Best 445 quotes of Charlie Munger on MyQuotes

A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it.

A board member should be perfectly willing to leave at any time and willing to make the tough calls.

A business model that relies on trickery is doomed to fail.

Accounting incomes were reduced by discrepancy [ but] "the net amount paid by lawyers for lawyerly discrepancy is close to zippo. In this case, the goddess of justice was blind.

Accounting is a big subject and there are huge forces in play. The entire momentum of existing thinking and existing custom is in a direction that allows terrible follies to happen, and the terrible follies have terrible consequences.

A different set of incentives from rising in an economic establishment where the rewards system, again, the reinforcement, comes from being a truffle hound. That's what Jacob Viner, the great economist called it: the truffle hound - an animal so bred and trained for one narrow purpose that he wasn't much good at anything else, and that is the reward system in a lot of academic departments.

A director who gets $150,000 per year from a company and needs the money is not independent.

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.

A few public hangings will really change behavior. One of our Presidents said if he could execute three people each year for no cause, it would make it a lot easier to govern. When someone said that's not enough, he said, "Oh yes it is, because I'd publish the list of people under consideration.

A foreign correspondent, after talking to me for a while, once said: "You don't seem smart enough to be so good at what you're doing. Do you have an explanation?

After nearly making a terrible mistake not buying See's, we've made this mistake many times. We are apparently slow learners. These opportunity costs don't show up on financial statements, but have cost us many billions.

A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business

All intelligent investing is value investing - acquiring more that you are paying for. You must value the business in order to value the stock.

...all man's desired geometric progressions, if a high rate of growth is chosen, at last come to grief on a finite earth. And the social system for man on earth is fair enough, eventually, that almost all massive cheating ends in disgrace.

All sensible investing is value investing

All the equity investors, in total, will surely bear a performance disadvantage per annum equal to the total croupiers' costs they have jointly elected to bear. This is an inescapable fact of life. And it is also inescapable that exactly half of the investors will get a result below the median result after the croupiers' take, which median result may well be somewhere between unexciting and lousy.

Almost all good businesses engage in 'pain today, gain tomorrow' activities.

A lot of opportunities in life tend to last a short while, due to some temporary inefficiency... For each of us, really good investment opportunities aren't going to come along too often and won't last too long, so you've got to be ready to act and have a prepared mind.

A lot of people think if you just had more process and more compliance -- checks and doublechecks and so forth -- you could create a better result in the world. Well, Berkshire has had practically no process. We had hardly any internal auditing until they forced it on us. We just try to operate in a seamless web of deserved trust and be careful whom we trust.

A lot of people with high IQs are terrible investors because they've got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success

A lot of share-buying, not bargain-seeking, is designed to prop stock prices up. Thirty to 40 years ago, it was very profitable to look at companies that were aggressively buying their own shares. They were motivated simply to buy below what it was worth.

A lot of success in life and business comes from knowing what you want to avoid: early death, a bad marriage, etc.

Although I am very interested in the subject of human misjudgment - and lord knows I've created a good bit of it - I don't think I've created my full statistical share, and I think that one of the reasons was I tried to do something about this terrible ignorance I left the Harvard Law School with.

And maybe the cereal makers by and large have learned to be less crazy about fighting for market share-because if you get even one person who's hell-bent on gaining market share.... For example, if I were Kellogg and I decided that I had to have 60% of the market, I think I could take most of the profit out of cereals. I'd ruin Kellogg in the process. But I think I could do it.

And, partly, I had found that theory-structure was a superpower in helping one get what one wanted. As I had early discovered in school wherein I had excelled without labor, guided by theory, while many others, without mastery of theory failed despite monstrous effort. Better theory I thought had always worked for me and, if now available could make me acquire capital and independence faster and better assist everything I loved.

And your brain doesn't naturally know how to think the way Zeckhauser knows how to play bridge. "for example," people do not react symmetrically to loss and gain. Well maybe a great bridge player like Zeckhauser does, but that's a trained response. Ordinary people, subconsciously affected by their inborn tendencies.

An investment decision in the common stock of a company frequently involves a whole lot of factors interacting ... the one thing that causes the most trouble is when you combine a bunch of these together, you get this lollapalooza effect.

Another thing I think should be avoided is extremely intense ideology because it cabbages up one's mind. You see it a lot with T.V. preachers (many have minds made of cabbage) but it can also happen with political ideology. When you're young it's easy to drift into loyalties and when you announce that you're a loyal member and you start shouting the orthodox ideology out, what you're doing is pounding it in, pounding it in, and you're gradually ruining your mind. So you want to be very, very careful of this ideology. It's a big danger.

Anyone with an engineering frame of mind will look at [accounting standards] and want to throw up.

Anytime anybody offers you anything with a big commission and a 200-page prospectus, don't buy it. Occasionally, you'll be wrong if you adopt "Munger's Rule." However, over a lifetime, you'll be a long way ahead - and you will miss a lot of unhappy experiences.

A rough rule in life is that an organization foolish in one way in dealing with a complex system is all too likely to be foolish in another.

As I continued through Cicero's pages, I found much more material celebrating my way of life.

As I talk about strengths and weaknesses in academic economics, one interesting fact you are entitled to know is that I never took a course in economics. And with this striking lack of credentials, you may wonder why I have the chutzpah to be up here giving this talk. The answer is I have a black belt in chutzpah. I was born with it.

Assume life will be really tough, and then ask if you can handle it. If the answer is yes, you've won.

At most corporations if you make an acquisition and it turns out to be a disaster, all the paperwork and presentations that caused the dumb acquisition to be made are quickly forgotten. You've got denial, you've got everything in the world. You've got Pavlovian association tendency. Nobody even wants to even be associated with the damned thing or even mention it. At Johnson & Johnson, they make everybody revisit their old acquisitions and wade through the presentations. That is a very smart thing to do. And by the way, I do the same thing routinely.

Avoid evil, particularly if they're attractive members of the opposite sex.

...being an effective teacher is a high calling.

Being rational is a moral Imperative. You should never be stupider than you need to be.

Being short and seeing a promoter take the stock up is very irritating. It's not worth it to have that much irritation in your life.

Ben Franklin and Samuel Johnson, he credits their wisdom for his success. "They were both utterly brilliant men. And powerful communicators. Both have helped me all the way through life. Their lessons are easy to assimilate.

Berkshire has the lowest turnover of any major company in the U.S.The Walton family owns more of Wal-Mart than Buffett owns of Berkshire, so it isn't because of large holdings. It's because we have a really unusual shareholder body that thinks of itself as owners and not holders of little pieces of paper.

Berkshireis in the business of making easy predictions If a deal looks too hard, the partners simply shelve it.

Berkshireis not as good as it was in terms of percentage compounding [going forward], but it's still a hell of a business.

Berkshire's past record has been almost ridiculous. If Berkshirehad used even half the leverage of, say, Rupert Murdoch, it would be five times its current size.

Berkshire's whole record has been achieved without paying one ounce of attention to the efficient market theory in its hard form. And not one ounce of attention to the descendants of that idea, which came out of academic economics and went into corporate finance and morphed into such obscenities as the capital asset pricing model, which we also paid no attention to. I think you'd have to believe in the tooth fairy to believe that you could easily outperform the market by seven-percentage points per annum just by investing in high volatility stocks.

Berkshire was built on the eternal verities: basic mathematics, basic horse sense, basic fear, and basic diagnosis of human nature to make predictions regarding human behavior. We stuck to the basics with a certain amount of discipline and it has worked out quite well.

Bernie Ebbers and Ken Lay were caricatures - they were easy to spot. They were almost psychopaths. But it's much harder to spot problems at companies like Royal Dutch [Shell].

Beta and modern portfolio theory and the like - none of it makes any sense to me.

Black-Scholes is a know-nothing system. If you know nothing about value - only price - then Black-Scholes is a pretty good guess at what a 90-day option might be worth. But the minute you get into longer periods of time, it's crazy to get into Black-Scholes. For example, at Costco we issued stock options with strike prices of $30 and $60, and Black-Scholes valued the $60 ones higher. This is insane.

Black-Scholes works for short-term options, but if it's a long-term option and you think you know something [about the underlying asset], it's insane to use Black-Scholes.