Charlie Munger's 6 Secrets for a Successful Life

And another thing that people do, like bear guard is amazing, is they build these enormous mausoleums. I think they figure they want people to walk by that mausoleum and say, "Gosh, I wish I were in there."

Let me tell you another story that I think is an interesting one about modern life, but this goes back to a different time. This man has this wonderful horse; it's just a marvelous horse, got an easy gait and good looking and everything. It just works wonderfully but also occasionally just gets so dangerous and vicious and causes enormous damage and trouble and breaks arms and legs for other riders and so on. He goes to the vet and says, "What can I do about this horse?" The vet says, "That's a very easy problem and I'm glad to help you."

He says, "What should I do?" and the man says, "The next time your horse is behaving well, sell it." Well, think of how immoral that is. And haven't I just described what private equity has to do? When private equity has to sell something that's really troublesome, they hire an investment banker. And what does the investment banker do? He makes a projection. You can't; I have never seen such expertise in my whole life just created in making projections in investment banking. There is no business so lousy you can't get a wonderful projection.

But is that a great way to make a living: to have phony projections and use it to make money out of people you look right into the eyes of? I would say no. And by and large, Lauren and I, we never tried to make money on a dumb sale out of stupidity of our dumb buyers. We tried to make money by buying. If we were selling a horse, we didn't want to pretend it was a cure for arthritis.

I think it's better to go through life our way instead of theirs. My father had this best friend and client, and he also had this other client who was a big blowhard. He was always working for the big blowhard and he wasn't ever working for his wonderful clown whom I admired. I said, "Why do you do this?" and he said, "Charlie, you idiot. The big blowhard is an endless source of legal troubles. He's always in trouble, overreaching and misbehaving and so forth."

Where he says Grant McFadden treats everybody right—the employees, the customers, everything. He gets involved with some psychotic. He walks over there and makes a graceful exit immediately. A man like that doesn't need a lawyer. My father was trying to teach me something, and it really worked. I spent my whole life trying to be like Grant McFadden, and I want to tell you it works. It really works.

Peter Coffin is always telling me if the crooks only knew how much money you could make by being honest, they'd all behave differently. Warren has a wonderful saying I like: he says, "You take the high road; it's never crowded." And it's worked.

Take the Daily Journal Corporation. We made quite a few millions of dollars out of the foreclosure boom because we published legal notices, and we dominated the publication of foreclosure notices in the worst real estate depression in the history of modern times. We could have raised our prices at the time and made more tens of millions of dollars, but we didn't do it.

You know, when your fellow citizens are losing their damn houses in the worst recession, Charlie Munger, billionaire, raises prices? It would look lousy on the front page of the paper for people around. The honest right should you do it? And the answer is no, of course not.

But maybe when you're Warren he always said it's probably always a mistake to marry for money. It's really stupid if you're already rich, and it's really stupid when you're already rich to get a reputation of being a total no-goodnik. The skill that got Berkshire through one decade would not have sufficed to get it through the next decade.

With the achievements made without Warren Buffett being a learning machine, a continuous learning machine, the record would have been absolutely impossible. The same is true at lower walks of life. I constantly see people rise in life who were 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 habit help, particularly when you have a long run ahead of you.

Alfred North Whitehead said at one time that the rapid advance of civilization came only when man invented the method of invention. Of course, he was referring to the huge growth in GDP per capita and all the other good things that we now take for granted, which happened, just started a few hundred years ago when before that, all was stasis.

So if civilization can progress only when it invents the method of invention, you can progress only when you learn the method of learning. I was very lucky; I came to law school having learned the method of learning, and nothing has served me better in my long life than continuous learning.

If you take Warren Buffett, if you watched him with a time clock, I would say half of all the time that he spends is just sitting on his ass and reading. A big chunk of the rest of the time is spent talking one-on-one, either on the telephone or personally, with highly gifted people whom he trusts and who trust him.

In other words, it looks quite academic, all this worldly success. Here's an apocryphal story that is very instructive: a young man comes to visit Mozart, and he says, "Mozart, I want to write symphonies." Mozart says, "How old are you?" The man replies, "I'm 23." Mozart says, "You're too young to write symphonies."

He says, "But Mozart, you were writing symphonies when you were 10 years old!" Mozart says, "Yes, but I wasn't asking other people how to do it." Now, there's another Mozart story. Here's the greatest musical talent maybe that ever lived, and what was his life like?

Well, he was bitterly unhappy and he died young. That's the life of Mozart. What the hell did Mozart do to screw it up to make himself... well, he did two things that are guaranteed to create a lot of misery. He overspent his income scrupulously; that's number one, and that is really stupid.

The other thing was he was full of jealousies and resentments. If you'll overspend your income and be full of jealousy and resentments, you can have a lousy, unhappy life and die young. All you've got to do is learn from Mozart. You can also learn from that young man who was asking Mozart how to write a symphony.

The truth of the matter is that not everybody can learn everything. Some people are way the hell better, and of course, no matter how hard you try, there’s always some guy or gal that achieves more. Some might ask, "So what?" Do any of us need to be the very top of the whole world? It's ridiculous.

Generally speaking, envy, resentment, revenge, and self-pity are disastrous modes of thought. Self-pity gets pretty close to paranoia, and paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity.

I have a friend who carried a big stack of linen cards about this thick, and when somebody would make a comment that reflected self-pity, he would take out one of the cards, take the top one off the stack, and hand it to the person. The card said, "Your story has touched my heart. Never have I heard of anyone with as many misfortunes as you."

You can say that's waggery, but I suggest that every time you find you're drifting into self-pity—and I don't care what the cause, your child can be dying of cancer—self-pity is not going to improve the situation. Just give yourself one of those cards; it's a ridiculous way to behave, and when you avoid it, you get a great advantage over everybody else, almost everybody else, because self-pity is a standard condition.

Yet you can train yourself out of it. Of course, the self-serving bias; you want to get out of yourself, thinking that what's good for you is good for the wider civilization and rationalizing all these ridiculous conclusions based on this subconscious tendency to serve oneself. It's a terribly inaccurate way to think, and of course, you want to drive that out of yourself because you want to be wise, not foolish.

You also have to allow for the self-serving bias of everybody else because most people are not going to remove it all that successfully. The human condition being what it is, if you don't allow for self-serving bias in your conduct, again, you're a fool—you just aren't confident.

I watched the brilliant Harvard Law Review-trained general counsel of Solomon lose his career. What he did was when the CEO was aware that some underling had done something wrong, the general counsel said, "Gee, we don't have any legal duty to report this, but I think it's what we should do. It's our moral duty."

Now, the general counsel was totally correct, but of course, it didn't work. It was a very unpleasant thing for the CEO to do, and he put it off and put it off and put it on, and due course why the thing eroded into a major scandal, and down went the CEO and the general counsel with him.

The correct answer in situations like that was given by Ben Franklin: "If you would persuade, appeal to interest, not to reason." The self-serving bias is so extreme if the general counsel said, "Look, this can erupt in something that will destroy you, take away your money, take away your status; it's a perfect disaster!" it wouldn't work.

You want to appeal to interest. Yeah, you want to do it with lofty motives, but you should not avoid appealing to interest. I look at the people in my generation who were the nerds, who were patient and rational, eventually did well, who lived within their income and worked at being sensible, and when they saw an opportunity, grabbed it pretty fiercely and so forth.

I think that'll work for the new nerds of the world, and the people who get ahead because they're star salesmen or charismatic personalities—I'm not one of those, so I don't know how to do that. So if you're not a nerd, I can't help you.

I think that the odds are that most people who try to do finance are not going to succeed, and there's a lot of wretched excess in it because easy money will always attract wretched excess. It’s just the nature; it's like a bunch of animals feeding off a carcass in Africa. By the way, that's the image I chose on purpose.

But no, I don't think it's so pretty, and I don't think that modern finance is so wonderful. In my day, a lot of the finance people were more like engineers. They were so chastened by the Great Depression and all the wretched failure that they really tried to make everything super safe. It was a very different plotting place; they weren't trying to get rich; they were trying to be safe.

This modern world is radically different, and I’m not sure if I were starting out a new world in your world how well I would do. It would be a lot harder than it was to get ahead in the world the way it was when I came up.

How are you? My best advice? I think you'll be happier if you reduce your expectations and if you try and satisfy them. By the way, that's generally a very good idea.