Good Behavior Is Productive and Your Only Asset

Charlie: “How you behave in one place will help in surprising ways later.” Charlie thinks that the best way to get something is to deserve it. One has to discharge duties faithfully and well.

Charlie: “Well, luckily I had the idea at a very early age that the safest way to try to get what you want is to try to deserve what you want. It’s such a simple idea. It’s a golden rule. 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 and honors. They win the respect, the deserved trust of people they deal with. And there is a huge pleasure in life to be obtained from getting deserved trust.”

Potentially escaping from gambling, buying and selling stocks, speculating, and dealing with questionable people is one of the extreme characteristics of Charlie. From the beginning of his career, Charlie never gambled on stock, so we have no records of it.

Charlie: “I knew a guy who had five million and owned his house free and clear. But he wanted to make a bit more money to support his spending, so at the peak of the internet bubble, he was selling puts on the internet stocks. He lost all of his money and his house and now works in a restaurant. It’s not a smart thing for the country to legalize gambling [in the stock market] and make it very accessible.”

“Gambling does not become wonderful just because it pertains to commerce. It’s a casino.”

Charlie: “To me, it’s obvious that winners have to bet very selectively. It’s been obvious to me since very early in life. I don’t know why it’s not obvious to very many other people.”

Even as a young man, Charlie was extremely well behaved in times of crisis. One could say he has a natural talent to be rational, objective, and passionate about wisdom. The crazier people became, the calmer he was. In his partnership with Buffett, Charlie hasn’t ever felt blocked of his opinion by Buffett. Most of the time they agree on every issue and respect each other. With time, the partners already know what the other will think on any issue or problem. So, knowledge accumulation and skill acquisition happen based on personal experiences, but the best way is through the experiences of other people. The rule is for both Buffett and Charlie to read about catastrophes, mistakes other people have made before. To avoid causing pain to yourself, you have to learn it from the mistakes of others.

Charlie: “You don’t have to pee on an electric fence to learn not to do it.” Both Munger and Buffett consistently stress the importance of learning continually and that continuously applying his mental models approach is essential. Most people, though, don’t care about engineering a coherent set of mental models to prepare them to solve everyday issues and problems. What people want, mostly, is to acquire a lot of money.

From Whitney Tilson’s note from the 2007 Wesco Annual Meeting:

Charlie: “I want to do something I haven’t done before. I feel obligated because so many of you come from such great distances, so I’ll talk about a question I’ve chosen, one that ought to interest you. Why were Warren Buffett and his creation, Berkshire Hathaway, so unusually successful? If that success in investment isn’t the best in the history of the investment world, it’s certainly the top five. It’s a lollapalooza. Why did one man, starting with nothing, no credit rating, end up with this ridiculous collection of assets, $120 billion in cash and marketable securities, all from $10 million when Warren took over, with about the same number of shares outstanding. It’s a very extreme result.

“You get some hints if you read Poor Charlie’s Almanack, which was created by my friend Peter Kaufman, almost against my will—I let him crawl around my office when I wasn’t there. He said it would make a lot of money so he put up $750,000 and promised that all profits above this would go to the Huntington Library. Lo and behold, that’s happened. He got his money back, and the donees receiving a large profit. Some people are very peculiar, and we tend to collect them.”