Charlie Munger on Investing (quotes from Charlie Munger).

A thread.

1.The desire to get rich fast is pretty dangerous.

2.Knowing what you don’t know is more useful than being brilliant.

3.People are trying to be smart—all I am trying to do is not to be idiotic, but it’s harder than most people think.

4. Life, in part, 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.

5. My idea of shooting a fish in a barrel is draining the barrel first.

6.Once we’d gotten over the hurdle of recognizing that a thing could be a bargain based on quantitative measures that would have horrified Graham, we started thinking about better businesses.

7.Ben Graham had a lot to learn as an investor. His ideas of how to value companies were all shaped by how the Great Crash and the Depression almost destroyed him. .It left him with an aftermath of fear for the rest of his life, and his methods were designed to keep that at bay.

8.Sit on your ass investing. You’re paying less to brokers, you’re listening to less nonsense, and if it works, the tax system gives you an extra one, two, or three percentage points per annum.

9.Acknowledging what you don’t know is the dawning of wisdom.

10. In the corporate world, if you have analysts, due diligence, and no horse sense, you’ve just described hell.

11. You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.

http://13.You  should remember that good ideas are rare—when the odds are greatly in your favor, bet heavily.

14.Mimicking the herd invites regression to the mean.

15.I’ve never been able to predict accurately. I don’t make money predicting accurately. We just tend to get into good businesses and stay there.

16.If you, like me, lived through 1973–74 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.

17.The way to get rich is to keep $10 million in your checking account in case a good deal comes along.

18.Thanks to the early 1930s and the behavior of the capitalists in the robber-baron days. Stocks yielded dividends twice as much as the interest rates on bonds. It was a wonderful period to be buying stocks. We profited from others’ demoralization from the previous generation.

19.I succeeded because I have a long attention span.

20. It is a fact that great and foolish excess can come into prices of common stocks in the aggregate. They are valued partly like bonds, based on roughly rational projections of use value in producing future cash. But they are also valued partly like Rembrandt paintings.

21.I think that, every time you see the word EBITDA, you should substitute the word bullshit earnings.

22.Where you have complexity, by nature you can have fraud and mistakes. This will always be true of financial companies, including ones run by governments. If you want accurate numbers from financial companies, you’re in the wrong world.

http://23.Smart  people aren’t exempt from professional disasters from overconfidence.

24.I know one guy, he’s extremely smart & a capable investor. I asked him, ‘What returns do you tell your clients you will earn for them?’ He said, ‘20%.’ He knows that’s impossible. But he said, ‘Charlie, if I gave them a lower number, they wouldn’t give me money to invest!’

http://25.It ’s waiting that helps you as an investor, and a lot of people just can’t stand to wait.

26. In terms of business mistakes that I’ve seen over a long lifetime, I would say that trying to minimize taxes too much is one of the great standard causes of really dumb mistakes. Anytime somebody offers you a tax shelter from here on in life, my advice would be don’t buy it.

http://27.An  isolated example that’s very rare is much easier to endure than a perfect sea of misery that never ceases.

28.Favorable surprises are easy to handle. It’s the unfavorable surprises that cause the trouble.

29.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.

30.If you buy something because it’s undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. That’s hard. But, if you can buy a few great companies, then you can sit on your ass. That’s a good thing.

31.View a stock as an ownership of the business and judge the staying quality of the business in terms of its competitive advantage.

32.I think that one should recognize reality even when one doesn’t like it; indeed, especially when one doesn’t like it.

http://33.It  is 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 folk saying: ‘It’s the strong swimmers who drown.’

34. 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.

35. When I came out to California, there was this playboy & he spent all his time drinking heavily & chasing movie stars. His banker called him in & said that he was very nervous about his behavior. He told his banker, ‘Let me tell you something: my municipal bonds don’t drink.’

36. There is more dementia about finance than there is about sex.

37. If people weren’t wrong so often, we wouldn’t be so rich.

38. 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, waiting. It’s easy for us, we have a lot of other things to do.

39. We have a history when things are really horrible of wading in when no one else will.

40. By and large I don’t think too much of finance professors. It is a field with witchcraft.

41. Mortgage lending became a dirty way to make money. You take people that can’t handle credit and try to make high returns by abusing their stupidity—that’s not the way to make money in banking. You should try to make money by selling things that are good for the customer.

42. I don’t think anyone should buy a bank if they don’t have a feel for the bankers. Banking is a business that is a very dangerous place for an investor. Without deep insight, stay away.

43. 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 is a magic system that will do it for you.

44. The great lesson in microeconomics is to discriminate between when technology is going to help you and when it’s going to kill you.

45. Successful investing requires this crazy combination of gumption and patience, and then being ready to pounce when the opportunity presents itself, because in this world opportunities just don’t last very long.

46. It is in the nature of stock markets to go down. So people suffer. Conservative investing and steady saving without expecting miracles is the way to go. Some people can figure out how to average twice the rate of return. I can’t teach everyone else to do it. It is difficult.

47. Everywhere there is a large commission, there is a high probability of a rip-off.