
• Bankers can destroy themselves and an entire nations economz. Bankers are entrusted with an enormous amount of other peoples money and should be conservative in investing it.
• About trading with derivatives> Its like having thousands of professional poker players. What damn good are they doing for anybody?
• A carry trade is the borrowing of large amounts of money at one rate and using it to buy an asset that earns a higher rate of return.
• all of Berkshires business have in common> Keep costs low.\
• Berkshire itself> Doesnt have a public relations or investor services department and for many years the annual report was printed on the cheapest paper possible and had no expensive color photos.
• A great business at a fair price is superior to a fair business at a great price.
• the product was the same year after year. The business required very little in capital expenditures, so it was possible to take money out of it every year to invest in other businesses.
• From Carl von Clausewitz: No war plan outlasts the first encounter with the enemy.
• Strategz of decentralization frees Berkshires subsidiary managers - the people with the best knowledge - to adapt their businesses to the economic environment as they see fit, without being meddled with by a less knowledgeable home office. It also allows Charlie and Warren to avoid the financial costs and inefficiencies of running a large corporate bureaucracy.
• Spend each day trying to be a little wiser. One inch at a time, day by day.
• He implemented a self/educatin regime for one hour a day
• The compounding effect of knowledge
• The best way to get a good spouse is to deserve a good spouse.
• Extreme specialization is the way to succeed.
• Its specialists who make the big bucks - everyone else, the little bucks
• Just keep thinking and reading, and you will be all right
• That is all there is to the investment game
• you think a lot, and you read a lot
• Overspending can make us miserable.
• Oh, its just so useful dealing with people you can trust and getting all the others the hell out of your life.
• In my whole life, I have known no wise people who didnt read all the time - none, zero. Youd be amazed att how much Warren reads - and how much I read. My children laugh at me. They think Im a book with a couple legs sticking out.
• Thats what manhood is, taking life as it falls. Not whining all the time annd trying to fix it by whining.
• I dont think its terribly constructive to spend your time worrying about things you cant fix
• I constantly see people rise in life who are nott tthe smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a litlle wiser than they were when they got up, and boy, does that help, particularly when you have a long run ahead of you.
• compounding our intellect.
• Thomas Edison:”I failed my way to success.”