Charlie Munger, Berkshire Hathaway's vice-chairman, lays out ten principles for success: lifelong learning, knowing your limits, building mental models across disciplines, earning trust through quality work, seeking durable competitive advantages, using a margin of safety, rejecting victim thinking, applying stoic philosophy, and executing consistently rather than predicting the economy.
He's an American business magnate, lawyer, investor, and philanthropist. He's vice chairman of Berkshire Hathaway, the investment company chaired by Warren Buffett. He has a net worth of $1.3 billion. He's Charlie Munger, and here are his top 10 rules for success.
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. And we both just like it. And we have a wonderful group of friends, really wonderful. From whom we can learn a lot. 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, 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, and they don't win just money just honors and emoluments. They win the respect, the deserved trust of the people they deal with. And there is huge pleasure in life to be obtained from getting deserved trust. And so, and the way to get it is to deliver what you'd want to buy if the circumstances were reversed. 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 in great institutions? And 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 Tumbrello sense, and 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 are 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 that thinks it's 200." That second guy will kill you. And so it is very important to know the edge of your own competency. It's not my nature— when you get little surprises as a result of human nature— to spend much time feeling betrayed. I always want to just put my head down and adjust. So I don't allow myself to spend much time ever with any feelings of betrayal. So you're asking the wrong person, because if I— if some flickering idea like that came to me, I'd get rid of it quickly. I don't like any feeling of being victimized. I think that's a counterproductive way to think as a human being, and I am not a victim. I'm a survivor. I listened in law school when some wag said, a legal mind is a mind that when two things are all twisted up together and interacting, it's feasible to think responsibly about one thing and not the other. Well, I could see from that one sentence that that was perfectly ridiculous, and it pushed me further into my natural drift, which was into learning all the big ideas and all the big disciplines. So I wouldn't be a perfect damn fool who was trying to think about one aspect of something that couldn't be removed from the totality of the situation in a constructive fashion. And what I noted, since the really big ideas carry 95% of the freight, that it wasn't at all hard for me to pick up all the big ideas in all the disciplines and make them a standard part of my mental routines. Once you have the ideas, of course, they're no good if you don't practice. If you don't practice, you lose it. So I went through life constantly practicing this multidisciplinary approach. Well, I can't tell you what that's done for me. It's made life more fun. It's made me more it's made me more helpful to others, it's made me enormously rich, you name it, that attitude really helps. We have to deal in things that we're capable of understanding, and then once we're over that filter, we have to have a business with some intrinsic characteristics that give it a durable competitive advantage. And then, of course, we would vastly prefer a management in place with a lot of integrity and talent. And finally, no matter how wonderful it is, it's not worth an infinite price. So we have to have a price that makes sense and gives a margin of safety considering the natural vicissitudes of life. That's a very simple set of ideas. And the reason that our ideas have not spread faster is they're too simple. The professional classes can't justify their existence if that's all they have to say. We have this system where we translate very trustworthy people and give them enormous trust, and as they practice that trust, they get more confirmed in being trustworthy, and eventually we've got this seamless web of trust which is incredibly efficient and very useful. And by the way, this is not just my doctrine. This is a doctrine in economics that tries to explain why firms come into existence. And firms come into existence because a lot of people who trust one another operating within a firm are more efficient than they would be if they were a bunch of independent proprietors. I'm really following a very key idea of the greatest lawyer of antiquity, Marcus Tullius Cicero. Cicero is famous for saying, "A man who doesn't know what happened before he's born goes through life like a child." That is a very correct idea of Cicero's, and he's right to ridicule somebody so foolish as not to know what happened before he was born. But if you generalize Cicero, as I think one should, there are all these other things that you should know in addition to history. And those other things are the big ideas in all the other disciplines. And it doesn't help you just to know them enough so you could prattle them back on an exam and get an A. You have to learn these things in such a way that they're in a mental latticework in your head, and you automatically use them for the rest of your life. If you do that, I solemnly promise you that one day you'll be walking down the street and you'll look to your right and left and you'll think, my heavenly days, I'm now one of the few most competent people of my whole age cohort. 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 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. Life will have terrible blows in it. Horrible blows, unfair blows, doesn't matter. And some people recover and others don't. And, and there I think the attitude of Epictetus 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 your duty was not to be submerged in self-pity, but to utilize the terrible blow in a constructive fashion.
Thank you guys so much for watching. I made this video because Dom Aviation Channel asked me to. So if there's a famous entrepreneur that you want me to profile next, leave it in the comments below and I'll see what I can do. I'd also love to know which of Charlie Munger's top 10 rules had an impact on you the most? Leave it in the comments below and I'm gonna join in the discussion. Thank you guys so much for watching. Continue to believe and I'll see you soon.
