5 ideas from the annual meeting of Charlie Munger's 2019 daily newspaper

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Charlie Munger chaired the Daily Journal's annual Valentine's Day meeting to ensure that only the most dedicated members choose to attend the ceremony. Charlie is known for his frankness and insight, and his intelligence has not lost its brilliance with age. We can all learn from his ideas, both in investment and in life.

While Charlie Munger answered many questions in two hours and answered many questions, these five ideas, set out below, really stood out:

1. "My idea of ​​being properly educated is to be right when the teacher is wrong. Anyone can simply say what the teacher says. It takes a very educated person to think for herself. "

You always want to think from the first principles, but relatively few people do it. Too often, people think that something is going well because it is widely accepted in their field or because some authority has said it. If you look at many areas (for example, medicine), much of what we thought was wisdom accepted 20, 30, or 40 years ago has now proven to be incorrect or incomplete. . No, you do not want to reinvent each wheel, but you want to think for yourself.

2. "It's really important to stay in your circle of competence. If you are not sure of the limits of this circle for you, then you do not have a real mastery of your field. "

Warren Buffett has already stated that the size of your circle of skills is not as important as the clarity of its limits. Charlie Munger emphasized it again today, highlighting the point: if you do not know the limits of your circle of skills, this should in itself tell you that you have not mastered your field.

3. "The first rule of fishing is to fish where the fish is."

Charlie has talked a lot about the lack of quality investments that exist today and the excessive competitiveness of many developed markets like the United States. He was much more optimistic about the opportunity offered in China, even if it was clear from his answers that he relied on Li Lu, with whom he invested a part of the family's capital, rather than trying to become him. – even an expert of Chinese titles.

4. "If you have trouble finding the right investments, join the club … My advice to the high interest compound researcher is to lower your expectations. Things will probably be difficult for a moment. "

Munger explained that it is unlikely that the 10% nominal return on US long-term equities will be replicated from the current starting point. He thought that a single-digit average rate of return was much more likely given the starting level of valuation and the decline in inflation.

5. "The idea of ​​diversification is logical at one point. If you do not know what you are doing and do not want to embarrbad yourself, then having a lot of investments makes sense. But this is not something that deserves a great reward. The idea of ​​diversification if you are looking for excellence does not make sense … At Berkshire Hathaway and in the Daily Journal, our investment results were higher than those of the index. Now why is it? Because we try to do less. We do not know much about many things, so we focus only on the few people we know well. "

Charlie Munger felt it was perfectly reasonable to admit that you did not know enough about individual stocks and invest your capital in a low-cost index fund. What is not reasonable in his eyes is diversification and the expectation of exceptional returns. He explained that at Berkshire Hathaway and the Daily Journal, they diligently study many opportunities, but that these incredible opportunities are very rare. Combined with a limited skill circle, this has led them to make very few investments each year. If you find a lot of investment that you find interesting in this environment, it should be a warning: it is likely that you are too optimistic or overconfident.

The goal of learning from big investors such as Charlie Munger is not to blindly imitate them. Nor does it impress others by allowing them to cite them better than the next person. What you should try to do is learn from their experience and knowledge, then apply what you learn to your own investment, based on your strengths and weaknesses. Do not try to be the next Charlie Munger. Instead, focus on becoming an investor as strong as you can by learning from your wisdom.

If you would like to learn more about the investment process at Silver Ring Value Partners, you can ask for an owner's manual here.

Disclaimer: The above is my personal opinion and does not constitute investment advice

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Charlie Munger chaired the Daily Journal's annual Valentine's Day meeting to ensure that only the most dedicated members choose to attend the ceremony. Charlie is known for his frankness and insight, and his intelligence has not lost its brilliance with age. We can all learn from his ideas, both in investment and in life.

While Charlie Munger answered many questions in two hours and answered many questions, these five ideas, set out below, really stood out:

1. "My idea of ​​being properly educated is to be right when the teacher is wrong. Anyone can simply say what the teacher says. It takes a very educated person to think for herself. "

You always want to think from the first principles, but relatively few people do it. Too often, people think that something is going well because it is widely accepted in their field or because some authority has said it. If you look at many areas (for example, medicine), much of what we thought was wisdom accepted 20, 30, or 40 years ago has now proven to be incorrect or incomplete. . No, you do not want to reinvent each wheel, but you want to think for yourself.

2. "It's really important to stay in your circle of skills. If you are not sure of the limits of this circle for you, then you do not have a real mastery of your field. "

Warren Buffett has already stated that the size of your circle of skills is not as important as the clarity of its limits. Charlie Munger emphasized it again today, highlighting the point: if you do not know the limits of your circle of skills, this should in itself tell you that you have not mastered your field.

3. "The first rule of fishing is to fish where the fish is."

Charlie has talked a lot about the lack of quality investments that exist today and the excessive competitiveness of many developed markets like the United States. He was much more optimistic about the opportunity offered in China, even if it was clear from his answers that he relied on Li Lu, with whom he invested a part of the family's capital, rather than trying to become him. – even an expert of Chinese titles.

4. "If you have trouble finding the right investments, join the club … My advice to the high interest compound researcher is to lower your expectations. Things will probably be difficult for a moment. "

Munger explained that it is unlikely that the 10% nominal return on US long-term equities will be replicated from the current starting point. He thought that a single-digit average rate of return was much more likely given the starting level of valuation and the decline in inflation.

5. "The idea of ​​diversification makes sense to a certain extent. If you do not know what you are doing and do not want to embarrbad yourself, then having a lot of investments makes sense. But this is not something that deserves a great reward. The idea of ​​diversification if you are looking for excellence does not make sense … At Berkshire Hathaway and in the Daily Journal, our investment results were higher than those of the index. Now why is it? Because we try to do less. We do not know much about many things, so we focus only on the few people we know well. "

Charlie Munger felt it was perfectly reasonable to admit that you did not know enough about individual stocks and invest your capital in a low-cost index fund. What is not reasonable in his eyes is diversification and the expectation of exceptional returns. He explained that at Berkshire Hathaway and the Daily Journal, they diligently study many opportunities, but that these incredible opportunities are very rare. Combined with a limited skill circle, this has led them to make very few investments each year. If you find a lot of investment that you find interesting in this environment, it should be a warning: it is likely that you are too optimistic or overconfident.

The goal of learning from big investors such as Charlie Munger is not to blindly imitate them. Nor does it impress others by allowing them to cite them better than the next person. What you should try to do is learn from their experience and knowledge, then apply what you learn to your own investment, based on your strengths and weaknesses. Do not try to be the next Charlie Munger. Instead, focus on becoming an investor as strong as you can by learning from your wisdom.

If you would like to learn more about the investment process at Silver Ring Value Partners, you can ask for an owner's manual here.

Disclaimer: The above is my personal opinion and does not constitute investment advice