Charlie Munger: Avoid These Mistakes and You Will Double Your Net Worth

The truth of the matter is that not everybody can learn everything. Some people are away the hell better, and of course, no matter how hard you try, there're always some guy that achieves more—some guy or gal. And my answer is, so what? Do any of us need to be the very top of the whole world? It's ridiculous.

In my life, to give another example, the mongers would have twice the assets they now have if I hadn't made one mistake of omission back in the 1970s. It was really stupid, and I blew an opportunity that could have doubled my present net worth. That is a normal life; you get one or two chances, and that’s how things work out. It's the basis. We all know people that are out-married; I mean their spouses are so much better. Think what a good decision that was for them and what a lucky decision. Way more important than money.

A lot of them did it when they were young; they just stumbled into it. Now, you don't have to stumble into it; you can be very careful. A lot of people are wearing signs: "Danger, danger, do not touch," and people just charge right ahead. That's a mistake. Well, you can laugh, but it's still a horrible mistake.

It's been fun for the people on this board to know one another and work on these oddball things and to handle life's vicissitudes. Of course, it's very peculiar that we're so old. I mean, imagine a place where Gary Wilcox is one of the young men. His wife is still a golf champion, but that's not because she's good when she's old. I mean, yeah, it's an amazing group, and that’s an interesting example too. Imagine being as old and as impaired as I am and having a pretty good time. How does that happen?

Well, yeah, that is another story. A couple of other stories too because you like stories. 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 asks, “How old are you?” And the man replies, “23.” Then Mozart says, “You're too young to write symphonies.”

The man protests, “But Mozart, you were writing symphonies when you were 10 years old!” To which Mozart responds, “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 miserable?

Well, he did two things that are guaranteed to create a lot of misery. He overspent his income scrupulously—that's number one; that is really stupid. The other thing was he was full of jealousies and resentments. If you overspend your income and are 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 symphonies. The truth of the matter is that not everybody can learn everything. Some people are away the hell better, and of course, no matter how hard you try, there's always some guy that achieves more—some guy or gal. They might answer, "So what? Do any of us need to be the very top of the whole world? It's ridiculous."

Another thing that people do, like Bear Gard, is amazing: 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.”

Anyway, you can see we've had some fun as we go along, and it's worked so well. But if you actually figure out how many decisions were made in the history of the Daily Journal Corporation or the history of Berkshire Hathaway, it wasn't very many per year that were meaningful. It's a game of being there all the time and recognizing the rare opportunity when it comes, and recognizing that the normal human allotment is to not have very many.

Now, there's a very confident bunch of people who sell securities who act as though they've got an endless supply of wonderful opportunities. Well, those people are the equivalent of the racetrack tout; they're not even respectable. It's not a good way to live your life—to pretend to know a lot of stuff you don't know and pretend to furnish you a lot of opportunities you're not furnishing. My advice to you is to avoid those people.

But not if you're running a stock brokerage firm; you need them. But it's not the right way to make money. This business of controlling costs and living simply—that was the secret. 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. 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, and we bought into them very cheaply. But of course, the success came from changing our ways and getting into 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.

By the way, when we bought the Daily Journal, that was easy. What we’re doing now in this software business is difficult, but due to the accident of these good associations and the fact that these old colleagues have lived so long, we're doing pretty well on the new business. It has potential, and it's fun to do.

And how many declining newspapers have hundreds of millions of marketable securities lying around and a new business with some promise? We're like the last of the Mohicans.

Oh, he's giving it to somebody important. Well, I'll take some questions now.