I can't believe this happened I still I still cannot believe this happened as it was happening I couldn't believe it was happening it reminded me of a scene in one of my favorite documentaries this is documentary you can watch on HBO it's called the Define once it's about the partnership between Jimmy iven and Dr Dre that is the description that it will
say the documentary is about what is really about it's a documentary about entrepreneurship it's documentary about chasing and running down a dream and one of my favorite scenes in that documentary is when Eminem is describing the very first time he met Dr Dre Eminem is completely unknown at this time he's not assigned he's not signed any record
label Dr Dre is already a legend and he says I'm looking at Dre like dude I see you on TV all the time you're one of my biggest influences ever in life this is the greatest producer and I'm at his house and I just rewatched that clip from the documentary because that's exactly how how I felt I got to spend over 3 hours with Charlie I got to see
his Library I got to have dinner with him it was probably an hour into it where it stopped feeling like an outof Body Experience if you would have asked me before this out of everybody living like who would you want most want to have dinner with Charlie was at the top of that list I've said this before and I really mean it to me Charlie is the wise
grandfather I never had one of my grandfathers died when I was too young to remember him the other one is a psychopath on a monster and dumber than a bucket full of rocks and so that grandfather likee mentorship happened from afar it's from me reading his books from watching his speeches from listening to him talk never in a million
years would I think because I sit in a room by myself for half a decade reading biography after biography after biography every day for hours and then record what I learned and put it onto the world would I possibly there's no possible way I could think that leads me to being able to meet him and not only meet him but I got to I wrote him a letter and advance of
meeting him and then being able to tell him in person like this is not hyperbolic man you changed my life your words and your ideas shaped my thinking and this idea where people say don't meet your Heroes you know you're going to want it being disappointed I had the opposite experience with him Not only was he unbelievably smart but he was
unfailingly polite he was a gentleman with brain and so I've thanked them privately but it's important for me to thank them publicly as well Andrew Wilkinson and Chris Barling are the founders of tiny they're the ones that set up this dinner with Charlie Munger and so this episode that you're about to hear is going to be a little different what I did was the
week leading up to the dinner with Charlie I reread the towel of Charlie Munger then I had dinner with Charlie then I came back and recorded a podcast on the book but as I was recording I added in commentary and other lessons and interesting stories that I learned at the dinner I hope you enjoy it and thank you for listening in The Chronicles of American
Financial history Charlie Munger will be seen as an enigma wrapped in a paradox he is both a mystery and a contradiction at the same time Warren Buffett said Charlie's most important architectural feat was the design of today's birkshire the blueprint he gave me was simple forget what you know about buying Fair businesses at wonderful prices and
instead buy wonderful businesses at fair prices consequently Bur has been built to Charlie's blueprint my role has been that of general contractor with the CEOs of birkshire subsidiaries during the real work as subcontractors how is it that Charlie who trained as a meteorologist and a lawyer and never took a single College course in economics marketing Finance or
accounting became one of the greatest business and investing Geniuses of the 20th and 21st centuries there in lies the mystery Charlie spent much of his youth reading and that is where he discovered a larger world than the neighborhood of dunde where Warren Buffett's family also lived the two boys attended the same grade school and high
school though they were seven years apart in age in fact one of Charlie's first jobs was working for Warren's Grandfather at the Buffett Neighborhood Grocery Store he learned about taking inventory stocking shelves pleasing customers the importance of showing up on time for work how to get along with others while accomplishing a Joint Task
and running the cash register where money the lifeblood of the business flowed Omaha in the 1930s had distinct ethnic immigrant neighborhoods many immigrants worked for the railroad and meat packing plants whose operations were centered in Omaha Charlie went to public school with the children of those immigrants and as a result developed an
appreciation not only of their cultures but also of the commercial aptitude and the willingness to work unbelievably hard to give their children a better life that's how actually something that Charlie's going to talk about later in the book as well where he talks about the difference between the work ethic of like upand cominging countries like
people with immigrant mentality compared to people born in like rich countries and when comparing the two different approaches to like their work ethic he says something funny he's like uh the only people that are surprised when they lose to people like that are idiots back to this overview of Charlie's early life After High School 17-year-old Charlie
enrolled in the University of Michigan to study mathematics he turned 19 a year after Pearl Harbor dropped out of college and joined the US Army the Army sent him to Caltech in Pasadena California to study meteorology there he fell in love with the sunny Southern California weather while the teenage Warren Buffett was busy learning about
odds and probability at the horse racing track in Omaha Charlie was learning this important investment skill while playing poker with his army buddies and there's actually two maxims that I've heard him repeat that I've never forgotten that tie into this he says if you don't learn Elementary probability that you go through life like a one-legged man in an
ass kicking contest and another thing that he repeats is that you should remember that good ideas are rare and when you find one you have to bet heavily so back to this that's where he learned to fold his hand when the odds were against him and bet heavy when the odds were with him a strategy he later adapted to investing after the war
Charlie who did not have an undergrad degree applied to Harvard Law School he was rejected after a phone call from Harvard Law's retired Dean who was a Nebraskan and family friend he was admitted he has never forgotten the importance of having friends in high places after law school Charlie moved back to Los Angeles where he joined a prestigious corporate law firm one of my
favorite quotes that I've ever heard Peter teal say is he says most people systematically undervalue their time as we're about to see Charlie did not it just wrote so smart next to this paragraph about the ru Charlie thought a lot about business during that time he made a habit of asking people what was the best business they knew of he longed
to join the re the rich Elite clientele his Law Firm served he decided this is the part about not undervaluing your time he decided that each day he would devote one hour of his time at the office to work on his own real estate projects and by doing so he completed five he has said that the first million dollars he put together was the hardest
money he ever earned it was also during that period that he realized he would never become really rich practicing law he would have to find something else and we're going to see that he has perfect timing because he is about to find something else this is actually something that Charlie and I a question I got to ask him and Charlie and I
talked about Ben Franklin what Ben Franklin Andrew Carnegie and what we're going to see Warren Buffett and Charlie Munger had in common I'll get there in one second in the summer of 1959 while in Omaha to settle his father's estate he met two old friends for lunch the two men had decided to bring along a friend of theirs who was running a partnership
they had invested in and whom they thought Charlie would enjoy meeting a young man by the name of Warren Buffett the two began to talk about business and stocks the conversation became so intense that Charlie and Warren barely noticed when their two friends got up to leave that was the beginning of a long and very profitable relationship Charlie
asked if Warren thought it would be possible for Charlie to open an investment partnership like Warren in California this is way before birkshire there's two actually questions I asked Charlie about this or around this rather Warren said he couldn't see any reason why not and in 1962 Charlie finally started an investment partnership with
an old poker buddy he also started a new law firm within 3 years he stopped practicing law to focus on investing full-time okay and so I have so many notes and thoughts about this part of Charlie's life and I'm so glad I got to talk to him about this so one of the things that we were able to talk about all the way back on um episode 251 I read this
incredible biography of Ben Franklin and George Washington it's called Franklin and Washington the founding partnership and so Charlie hadn't read that book but he knew the story he knew the relationship between Ben Franklin and Washington and of course he did I guess I should pause here to to just point out something that was just incredible
absolutely incredible was the power of even at 99 years old how powerful Charlie's mind and his recall it was incredible all I could think about was imagine imagine trying to compete with this guy with that mind when he was 50 or 60 and it's not like he was working off any notes everything just came directly from his mind so when we were
talking about the fact that he was talking about one of the best things that uh that Ben Franklin did and you see it in that entire book uh was Ben Franklin was like 48 years old when he sought out and tried to build a relationship with George Washington George Washington like I think was like 20 or 21 years old at the time and so Charlie said one of the best things that
Ben Franklin ever did and this is advice to you and I right uh the one of the best things that Ben Franklin ever did was that he sought out other impressive people like Washington but a ton of others like a players only he intentionally built relationships with these people and while we're having this discussion Charlie mentioned the fact
that Andrew Carnegie did this as well and I just went into great detail of how Andrew did that on episode 284 cuz one of the people one of these a players that he that he sought out was Henry Kay Frick and so after Charlie explained this to us I asked him a followup question I was like well is this something that that you did in your life
immediately his answer was immediate he goes absolutely and still do so let's go back to where we are in the book right now he starts this investment partnership starts a new law firm three years in he's like okay I'm going to stop practicing law and I'm going to focus on investing full-time Charlie is 41 years old 41 years old when he makes
that decision and so when I got to this part of the book and I'm going to follow up with another question I I got to ask Charlie about this part of his life was this is the thought that came to my mind when I was reading this right we are in this stage of our lives right now the book about your life the book about my life is being written right now it's so
important to think about the younger version of Charlie Monger the younger version of Warren Buffett because the decisions that that Charlie and that that Warren made at this point in their lives the the the P literally the pages I'm looking at the decisions they're doing on these pages will affect everything that happens after the same
applies to you and I and I think reading biographies and thinking about the younger versions of not only Charlie and Moore and just everybody that you and I talk about in this podcast like that is going to motivate you and I to make the most of what we're doing right now because we know the effect that it's going to have on the multiple decades in
the future and so let's go into what 41-year-old Charlie was doing Charlie's investment partnership was different from Warren's in that he was willing to take on a lot of debt to do some of his trades he was particularly fond of stock Arbitrage one Arbitrage deal involved British Columbia power a company that was being taken over by the Canadian
government the Takeover price was $22 a share BCP was selling for $19 a share Charlie brought all the shares of BCP he could get his hands on and ended up putting all of his partnership's money all of his own money and all that he could borrow into BCP the trade worked out BCP was taken over at $22 a share and Charlie made out like a bandit and
so that was obviously a risk that Charlie would take early in his career when he didn't have a lot of money that he wouldn't take now right in the mid 1960s Charlie and Warren were busy scouring over the pink sheets so that's like a pre- internet daily publication of the prices of stocks that were printed on pink paper they're they're looking for deals right uh they're
looking for a bargain price on a good company one of the companies they found was Blue Chip Stamps so this is really important the reason I'm pulling this out is because this is an important idea that they are going to use forever Charlie at this point is in his mid4 Warren is in his late 30s so it says Blue Chip was a trading stamp company
other businesses would buy trading stamps from Blue Chip to give them to their customers who would then redeem them for prices that blue chip was offering this is going to be confusing to our modern day uh David Clark the author does a great job he's like listen just think of this as an early form of a Rewards program what made the company
interesting to Charlie was that blue chip had a pool of money called float again this is an important idea that they're going to use forever they had a pool of money called called float that was created by the lag time between the selling of the stamps and the customers redeeming them what made blue chips stock attractively priced was the fact
that the US government have filed an antitrust action against the company that's why they're getting a deal Charlie as a lawyer thought the lawsuit would be resolved in favor of Blue Chip which it was Charlie through his partnership and Warren through birkshire eventually took control of the company and Charlie became its chairman by the
late 1970s the float at Blue Chip had grown to approximately $100 million money that Charlie and Warren could invest blue Chip's business model eventually became obsolete under Charlie's Direction blue chip used its Surplus Capital to purchase 100% of C candies and 80% of a finance company called Wesco just as Warren this is the important part just as Warren had taken
Capital out of berkshire's failing textile operation to buy a thriving insurance company Charlie took the excess Capital out of Blue Chip stamp and invested it in profitable businesses so that is one good idea that's going to lead to the discovery of another good idea and they're going to combine these two ideas for decades and decades in
1968 Charlie teamed up with Warren and Sandy Goatman to form diversified retail company DRC acquired a department store called hosch child cone for $12 million hild cone was bought at a bargain price but it had no competitive advantage and was constantly having to spend precious Capital keeping up with the competition this mistake is going to lead to the
discovery of this great idea I just mentioned earlier during that time Charlie started seeing the the advantages of investing in better businesses that didn't have big Capital requirements and did have lots of free cash that could be reinvested in expanding operations or buying new businesses so let's stop right there go back to the beginning of this
introduction which I'm still reading from and I'm almost done with go back to the beginning introduction and what did Warren Buffett said Charlie's most important architectural feat was the design of today's birkshire it's this idea he says the blueprint he gave me was simple forget what you know about buying Fair businesses at wonderful
prices that's the garbut Ben Graham strategy right so forget about buying Fair businesses at wonderful prices uh instead buy wonderful businesses at fair prices in other words go for great aim for Quality those great businesses throw off a lot of cash we can then take that cash and reinvest it and so I read this part before I had dinner with Charlie
then I reread this entire section after and I realized the the biggest takeaway what like there was I mean Charlie's a genius like I just cannot believe that I got a chance to talk to him like I remember there's like I got to sit next to him at dinner and he like he looks at you in the eye like he'll turn his head and then look at you and I just I could
not believe I had the thought multiple times and I'm not trying to embarrass myself but you know I truly love Charlie merer like he is a hero of mine he is the wise grandfather I never had and so I had this idea it's like I cannot believe that I'm looking at like Charlie Monger is looking at me and talking to me that's how much I love and respect
like the role that Charlie has played in my life and so there's a ton of great ideas that I got and a ton of notes I took uh after I got back to my hotel after the dinner but I think the thing that that resonated with me the most is that Charlie has a an almost complete indifference to problems the way I would say is like troubles from time to time
should be expected this is an inescapable part of life so why are you letting it bother you and if you're listening to the lessons that he's trying to impart on others you realize what he's saying it's like you can problems are inescapable you're going to have some level of problems but you can reduce the amount of problems that you
have in your life by aiming for Quality highquality business and high quality people produce less problems so one of the notes I left myself after this is like I don't ever want to forget this it makes your life easier if you go for great great businesses are rare great people are rare but you will have way less problems in your life if you're in
a great business and you surround yourself by great people and at this point in the book you're seeing Warren and Charlie work themselves through this and realize oh this is the we need to course correct here we need to we have a good strategy let's alter it a little bit and it's going to become a great strategy uh so it says when uh Charlie
closed his Fund in 1975 it had $10 million in assets and showed an average annual rate of return of almost 25% uh for the 14 years it was in operation what is interesting is that in the final years of Charlie's Fund in the year in the final years of the fund Charlie was running uh a highly concentrated portfolio the holding in blue chip stamp
alone accounted for 61% of the funds Investments and this is something that Charlie and Warren repeat over and over again he has never been a fan of diversification as an investment strategy there's a great quote that I have in my readwise from something I read either a biography or maybe Warren shareholder letters in the past what Warren said diversification is for
people who don't know what they are doing look at how the great fortunes were built and Warren's point there is obvious like even if Sam Walton Estee Lauder Steve Jobs Andrew gar even if they never made an investment outside their company they only if they had 100% of their net worth in their companies they'd still be fantastically Rich back
to this in 1979 Charlie became birkshire Hathway's first vice chairman in 1983 Blue Chip stamp merged with birkshire hathway and Charlie took over as chairman of Wesco it was from those two positions that Charlie would help Warren make the investment and management decisions that would take birkshire hathway from a net income of 48 million
in 1984 to approximately 24 bill in 2016 that is when this book was was published and Warren wraps up the introduction for us in a perfect way Warren and summing Up Charlie's impact on his investment style over the last 57 years said Charlie shoved me in the direction of not just buying Bargains as Ben Graham had taught me this was the real impact
that he had on me it took a powerful force to move me on from Graham's limiting view it was the power of Charlie's mind when I read that the first first time made me think of one of my favorite quotes from Steve Jobs Steve realized exact same thing that Charlie and Warren realized in everything I've done this is what Steve said in everything I've done it really pays to
go after the best people in the world let me read that part again Warren in summing Up Charlie's impact on his investment style over the last 57 years said Charlie shove me in the direction of not just buying Bargains as Ben Graham had taught me this was the real impact that he had on me it took a powerful force to move move me on from
Graham's limiting view it was the power of Charlie's mind and that was the end of the introduction of the book that I'm going to talk to you about today and the one I've read for the second time now the to maybe actually maybe three or four times uh the tow of Charlie Monger a compilation of quotes from burar Hathway's Vice chairman on life business
and the pursuit of wealth and it was put together by David Clark and the reason I said I probably read this three or four times because the very first time I read it was all the way back in 2019 it was episode 7 78 of Founders but I have the hard cover Kindle and audible audible versions of this book that's how important it is I hope I can convince
you if you don't already own it to order it by the by the time you finish listening to this podcast but I relistened I relistened to the audible version over and over and over again and I think having the hard cover the physical copy of the book and just leave it out on the table your desk because it's the way it's set up is like you
have these tiny chapters just like 100 or you know 150 different chapters and they just start off with quotes from Charlie and then David Clark adding some like context to it and so you can read the book all the way through but you don't have to you could just pick it up you know 5 10 15 minutes a day read some of Charlie's words he's going to give
you something to think about so I want to jump into one of his quotes right here uh Charlie says life is like a poker game wherein you have to learn to quit sometimes when holding a much loved hand you must learn to handle mistakes and new facts that change the odds and so this is some context provided by David Clark Charlie experienced this
with home mortgage lender Freddy Mack when burshire bought shares in Freddy Mack in the 1980s it was was a very well-run conservatively managed profitable Enterprise that was involved in the mortgage business as time went on Freddy's management branched out into a new line of business in which they were using their quasi governmental status to
aggressively borrow short short-term money and then lend it out long-term the same Financial equation that eventually put Leman Brothers into bankruptcy seeing the dramatic increase in risk and the change in the attitude of Freddy Max management birkshire sold its much loved investment at a profit in 19 99 n years later check out this out by 2008 Freddy
Mack was in receivership the old management had been fired and the stock was worth a tiny fraction of what it had been when birkshire so its shares and then the next page is another quote by Charlie says my idea of shooting a fish in a barrel is draining the barrel first and so what popped to my mind uh when I read that is something that's very
common in all these that history SC entrepreneurs have in common you'll see over and over again if if you read their biographies is they're always trying to figure out how they can build an unfair Advantage I don't mean an illegal Advantage right an unfair advantage and the way to think about this is something that uh Jeff bezo said one time and he
says do you really want to plan for a future in which you might have to fight with somebody who is just as good as you are I wouldn't and then Charlie goes into the importance of always advancing your thinking they talked about you know for the first part of Warren's career he stuck to Graham's Playbook and what they realized is that there was actually
quantitative measures in a in a wonderful business in a truly great business that would have horrified Graham and so he he says well even if they've horrified Graham we started thinking about better businesses and then David gives us uh an example of berkshire's decision to invest in Coca-Cola that would have never happened if they were just using Graham's uh
Graham's Playbook it says in Graham's investment philosophy there was no such thing as owning a company for 20 years or longer and letting the underlying economics of the business grow the company and lift the stock price Charlie and Warren realiz realiz that some businesses have exceptional economics working in their favor that will cause
their intrinsic value to increase over time and so the numbers are going to be a little dated in the book because this book is you know s years old or whatever the case is but you'll get the point uh burshire decides to put one point let's let's call it$ 1.3 billion in uh coch in 1988 over the last 27 years that investment alone has grown to over 17
billion but that does not include all the dividends that it received in that time period in the year before the book was published uh Coca-Cola paid birkshire 528 million in dividends a current annual dividend rate of 40% on the initial investment of 1.29 billion which I think is a great illustration on the importance of advancing your
thinking and so that concept of get in a good business and stay there get in a great business and stay there is going to appear over and over again Charlie says it in many different ways one is better off buying a business with exceptional business economics working in its favor and holding it for many years then engaging in a lot of buying
and selling Charlie knows that time is a good friend to the to a business that has exceptional economics working in its favor but for a mediocre business time can be a curse so this is something you hear me repeat over and over again pops up in these stories time carries most of the weight and the reason that's so important to repeat over and over again
because it goes against human nature even it's so hard to build a truly great business and yet more likely than not your truly great business is not going to be destroyed by competition it's going to be destroyed by you and so there's another line that Charlie repeats that I think is not this book but ties into exactly what he's talking
about here the problem isn't getting rich it's staying sane so it's not redundant that Charlie repeats this over and over again it's really important repetition first of all is the mother of all learning but it's repetition is also persuasive and so and the most important for us to person for us to persuade is ourselves we're in a good business if
you're in a good business just know that is human nature to mess it up don't mess it up just stay there and let time do its work going back to another line that Charlie repeats over and over again the worshiping at the altar of diversification I think is really crazy this is the note I left myself and something I'm trying to apply in my life
one truly great business will make your unborn grandchildren wealthy and then on the next page there's one line there's one line from Charlie and I'm like over here writing novels about it so I'll tell you what pops up to my popped up to my mind mimicking the herd invites regression to the mean so that's what Charlie says mimicking the herd invites
regression to the mean now we're getting into my novel and then I have other notes on this too Charlie and Warren trust their own judgment implicitly they don't care what other people are doing or thinking then I grabbed a quote from episode 286 which is titled I think Warren Buffett and Charlie Monger speaking directly to you and there's a
line in the book that I read for that episode it says I would say if Charlie and I have any advantage it is because we're rational and we very seldom let extra extraneous factors interfere with our own thoughts we do not let other people's opinions interfere and this also made me think of something that happened when we were having dinner uh with Charlie Andrew or
Chris I can't remember which one from Tiny asked Charlie a fantastic question and there were uh the question was I'm going to paraphrase here I I wasn't it's not I was taking notes I had all these I had prepared all these questions and ideas I wanted to talk to Charlie about and I never looked at my phone one time and so they asked like were you
motivated with like part of your your desire to to be successful like this drive to succeed did it have anything to do with like proving or like getting the uh the appreciation or the like was did you do it because of your relationship with like your dad or your mom which is a good question because this appears over and over again in the biographies
that you and I talk about uh this idea that came from Francis for cop's biography but was really in almost every single story and it's the idea that you can always understand the son by the story of the father that the story of the father is embedded in the son and so Charlie's answer to the question was fascinating he says no I always had an
inner clock and so Charlie's point there was that he was doing it for him he did it because he wanted to do these things he was interested in them not because ex even if it you know you obviously love your parents but those are external factors like everything came from internally he has an inner clock and so when I was taking notes I had to
paraphrase like I was trying to think okay what are the things like I want to never forget this right like Charlie M like it's a night that Charlie Munger probably won't remember and I'll never forget and so I wanted to make sure and document like in writing what are the things that jumped out at me and so one of the notes this is one of the notes I
left myself these are not the words that he used he never used this word but this is exactly like the impression he left on me and so I wrote Charlie has always had an inner clock he just does what he wants to do and doesn't give a about the ideas or thoughts of others I think all of that ties back to what Charlie's saying here in the book
mimicking the herd invites regression to the mean Charlie Monger was not put on the earth to be average he has no desire and has never had a desire to mimic the herd go go back to what Warren says I would say if Charlie and I have any advantage it is because we're rational and we very seldom let extraneous factors interfere with our own thoughts
we do not let other people's opinions interfere and so moving ahead in the book we see this idea same idea that we've already gone over right presented a different way and he talks about the like why are you worrying about prediction I have never been able to predict accurately I don't make money predicting accurately we just tend to get into good businesses and stay there
again what I write on this page what note to myself on this page time carries most of the weight stop over complicating things just get into a wonderful business and stay there another idea that Warren and Charlie repeat over and over again is the fact that financial crisis uh the Equal Opportunity we'll go over this later on because I jotted some notes down uh he
says this in another way and I just tie in a bunch of the founders that you and I have studied you know Advance they use financial crisis because everybody else again it goes against human nature everybody else runs away they run towards it and they actually wind up growing their businesses uh by Leading leaps and bounds by investing and uh
investing into their business when everybody else is running if you like me live through the 1973 to 1974 financial crisis or even the early 1990s there was a waiting list to get out of the country club that's when you know things are tough if you live long enough you'll see it this goes back to the main thing I learned from speaking to him is just
this complete almost complete indifference to problems troubles will be from time to time they should be expected they're inescapable you cannot let them bother you can also not let them kill you like your business should have redundancies so you can survive them right he another way that Charlie says this he says listen it's in the
nature of stocks that they go down from time to time and so he talks about keeping cash for this inevitability like why don't you have cash why aren't you prepared for this he knows that cyclical Financial crisises are just in the nature of capitalism random recessions and crashes are programmed into Charlie's buying strategy he lets cash
him and Warren let cash pile up they wait for a recession and crash even if it means getting low rates of return on their cash Holdings as they wait for the inevitable when the crash hits they make their purchases as Charlie has said many times it was not brains that made him so rich it was temperament and this is an idea that they're still using in present day at
the end of 2022 bursh held $92 billion of treasury bills and we brought this up at dinner and he said something like it was hilarious uh just how na shalani was about it he goes yeah the world came around to us on that and so in this book they talk about the the importance over and over again and they have one line here I'm actually going to read the full
quote this comes from uh episode 286 the T Charlie Monger it says I succeeded I succeeded because I have a long attention span that's still a fantastic quote but I like that what happens before it it's just a reminder of something I'm trying to obviously do with Founders is he says I think people that multitask pay a huge price I only
do this right I only focus on this this is something I actually like I got an idea from Charlie and the way I break it down in my own mind it's only two words stop multitasking I have like a little Charlie on my shoulder that like admonishes my behavior from time to time I think people that multitask pay a huge price when you multitask so much you
don't have time to think about anything deeply you're giving the world an advantage you shouldn't do practically everybody is drifting into that mistake I did not succeed in life by intelligence I succeeded because I have a long attention span and so that quote in this book is under the headline patience something that I heard Charlie
say a long time ago that I've never forgotten and I think reading biographies and obviously listening to found uh podcast like Founders is going to play the role that Baron magazine played in his life and so like another uh way to talk about the importance of patience as he tells the story he's like well you know I made four or500 million
from Reading Baron's magazine for 50 years and people like what what are you talking about and so his whole point is like listen I read Baron's magazine for 50 years I only found the entire time I found one idea that I could act on only one I made $80 million on that idea basically risk-free then I took that $80 million and I gave it to leelu and he
turned it into $4 or $500 million and so that is how I learn how I made $4 or $500 million from Reading Barons for 50 years that is one of the greatest anecdotes you could ever hear about the importance of patience and then this is Charlie on the dangers of overconfidence smart people are not exempt from professional disasters from
overconfidence another way to think about that is he says this in a different way the problem is not getting rich it is staying sane then they go back into the importance of having patience and waiting for great opportunity I love this sentence because again it could just the reason we could shout this these things from from the rooftops most humans are never going to
do it just because it goes against human nature and they're incapable of going against our nature right and Charlie and Warren are capable of going of bucking the trend one of the reasons Charlie and Warren have never worried about anyone mimicking their investment style because no other institution or individual has the discipline or the patience to wait
as long as they can he then talks about the importance of making sure that you can endure problems an isolated example that's very rare is much easier to endure than a perfect sea of misery that never ceases and again this all ties back to that main theme where it's like the formula is simple but not easy great businesses and great people get in great
businesses surround yourself with great people that's going to take care of most of the avoid what one of the best things that Charlie said on episode 286 right that it's crazy how much information he's able to convey to us in three words and I think they this all ties together wisdom is prevention and how do you prevent from having to solve problems
you avoid them wisdom is prevention and how do you avoid problems you you get into great businesses and you surround yourself with great people Charlie's talking about the difference between an excellent company which might confront a major problem a few times in a span of 20 years compared with a mediocre company which might go from problem to
problem year after year and one way you know that you're around lowquality people is cuz that they are perfect sea of misery that never ceases they just have one problem after another my wife has this beautiful way to to describe this she says in Spanish but it Loosely translates to that person can drown in a cup of water on the next page Charlie
says something that I'm doing in my life and it's something that jumped out at me makes me think of something I learned from Ed Thorp and Jeff Bezos he says move only when you have the advantage you have to understand the odds and have the discipline to bet only when the odds are in your favor something that popped up when I uh when I read this page as
well is advice that I learned from Ed Thorp on episode 222 which is only play games where you have an edge and in his very last uh shareholder letter that Jeff wrote as the CEO of Amazon he has another great three line piece of advice differentiation is survival to understand this piece of advice you need a little bit of Charlie history in the
late 1960s both Charlie and Warren had their own hedge fund as the bull market of late 1960s rage on everything became overpriced and Warren could no longer find anything cheap enough to buy so rather than alter his investment strategy Warren shut down his hedge fund and returned the money to his Partners putting the vast majority of his own
money into Cash equivalents Charlie kept on invest in and enjoyed great returns until the stock market crash of 1973 and 1974 when he lost nearly half of his partner's money he called it the worst time of his life Warren who was sitting on a huge amount of cash because everything running up to the crash had been overpriced suddenly found himself
surrounded by dozens of wonderful companies selling at bargain prices another thing that I learned from Charlie aim for durability in his eyes durability is a first class trait more about this now Charlie and Warren's theory is that a company with a durable competive Advantage has business economics that will expand the underlying value of the business over
time and the more time passes the more the company's value will expand time carry that's another way to say time carries most of the weight we can apply that into actionable device get in a great business and stay there more advice from Charlie make sure you have an accurate representation of your business in your mind I think one should recognize reality even when one
doesn't like it indeed especially when one doesn't like it they talk Munger and Buffett talk about the importance of stepping on problems early like the time the right time when you have a problem to act is right now Munger has this great quote uh wise people step on big and growing troubles early wise people step on big and growing troubles early
and then this is one of the most well-known of Charlie monger's quotes it's remarkable how much long-term Advantage People Like Us have gotten by trying to be consistently not stupid instead of trying to be very intelligent there must be some wisdom in the folks that say it's the strong swimmers who drown Charlie is interested in a simple
strategy that allows him to post Superior results over the long term the foundation of which is trying not to do anything stupid another main theme that Charlie repeats over and over again is the ability to recognize it's not just good enough to recognize an opportunity when it's presented to you you have to act on it you do get an occasional
opportunity to get into a wonderful business that's being run by a wonderful manager and of course that's Hog Heaven day Charlie believes that if you aren't buying like crazy when you have the opportunity to buy a business that has huge potential it is a big mistake and then he has a hilarious story his whole thing is like listen if you have an
exceptional exceptional business will just keep on earning money over and over and over again forever and so he has a fantastic way to tell the story and he says when I came out to California there was this Playboy and he spent all his time drinking heavily and chasing movie stars his Banker called him in and said that he was very nervous about his
behavior he told his Banker let me tell you something my municipal bonds don't drink I love that um and then Charlie says that learning from history is a form of Leverage the fact is so few people can do this that and you see this because Financial the financial disasters of today are almost completely forgotten in a year or two and so this
goes back to the idea that Warren and Charlie just trust their own judgment and so it says if people weren't wrong so often we wouldn't be so rich and so I read that one sentence and without looking up any notes I just wrote down I go okay what are other people what are a list of other entrepreneurs that you and I studied that other people said that
what these people were doing wouldn't work Sam wal Steve Jobs Jeff Bezos Rockefeller Edwin Lan Coco Chanel Andrew Carnegie Michael Jordan Kobe Bryant Larry Ellison Ray Croc John Malone Henry Ford George Lucas the Wright brothers and if we went through every single episode or biography read so far for Founders the the list would be a lot
longer than that this goes back to patience and again this idea of like breaking down what he's trying to say and just very simple like rules for life uh to me it's like human nature is to be impatient and quit just do the opposite you have to be very patient you have to wait until something comes along which at the price you're paying is easy
that's contrary to human nature just to sit there all day long doing nothing and waiting it's easy for us we have lots of other things to do but for an ordinary person can you imagine just sitting for 5 years doing nothing you don't feel active you don't feel useful so you do something stupid and so they break down what is the likely human reaction if you
wake up one morning determined to invest your money your chances of finding an investment that would meet Charlie's standards is almost zero so you settle for something less when you could have gotten something more if you had just waited Charlie's approach is contrary to human nature this is what I mentioned earlier how that they run in when everybody else
is running away and that this is actually a great way to expand your business uh we have a history when things are really horrible of waiting in when no one else will all these people used economic downturns to their advantage this is when they expanded Rockefeller Carnegie Henry Clay Frick and Izzy sharp Izzy sharp is the founder of Four Seasons and so this came up a
few times at dinner he tells these wonderful stories with amazing recall of like all these different deals or businesses or ideas they came across as they built you know burshire over the last was that 60 years 50 years something like that and he just has like this tagline this is like my again I wasn't taking notes this is something I
wrote down after the fact but really he's just like we made so much money because we had cash and we could move fast think about how crazy that is that that could be a Advantage obviously you you're you're getting you're seeing these deals too which is a you know another advantage that you have to figure out like how to build up in your
own business but once you are getting the deal flow and actually seeing the opportunities that are coming to you right the idea is like we're just we just made a lot of money because we had cash and we could move fast and then the book goes into something that obviously Charlie and I share the fact that we're both biography nuts uh hope one day to
catch him although now I know i' having seen his bookshelves I have to step my game way up he was on another thing it's like people say don't meet your Heroes and I understand that advice but like I just came away like even more impressed by him like Not only was he unbelievably intelligent his mind is really powerful he told Amazing Stories super impressive
at 99 years old but he was just unbelievably like polite I asked like hey Charlie do you mind if I look at your book show like go ahead do whatever you want just un I just could not believe how generous he was so I saw the reason I bring this up is because you know I'm thinking I'm getting close to 300 biographies for the podcast he has
so many books I've never even heard of like it it was just amazing in some cases he's making his own books he has transcriptions from very valuable and rare interviews with some of History's Greatest Founders and he put them in binders that's what I mean it's like oh I'm going to I need to step my game way up here so there's going to be a bunch
of books coming over the next you know few year few months to few years that I found on Charlie's bookshelf and now I'm I'm trying to like they're very rare books I have to like go and hunt them down I was just unbelievably again I repeating myself but I was just unbelievably impressed with just how much and how dedicated he was to to
reading and how he says like that that made all the difference in his life there isn't a single formula you need to know a lot about business and human nature and the numbers it is unreasonable to expect that there's a magic system that will do it for you people are looking for a simple method that they can learn from Reading one book that will make them Rich it doesn't
happen that way one is actually better off reading 100 business biographies than 100 books on investing why because if we learn the history of a hundred different business models we learn when the businesses had tough times and how they got through them we also learn what made them great or not so great and so on the next page it goes
back to this idea where it's like hey we made a lot of money because we had the cash and we can move fast right and essentially saying hey these opportunities they present themselves you got to make a decision right then they're not going to like oh it's on the open market it's going to sit there for months and so he says um you have to be
ready to pounce when the opportunity presents itself because in this world opportunities just don't last very long and so when I got to that section it made me think of one of my favorite quotes uh I got to re redo this podcast because the it's Mark Andre's blog archive which I still think is fantastic it's episode 50 I'm going to read uh two
paragraphs from Mark and Jon's blog archive this was written probably 15 years ago and it ties into what Charlie's talking about here this is what Mark said the second rule of career planning instead of planning your career focus on pursuing opportunities opportunities that present themselves to you are the consequence of being in the right place at the right time they tend
to present themselves when you're not expecting it and often when you're engaged in other activities that would seem to preclude you from pursuing them and they come and go quickly if you don't jump all over an opportunity somebody else generally will and it will vanish I am continually amazed at the number of people who are presented with
an opportunity and pass there's your basic dividing line between the people who shoot up in their careers like a rocket ship and those who don't right there I am also continually amazed at the number of people who Coast through life and don't go out and see and don't go and seek out opportunities even when they know in their gut that is what
they'd really like to do do not be one of those people life is way too short and so now we got to the part that I mentioned earlier where he was talking about the fact that people that that are coming from poorer countries or like they have immigrant mentality they just work so unbelievably hard much harder than people who grew up using like
wealth and comfort and you should not be surprised if a person's working and putting in you know two or five or 10 times the effort that you lose to this person this is this spawned a bunch of thoughts for me as well and so he's talking about the rise of Korea in the business world and he says Koreans came up from nothing in the auto business so
let me pause right there chungju young the most I've read you know 300 biography so far for the podcast number episode 117 that is the single most inspiring autobiography that I have read so far uh it's called Born of this land my life story I think chunju Young was the founder of hondai he grew up so poor uh he had to eat tree bark in the winter
to survive as a kid and he winds up dying as the richest man in Korea Koreans came up from nothing in the auto business they worked 84 hours a week for more than a decade at the same time every Korean child came home from grade school and worked with a tutor for 4 hours in the afternoon are you surpris when you lose to people like that only
if you're a total idiot and so when I read this part not only did I think of Chung J young but I thought of uh my friend Sam hinky was on uh the invest like the best podcast and the the title is find your people I think it's find your people I will I will find the actual link and put in the show notes for you and Sam is an authority on um
the writing of Robert Caro I think Caro's um multiple part series on lynon B Johnson is is Sam's favorite book but he says something on the the podcast I took these notes years ago or maybe like a year ago and I thought it was fascinating it relates to exactly what Charlie is saying here and so Sam is talking about like you know Carl is
famous for writing his series on lenon Johnson and it's famous for writing the power broker uh on Robert Moses I read the power broker I'm working my way through the Lyon Johnson Series right now but Sam said something was fascinating he says Carl profiled two men whose seeds were not high in the tournament of Life they were born without many advantages and to get all
the way to the top you probably had to sacrifice everything to the effort The Meta lesson is if you are not willing to pay that price you should presume that someone else will if you want something like the presidency and then and then my note here or is or being a billionaire if you want something like the presidency you should presume there is
someone out there who will devote all their time money relationships sense of Ethics everything in sacrifice of that one goal of course that person would win that race and to me that sounds a lot like the same lesson that Charlie's trying to impart on you and I here are you surprised when you lose to some people like that only if you are a total
idiot another person Charlie brings up uh that he admired a lot was Sam Walton and so this quote from Charlie made me think of a quote that I read in Sam's fantastic autobiography which I covered for the second time on episode 234 I'll probably read that book I would imagine I read that book five or 10 times throughout my life um I just had uh
lunch with somebody that was in town to have dinner uh with with Peter teal and he said something that was fascinating that uh Peter had mentioned at dinner uh he just randomly said oh yeah I was reading this book for the seventh time and he noticed something and I was like oh okay like I thought like reading them two times was enough maybe three times
enough and again you just you're constantly supposed to see people that just take things farther than you other otherwise would Charlie says we just keep our heads down and handle the headwinds and Tailwinds as best we can and take the result after a period of years uh Sam in his fantastic autobiography said when he was asked how did Walmart do it he says friend we just
got after it and we stayed after it and then we're almost to the end of the book and we come to one of my this is one of my favorite Charlie merer ideas of all time in business we often find that the winning system goes almost ridiculously far in maximizing and are minimizing one or a few variables like the discount warehouses of Costco Costco is obsessed
with keeping operating cost to a minimum it do so now David Clark is giving us some commentary on like how extreme they are and it's going to tie into something I asked something I got to ask Charlie about Jim Sagle because he knows Jim Sagle he loves Jim Cagle it's was just hilarious and I love Jim Cagle too and I was well I'll get there in a minute so
it says uh Costco is obsessed with keeping operating cost to a minimum it does not provide shopping bags saving Costco 2 to 5 cents each on plastic bags and 10 to 25 cents each on paper ones this might not seem significant but consider this there's approximately 150 million customer checkouts every year at Costco that's crazy so let's say that
each checkout if they provided bags it cost some 30 cents if you multiply that 30 cents by by the total checkouts that's $45 million a year by simply getting rid of paper bags a checkout Costco arguably saves itself 45 million a year and saying Costco is not alone in in this kind of thinking Geico did something that seemed outrageous early
on it got rid of its insurance agent and its commission by selling directly to the consumer thereby reducing its costs which allowed it to be more competitive in the pricing and still maintain its profit margins another example Nebraska Furniture Mart buys huge quantities of furniture from a single manufacturer at a huge discount which allows it to
stores to sell us a sofa cheaper than the competition and still keep its margins high this paragraph is so important I have a giant exclamation point next to this in the book uh the one thing that all of bir's businesses have in common is that they are managed by people who are willing to go to Great Lengths to keep costs low that goes for
berkshire's home office as well it doesn't have a public relations department or an investor services department and for many years the annual report was printed on the cheapest paper possible and had no expensive color photos note in recent years the paper quality has improved and the annual report Now Sports one color photo which may be a sign that management is
starting to slip and so there's few people in the world that love Costco more than Charlie Munger I got to ask him I was like hey I love Jim Sagle you know the only thing I've ever found him in writing is the fact that he wrote the the introduction to to Soul Price's biography which was like his his hero and his mentor and I was like what's
going on like why can't I I forgot the exact way I said it's like why does like uh I asked him like why Jim kept a low profile that it's just so hard to find speeches or writings of Jim and Charlie's simple answer was that's because he was busy working and I thought there was a lesson there and then Charlie brings up the fact that this is harder to understand especially
for people in business like just how magical that's the only way to describe it like a great brand is nothing short of magic if you think about it like the the quote unquote you know richest person in the world right now Bernardo KN has built his fortune on the power the magic of Brands and so they didn't understand Warren and Charlie didn't
understand the magic of Brands until they bought C candies it says when we brought Seas candies we didn't know the power of a good brand over time we just discovered that we could raise prices by 10% a year and no one cared learning that changed birkshire it was really important and this is why it's so important and valuable some brand names
own a piece of consumer minds and they do not have any direct competition when Charlie and Warren first discovered such companies they called them consumer monopolies and I thought this was interesting One Way Charlie found great businesses is by buying a bunch of bad businesses first Charlie and Warren have both owned a few bad businesses in their
day department store a Windfield windmill manufacturer a textile Factory and an airline why are those businesses bad because they are involved in intensely competitive Industries think about what Jeff basos SAS differentiation is survival because they're involved in intensely competitive industries that beat each other up over price which brings their
profit margins down kills their cash flow and diminishes their chances of long-term survivability now we know that the secret is always to go with with the Better Business that has a durable competitive Advantage he mentioned this earlier that is in the nature of stocks to go up and down if you're not willing to Rea with equinity to market price
decline at 50% two or three times a century you're not fit to be a common shareholder and you deserve the mediocre result you're going to get compared with the people who do have the temperament who can be more philosophical about these Market fluctuations I would condense that down even further into an aphorism that un I could take with us in
the future tough times don't last but tough people do uh average out betting on the quality of a business is better than betting on the quality of the management but very rarely you find a manager who is so good that you're wise to follow him into what looks like a mediocre business and so they use this example of Rose blumin Mrs B who's my favorite character in all of
uh Warren's shareholder letters I wish there was I can't find a biography on her if you find a biography on Mrs B please let me know Mrs B started the Nebraska Furniture Mart uh in Omaha in 1937 she grew it into the most successful furniture store in the United States birkshire bought 90% of the company from her when she was 89 years
old and she stayed on managing managing it with her sons 5 years later she gets into a fight with her sons she leaves in a huff and starts a new store across the street what harm can a 94 year-old woman do to a multi-billion dollar conglomerate in no time at all she had taken so much of Nebraska Furniture Mart's business that burshire was forced
to spend millions of dollars buying her out a second time but this time around they had her sign a non-complete CL A very wise thing uh to do given that she went on to work s days a week open to close till she passed away at the age of 104 but as a general rule bet on the quality of the business not on the quality of the management unless you've
got a Mrs B in that case go all in Mrs B is going to make another appearance under the section of Master plans which is hilarious uh at birkshire there's never been a master plan anyone who wanted to do it we fired because it takes on a life of its own and doesn't cover new reality we want people taking into account new information that's a great
way to describe it I think they describ described it even better in episode 286 they said we are individual opportunity driven our acquisition technique at birkshire is simple is Simplicity itself we answer the phone individual opportunity driven and so at the end of the section it goes back to Mrs B we'd rather keep things simple and
improvised as we go along whenever I think of Master plans I remember Nebraska Furniture Marts founder Mrs B who in response to a question about having a business plan replied yes sell cheap and tell the truth so this is a quote you don't hear all the time it's it's idea ties together these two ideas that uh the importance of continuing advancing your
thinking and then know when to stretch for great opportunities and so there's this uh company called iscar it's actually the first time they bought a wholly owned company outside United States and so Charlie was going to describe it now he says we didn't know when we were young which things to stretch for but by the time we reached
iscar which we never would have bought When We Were Young young we knew to stretch for the right people so stretch for the right people and so this is a description of what they did iscar is an israel-based worldwide maker of precision carbide metal cutting tools used in industry it is the dominant player in its field so burshire bought 80% of the company 2006 for 4 billion
and then purchased the final 20% in 2013 for 2 billion which shows that it was a better business in 2013 than it was in 2006 Benjamin Graham would have never bought it because it wasn't selling below Book value Charlie and Warren learned with the purchase of Nebraska Furniture Mart that if the dominant player is large enough and well enough
entrenched with its customer base the cost of entry into its Market is much too high for potential competitors size and Market domination can create this is the the punchline size and Market domination can create their own kind of durable competitive Advantage which is what iscar had in Spades so something Charlie brought up at dinner as well is
the people he greatly admired we were talking a lot about Benjamin Franklin he says there was unlikely to ever be another life as remarkable as Ben Franklin's and another person that he greatly admires and I saw a bunch of books about was leean you uh I'm going to actually do a a podcast on Lee's book which is called the from third world to
first to First Singapore story because it says in this book that that book is well worth reading and actually says Charlie became so enamored of Lee that he commissioned a bronze bust of him to keep the one he owns of Benjamin Franklin company so I thought that was interesting this is what Charlie said about uh Le and Singapore in a democracy
everyone takes turns but if you really want a lot of wisdom it's better to concentrate decisions or Pro and process in one person just's repeat that if you really want a lot of wisdom it's better to concentrate decisions and process in one person it is no accident that Singapore has had a much much better record given where it started than the
United States there power was concentrated in an enormously talented person Lee Quan Yu who was the waren Buffett of Singapore and so the reason I wanted to include that in the discussion you and I are having today is because when I read that I didn't think about lewanuu and I didn't think about Warren Buffett I actually thought about Steve
Jobs and it's something that I read in um I read the the biography of Johnny I which is fantastic for episode 178 and this idea that Founders have absolute control right it's better to concentrate decisions in process on one person and there's a story in that book when Steve comes back to Apple where he's getting a lot of push back by some of the people
that were there and jobs just refused to take no for an answer and because had absolute control and absolute Authority he could do so so there's a paragraph in the book of it's called Johnny IV The Genius behind Apple's greatest products and it says this is what Steve Jobs talking when we took it this idea when we took this idea to the engineers they
came up with 38 reasons they couldn't do it jobs Rec called and I said no no we're doing this and they said well why and I said because I'm the CEO and I think it can be done and they grudgingly did it and then they get into the importance of this trait that you and I share this idea like lifelong learning and self-improvement lasts as long as the
breath lasts because why because it's so valuable there there's a compounding effect to to knowledge in Charlie's own life when he was uh practicing law he implemented a self-education regime of 1 hour a day to learn such things as real estate development Stock Investing it was slow goinging at first but after a great number of years and thousands of
books read he started to see how different areas of knowledge interplay with each other and how knowledge like money can compound making one more and more aware of the world in which he or she lives I'm usually pretty suspect of formulas but I actually think this three-part formula is actually really good uh these are Charlie monger's three
rules for a career number one don't sell anything you wouldn't buy yourself number two don't work for anyone you don't respect and admire and three work only with people you enjoy and so when I was rereading my highlights last night because I knew I was going to sit down and talk to you about this today when I got to this part again about making
mistakes this is what I wrote at the top of the page this was my main takeaway from my dinner with Charlie his complete indifference to problems and this is what he says there's no no way you can live an adequate life without many mistakes in fact one trick in life is to get so you can handle mistakes and so one of my favorite quotes on this
actually came from the founder of AIA I read his autobiography all the way back on this like years ago episode 104 and he has a great line I've never forgotten you know many years since he says only those who are asleep make no mistakes making mistakes is the privilege of the active the fear of making mistakes is the root of bureaucracy and the enemy of
development it is is always the mediocre people who are negative who spend their time proving that they were not wrong the strong person is always positive and moves forward and so when Charlie says listen you're going to go through life you're going to make mistakes right the fact is that you have to get get to a point where you can handle them I would
also say something he he mentioned a few times is the importance of learning from mistakes and so he brought up a few times throughout the night some mistakes that he had made and then what he learned from them and it reminded me of this he has a um there's a short chapter in this book book called admitting stupidity and this is the quote from
Charlie that I feel that he definitely applied to his own life he says I like people admitting that they were complete stupid horses asses I know I'll perform better if I rub my nose in my mistakes this is a wonderful trick to learn and so before sitting down and rereading this book for like the second or third time or whatever it was I had listened
to the entire audio book and I heard once I heard uh this part in the Audi book I had the thought I was like oh that's definitely going in the podcast I love this this is another one of his ideas that I'm trying uh to to use in my own work uh he says extreme specialization is the way to succeed most people are way better off specializing than trying to understand
the world and this is the commentary by David Clark specialization is the key to survival in any species and that is the key to success in any business specialization protects us from competition why because specialization presents a barrier of Entry to the competition and the more difficult it is to become specialized the greater the
barrier if if all we do is what everyone else does we will spend our lives competing head-to-head with everyone else but if we specialize in something and Excel at it the specialization will set us apart from the rest of the crowd do we take our Porsche to the local car mechanic who works on everyone's car of course not we take it to the shop that
specializes in Porsches it charges us twice the normal hourly rate and gets away with it because it is a Porsche specialist it is Specialists who make the big bucks and then this next one is it secret of success which usually I'm very skeptical when I hear things like this but I really do believe it does most of the heavy lifting if we believe
and I I think what Charlie said is accurate but if we believe what he said is accurate is that listen problems are inevitable but if you if you surround yourself with great people and get into great businesses it eliminates wisdom is prevention it's going to eliminate most of the problems that you have that you're going to have in life that are
under your control right so I think that's a hugely important idea and I would combine it with this and I think this is the same principle and he says I have never succeeded very much in anything in which I was not very interested if you can't somehow find yourself very interested in something I don't think you'll succeed very much
even if you're fairly smart there's another way that I've heard him explain this exact same idea and that he says an intense interest in any subject is indispensable if you want to Excel and this is the commentary by David Clark Charlie often says that the key to being a great business manager is to have a passion for the business for people who
have that they are artists whose passion for their work drives and defines their lives here Charlie's pointing out that this Theory applies to anything that we do in life to be successful in something we need to be passionately interested in it and that passion more than raw intelligence tends to determine whether or not we will succeed at what we do as
Steve Jobs said work is going to fill a large part of your life and the only way to be truly satisfied is to do what you believe is great work and the only way to do great work is to love what you do and I want to summarize that again with by repeating this an intense interest in any subject is indispensable if you want to excel at it a few pages later he goes
right back at it this time it's from the opposite angle that most people a rat poison therefore you should avoid them the other side of that is obviously go for great right go for great I think is the the maximum that's coming going to come out of this podcast that I'll remember the most oh it's just so useful dealing with people you can trust and
getting all the others the hell out of your life wise people want to avoid other people who are just total rat poison and there are a lot of them wise people want to avoid other people who are just total rat poison and there are a lot of them when I read this uh this quote from Charlie it made me think of something that I read uh in in Warren
Buffett's shareholder letters and it's really this application of the idea they only want to work with other great people and what Warren I'm going to read this this paragraph from uh his shareholder letters real quick and really what he's talking about is like just most businesses right are poorly run to average run and so he says our
major contribution to the operations of our subsidiaries is Applause but it is not the indiscriminate Applause of aana this is Warren writing by the way rather it is informed Applause based upon the two long careers that we have spent intensively observing business performance and managerial Behavior Charlie and I have seen so much of the
ordinary in business that we can truly appreciate a virtuoso performance another piece of advice from Charlie there is no cookie cutter Solutions think about his answer when he was asked hey if you are if you ever had to teach like a Class A business class or a finance class what what would you and he's like I would take a hundred uh
studies of company history and just talk about what they did correctly and what they did incorrectly earlier in the book they said hey you're better off reading hundreds of biographies than just reading you know 100 business books and this is why it's like you're when you're doing that you're just watching gam tape it's no different than a young Kobe
Bryant watching videotape of Michael Jordan and mag Magic Johnson and just constantly being exposed to a million different game scenarios and then using that knowledge in his own work when he's presented with another complex scenario and it says beware of cookie cutter Solutions one solution fits all is not the way to go the right culture for the
Mayo Clinic is different from the right culture at a Hollywood movie studio you cannot run all these places with a cookie cutter solution and then Charlie talks about the importance of being a learning machine and you see this what's amazing to me is you know I've read every single book that I can find on Charlie muger hopefully I've covered
them all Charlie at 41 or 45 would get his ass kicked by the 65-year-old Charlie this 70-year-old Charlie he applied this in his own life like he took his own advice Warren is one of the best learning machines on this Earth Warren's investing skills have markedly increased since he turned 65 having watched the whole process with Warren I can report that if he had stopped with
what he knew at earlier points the record would be a pale shadow of what it is and this commentary by David Clark is one of my favorite uh sections in this entire book there is another point that I've noticed with men and women who truly excel at their craft or profession they keep on learning and improving themselves long long after most people
would have retired it's like sharks they have to swim to live learning as just something those people have to do and a large part of the way that Warren and Charlie learned not only through the experience they spent a ton of time reading and then talking to smart people this is actually another idea that I that I stole from Charlie and I'm using
I don't know if I told you this like hopefully this podcast is you're like learning something being entertained by this because I still feel like like I'm I'm on the high that this happened uh the reason I'm bring that up is because I can't remember if I told you that I got a chance to write a letter to Charlie before I met up with him and it
was really short just explaining like the the influence I had a chance to tell one of my heroes like this is not hyperbolic your ideas changed my life your thinking has shaped mine and so I won't read the whole thing but I do want to read a section and this is just a handful of these ideas so I wrote I wrote a letter I like I'm using a
collection of your your ideas as a blueprint for building my business and I just listed off some of them and you know this is just part a few of them uh become friends with the eminent dead aim for durability take a simple idea and take it seriously find what you're best at and keep pounding away at it forever stop multi multitasking self-improvement
lasts as long as the breath does so that second to last one right there to stop multitasking this is what he says look at this generation with all of its electronic devices and multitasking I will confidently predict less success than Warren who just focused on reading and then this is the extension of that idea reading personal biographies allows
one to experience multiple lives and successes and failures reading business biographies allows one to experience the visites of a business and learn how problems are solved both Charlie and Warren are copious readers of personal and business biographies and that last line is an understatement I thought I've read a lot of biographies Charlie and
Warren make me look like an absolute amateur Sam zel I don't think I've told you this yet I'm working on a podcast about it but I got to also have a two-hour lunch uh sitting directly across from Sam zel same thing this guy knew more about business history than I did every obscure figure every obscure book every obscure company I try to
bring up he knew the founder he knew the company history he knew the outcome it was remarkable and again just meeting Sam talking to him talking to Charlie it's like okay I get done with this and I'm like I'm clearly clearly on the right path and then Charlie shares a lesson that he learned from his dad when his dad was still alive I asked my
father why he did his dad was an attorney for a bunch of businessmen in Omaha I asked my father why he did so much work for a big blo hard an overreaching jerk rather than for his best friend Grant mcfaden he said that man you call a blo hard is a walking Bonanza of legal troubles whereas Grant MC faten who fixes problems promptly and is nice hardly generates any legal work
at all and again that ties into a main themee of this book same with businesses the great ones don't have endless problems there's a great line that's in the inside cover of this book and it says Monger is a deeply perceptive Observer of human nature this next quote from him uh made me think of that something I also wrote down to myself
after um after I had din with him I said Charlie looks at nearly everything through the lens of History you aren't changing human nature things will just keep repeating forever and so he said says all human beings work better when they get what psychologists call reinforcement if you get constant rewards even if you're Warren Buffett you will respond learn from this and
find out how to prosper by reinforcing the people who are close to you next quote from Charlie I just wrote simply this is excellent you must have the confidence to override people with more credentials than you whose cognition is impaired by incentive caused bias or some similar psychological force that is obviously present but there are also
cases where you have to recognize that you have no wisdom to add and that your best course is to trust some expert we are lucky if we get to live to old age and so he has advice for that the best armor for old age is a well spent life preceding it I wrote down on this page After I reread the highlights last night another takeaway from my dinner with
Charlie he did this the best armor of old age is a well spent life preceding it and so this is some of his best advice because I think it applies specifically to people like you and I these like very driven trying to do something in the world willing to push yourself wanting to build a successful business a successful life and it's amazing how
many wealthy people I know have not heeded this advice yet and their their lives are worse off at at this he says I've heard Warren say a half a dozen times it's not greed that drives the world but Envy you have to cure yourself of this curing yourself of this is key key for a well-lived Life Charlie is known for saying that self-pity has no
utility Envy doesn't either Envy has no utility and then Charlie talks about his favorite habit that's the habit of reading I got to see this firstand again this is advice that Charlie gives it's advice that Warren gives it's something I experienced directly when I when I had lunch with Sam zel in my whole life I have known no wise people who didn't
read all the time none zero you'd be amazed at how much Warren reads and how much I read my children laugh at me they think I'm a book with a couple of legs sticking out Charlie's always been a vicious reader as a child he lived in the downtown Omaha Public Library where exploring the stacks he met the Towering intellectuals of both the past and
present in books by the age of eight both Thomas Jefferson and Benjamin Franklin had permanent places on the bookshelf above his bed it is reading that helped put him ahead of the pack in fact this is my oversight that I have not done I have a biography Thomas Jefferson I just haven't read it yet and I haven't done it from the podcast
forgot that he that Thomas Jefferson was one of um Charlie munger's Heroes and who he looked up to and influenc his thinking so that that alone is why I need to do it and I as I'd imagine uh Charlie Munger would recommend as well next thing uh this is definitely uh really important advice and something you see that Charlie does in his own
life life is always going to hurt some people in some ways and help others there should be more willingness to take the blows of life as they fall that's what manhood is taking life as it falls not whining all the time and trying to fix it by whining as the Great American cowboy actor John Wayne once said son I don't care much for quitters and then this is Charlie
repeating the compounding effect of knowledge I constantly see people rise in life who are not the smartest sometimes not even the most diligent but they are learning machines they go to bed every night a little wiser than they were when they got up and boy does that help particularly when you have a long run ahead of you then he repeats stop
multitasking I think people who multitask pay a huge price it was in one of the books I I can't remember if it was on the Bill Gates biography that I just recently did or one of the Warren Buffett biographies but I read this story where uh young Bill Gates and then a slightly older but still younger Warren version of Warren Buffett because I think he's like a decade and a half
older and Bill maybe two a decade something like that maybe even three but uh Warren uh Warren and Bill Gates are at a some kind of dinner meeting and they're Bill Gates's dad is there and he was asking the group they're like in the small group like okay what was uh what was the one trait or what was most responsible for your success and Warren
Buffett and Bill Gates both answered the same way they said focus and I think if you listen to episode 290 or if you read the book that the episode is about hard drive Bill Gates and the making of the Microsoft Empire you'd realize that that he had complete focus on in fact I heard Bill speak uh later in like some kind of documentary where he said he knew
something had changed because uh when he started having to deal with the antitrust suit uh that Microsoft was going through for the first time since the founding of Microsoft he was actively looking for a distraction so let's go back to this idea that Charlie mentioned the fact that this is what Ben Franklin did this is what Andrew
Carnegie did this is what uh him and Warren Buffett did is you've got to try to build this Seamless Web of trust with the people that are around you the highest form that Civilization can reach is a seamless web of deserve trust not much procedure just totally reliable people correctly trusting one another in your own life what you want is a
seamless web of deserved trust and if your proposed marriage contract has 47 pages I suggest you not enter the corporate culture at birkshire is that if you can't trust someone you really shouldn't be doing business with him or her so Charlie was just telling us that Envy has no utility this is when he talks about that self-pity has no
utility at all either I think the attitude of epitus is the best he thought that every mischance in life was an opportunity to behave well every mischance in life was an opportunity to learn something and that you're Duty was not to be submerged in self-pity but to utilize the terrible blow in a constructive fashion that is a very good
idea and I love the fact that you know he says that studying from history is a form of Leverage like hopefully you and I have multiple decades left in our career and think about all the lessons that we're able to observe from other people and learn from other people's experience that we can apply in the same fashion Charlie did that but he also had
to learn from his own experience so this is an example of this is the fact that he didn't cry about these mistakes he learned a lesson and then appli applied the the the lesson that he learned to his profit later on in life if he had never experienced troubles with a business in very competitive Industries like textile shoes retail and Airlines
he would have never gained the insight into the wonders of owning a business that had a consumer Monopoly such as Coca-Cola or se's candies he would have never seen how a lowcost producer such as Geico can have a competitive advantage over its much bigger competitors if he had never experienced the pain of the market crash of 1973 and 1974 he would have never had the
foresight to stockpile the cash he used to buy Wells Fargo stock in 2008 and 2009 so there's a lesson I learned from Reading two of Arnold Schwarzenegger's autobiographies it's episode 193 that's the auto autobiography Arnold wrote when he was in like 70 and uh episode 141 which is the the episode that he wrote when he was like 30 and he kind of at
the very end the book ends of him calling a shot saying hey the same lessons that I use to to become a a world champion of bodybuilding I'm just going to use to become an an uh an actor and build a business Empire so it's it's kind of interesting that he called the shot there but one thing he said he's like it's very dangerous when you start
doubting yourself that you're going to get don't worry the external world is going to try to get you to doubt yourself as much as possible but it's dangerous when you actually believe and you start doubting yourself this ties into what this the story that Charlie's about to tell you and I is like it's very dangerous if you start lying to
yourself and this is a great little story to remember how dangerous that is and how to avoid it Dean Kendall once told me a story when I was a little boy I was put in charge of a little retail operation that included candy my father saw me take a piece of candy and eat it and I told him don't worry I intend to replace it now listen to this what his
this fantastic advice that this father gave his son my father said remember he's like oh don't worry I'll eat it I'll replace it later my father said that sort of thinking will ruin your mind it will be much better for you if you take all you want and call yourself a thief every time you do it he's trying to tell his son don't lie to yourself so
and then this is the second to last piece of advice from Charlie Munger to you and I if you have enough sense to become a mental adult yourself you can run rings around people smarter than you just pick up the key ideas from all the disciplines not just a few and you're immensely wiser than they are and finally he says over the long term the eclipse rate of great civilizations
being overtaken is 100% so you know how it's going to end when we brought up the subject of death he said he wasn't afraid of it and he made a joke saying he just planned to lay there like everyone else does and that is where I'll leave it for the full story highly recommend I I really think it's it's crazy if you don't buy this book um it's
to me it's just a manual for for life for business keep it around keep it out constantly pick it up if you don't buy the physical copy at least buy the audible and just listen to it over and over again and if you buy the book and you use the link that's in the show notes in your podcast player are available at Founders podcast.com you'll
be supporting the podcast at the same time if you haven't haven't yet signed up for Founders premium that link is also down below and available at Founders podcast.com that is so you can listen to the AMA the ask me anything episodes that I've been making I might actually do a Charlie Monger only AMA episode soon as well I had that idea
earlier today uh that's available Down Below in the show notes on your podcast player and available at Founders podcast.com and if you want to join my free email newsletter where I email the top 10 highlights for the books that I read that link is also below that is 295 bucks down and if I want to catch up with Charlie Munger 10,000 to go and I'll talk to you again soon