Wolf Review(The Tao of Charlie Munger)
It is always better to gain wisdom from others experiences rather than learning those wisdom by making one of those costly mistakes yourself. You got me? 🙃
The Tao of Charlie Munger by David Clark. By now most value investors would have known Charlie Munger, the better half of Berkshire Hathaway. Charlie Munger, over the years, has given us plenty of his wisdom in the most simplistic form. He had inspired Warren Buffett to ditch the Ben Graham’s cigarette butt approach to buying and holding good companies with strong economic moats. That approach produces much greater returns over the long run.
Charlie Munger is very cautious about debt, having suffered under the great stock market fall in 73-74. That experience shaped him into a highly conservative investor. He quotes, “The desire to get rich is pretty dangerous”. Sometimes fast money involves excessive leverage, which can cause a catastrophic outcome.
In the book, a lot of Charlie’s wisdom centre around patience. Charlie quotes, “Sitting on your axx is a damn difficult thing for most people, but it is the most rewarding in long term investing while paying less commission to your broker and the tax system give you an extra 3% just by sitting still”. He attributed his success to his long attention span.
There are some elements of Lao Tzu’s wisdom incorporated into Charlie Munger quotes “Acknowledging what you don’t know is the dawning of wisdom”. The smarter we get, the more we realise how little we actually know. By acknowledging what we don’t know, we are putting ourselves in a position to learn more; thus, the dawning of true wisdom. One will have a higher chance of coming out a winner in the investment game if one stays within their circle of competence. Taking advantage of any great opportunity and acknowledging mistakes made is true knowledge.
Charlie advocates keeping a good amount of cash just in case a good deal comes along. I practise the same discipline when I invest. I would sell in a bull market to achieve a high level of cash during the boom. One can never predict the market turning bearish where bargains are aplenty. Given the high cash yield, one is paid reasonably well to wait for opportunities.
Charlie Munger is a big admirer of our ex-Prime Minister, Mr. Lee Kuan Yew. He praised Mr. Lee for getting the basic right of running the country by being honest, incorruptible, effective and efficient. He goes as far of praising Mr. Lee, giving him a nickname of the Warren Buffett of Singapore. The huge success Singapore is enjoying now can be largely attributed to Mr. Lee’s talent. He admires Mr. Lee so much that he asked someone to make a bust of him in honour of the great man.
There are plenty of snippets of wisdom shared in the book. Some of Charlie Munger’s wisdom is very simple and commonsensical but very few people in the world could follow. The book goes onto Lone Wolf recommendation list. The author did a great job of explaining the concept of Charlie Munger’s words. Charlie Munger will always be remembered as one of the greatest value investors of our time.
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