Charlie Munger's 10 Secrets to Getting Rich

A lot of questions today. People trying to figure out what the secret to life is to a long and happy life. And I just wonder if you were—that is easy because it's so simple. What is it? Don't have a lot of envy. You don't have a lot of resentment. You don't overspend your income. You stay charitable in spite of your troubles. You deal with reliable people. And you do what you're supposed to do. All these simple rules work so well to make your life better, and they're so tight.

Charlie Munger has developed a set of principles throughout his long life that have helped him become immensely successful and build incredible wealth. In this video, we're going to listen to Charlie describe 10 of these principles that helped him reach his net worth of over 2 billion. Make sure to hit the like button because it takes a ton of time to put these videos together, and I would really appreciate the support.

Number 10 on the countdown is my personal favorite. Now, let's get into the video. But the other great secret is that we're good at lifelong learning. Warren is so much better in some ways in his 70s and 80s than he was younger, that it's almost awesome. If you keep learning all the time, you have a huge advantage. We both just like it, and we have a wonderful group of friends—really wonderful—from whom we can learn a lot.

Yeah, now there is a part of life which is how do you scramble out of your mistakes without them costing too much? And we've done some of that too. If you look at Berkshire Hathaway, think of its founding businesses: a doomed department store, a doomed New England textile company, a doomed trading stamp company. Out of that came Berkshire Hathaway. Now, we handled those losing hands pretty well when we bought into them very cheaply. But, of course, the success came from changing our ways and getting into the better businesses.

It isn't that we were so good at doing things that were difficult; we were good at avoiding things that were difficult and finding things that are easy. Well, luckily, I got at a very early age the idea that the safest way to try and get what you want is to try and deserve what you want. It's such a simple idea—it's the golden rule, so to speak. You want to deliver to the world what you would buy if you were on the other end.

There is no ethos, in my opinion, that is better for any lawyer or any other person to have. By and large, the people who've had this ethos win in life. They don't win just money, just honors, or a million emoluments; they win the respect, the deserved trust of the people they deal with. There is huge pleasure in life to be obtained from getting deserved trust. And so, the way to get it is to deliver what you'd want to buy if the circumstances were reversed.

I will say something about life generally: I was very lucky. I had an ancestor that I never met. My mother's grandfather was a pioneer. He came out to Iowa and lived in a sod house with his young wife. That's a cave through two winters, and he literally was a pioneer from nothing. He rose finally where he controlled the leading bank in the town, and was a very reputable citizen and a very charitable man. He joined Andrew Carnegie and gave the town library to Algona. My grandfather made him do it—my great-grandmother. He never would have done it by himself, and he made him put his giant tarpon in the library as part of the gift.

He always amused me to go by that library and see this giant tarpon. Eccentrics come naturally in my family. But at any rate, having wrested the success from hardship and danger and trouble when he was a captain in the Black Hawk Wars—I mean, he was literally a soldier. He had this theory, looking back at his long life, of unusual success. He owned a bunch of farms at the end that he leased to Germans, but you couldn't lose money leasing a farm to a German in Iowa. Naturally, he was successful.

But what he said over and over again to his grandchildren, including my mother, was, "The real opportunities that come to you are few. It's a very fortunate life that is just bathed in opportunity all the way." Most people just get a few times when they can make a huge difference by seizing a huge activity. He said, "When you find one, my dear grandchildren, and you can clearly recognize it, seize it boldly and don't do it small."

My mother, who wasn't interested in finance, would like to talk to the family. She liked to transmit the family quirks. But of course, this guy was my soulmate—the great-grandfather I never knew. And of course, I totally adopted his point of view, and I must say this worked wonderfully. So, I quit claim my great-grandfather Ingham's rule to you: Assume that your really major opportunities in life are going to be few, and when you get a wallapalooza, for God's sakes, don't hang back like a timid little rabbit. Don't hang back.

There aren't that many of the really big good ones. If you take the whole history of Berkshire Hathaway, if you take out the 20 best transactions, our record is a joke. Well, 20 best transactions over 40-some years—that's one every two years. We work at it all the time. Life is not just bathing you in unlimited opportunities, even if you work at being able to find them and seize them.

This business of controlling the costs and living simply—that was the secret. How much? My Warren and I had tiny little bits of money. We always understood our incomes, and we invested. Well, you know, if you live long enough, you end up rich—it's not very complicated. One of these guys at the Berkshire meeting, from one of the foreign publications, said, "Why do a couple of guys in a little place in Omaha do so much better than all these powerful minds and great institutions?"

I said, "Well, I think Warren and I know the edge of our competency better than other people do, and that's humility in the umbrella sense." That is a very important thing to know. I say over and over again, it's not a competency if you don't know the edge of it. You're a disaster if you don't know the edge of your own competency. Warren frequently says, "I'd rather deal with a guy with an IQ of 130 who thinks it's 125 than a guy with an IQ of 180 who thinks it's 200." That second guy will kill you.

And so it is very important to know the edge of your own competency. Warren and I have not made our way in life by making successful macroeconomic predictions and betting on our conclusions. Our system is to swim as competently as we can, and sometimes the tide will be with us and sometimes it will be against us. But by and large, we don't much bother with trying to predict the tides because we plan to play for the game for a long time.

I recommend to all of you exactly the same attitude. It's kind of a snare and a delusion to outguess macroeconomic cycles. Very few people do it successfully, and some of them do it by accident. When the game is that tough, why not adopt the other system of swimming as competently as you can and figuring that over a long life you'll have your share of good tides and bad tides?

I think you can count on more booms and busts over your remaining lifetime. How big and with what safe cyclicality, I can't tell you. I can tell you the best way of coping, which is just to put your head down and behave credibly every day. It's amazing how, if you just get up every morning and keep plugging and have some discipline and keep learning, it works out okay.

I don't think it's wise to have an ambition to be President of the United States or a billionaire or something like that because the odds are too much against you. Much better to aim low. I did not intend to get rich; I wanted to get independent. I just overshot. And by the way, while you're clapping, some of the overshooting was accidental.

You can be very deserving and very intelligent and very disciplined, but there's also a factor of luck that comes into this thing. The people who get the outcomes that seem extraordinary are the people who have discipline and intelligence and good virtue plus a hell of a lot of luck. Why wouldn't the world work like that? So, you shouldn't give credit for the unusual.

A friend of mine said about a colleague of his in his fraternity, he says, "Old George was a duck sitting on a pond, and they raised the level of the pond." There are a lot of people that just luck into the right place and rise, and then there are a lot of very eminent people who have many advantages, and they've got one little flaw or one bit of bad luck, and they're mired in misery all their lives. But that makes it interesting to have all this variation.

Then there are people on the TV—another wonderful place—and they say, "I have this book that will teach you how to make 300 a year, and all you have to do is pay for shipping and I will mail it to you." How likely is the person who suddenly found a way to make 300 a year would be trying to sell books on the internet to you? It's ridiculous. Yet I've described modern commerce, and the people who do this all day think they're useful citizens.

The advertising agents invent the lingo. So, in insurance, they say, well, they say the two people who shifted from Geico to the Glottal Insurance Company saved 400 each. But they don't tell you there are only two such people in the whole United States, and they were both nuts. They mislead you on purpose, and I get tired of it. I don't think it's right that we deliberately mislead people as much as we do.

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 wasn't ever working for his wonderful friend, whom I admired. I said, "Why do you do this?" 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. Whereas Grant McFaden treats everybody right—the employees, the customers, everything. He gets involved with some psychotic; he walks over there and makes a graceful exit immediately. So, 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 McFaden, and I want to tell you—it works. It really works. Peter Goffin 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."