American billionaire investor Charlie Munger has just died in California, a few weeks before his hundredth birthday, which would have taken place on 1er January 2024.
Warren Buffett’s right-hand man, Mr. Munger was famous for never having taken an economics or finance course. He studied law at Harvard University, then co-founded the law firm Munger, Tolles & Olson in Los Angeles, before going into business with Warren Buffett, whom he met at a dinner in Omaha, in Nebraska in 1959.
Vice chairman of Berkshire Hathaway since 1978, Charlie Munger was known for his colorful, controversial, funny, or simply brilliant statements. Here are some of them, along with some context.
Regarding inflation:
“I remember the 5-cent hamburger and the minimum wage of 40 cents an hour. [L’inflation] has it ruined the investment climate? I do not think so. »
Here Munger debunked a stubborn myth in finance: that inflation prevents us from getting rich. Of course, if you live in Argentina and inflation is 100% per year, that’s a problem. But overall stock market returns in developed countries have historically been 5% more than inflation on average for centuries, for as long as manuscript records exist in archives in France and England. And even if the purchasing power of a dollar decreases over time, the population’s standard of living has constantly improved for several generations. In short, Munger was urging us to stop seeing inflation as a destructive force in our lives.
About desire:
“There is nothing more counterproductive than envy. There will always be someone in the world who is better than you. Of all the sins, envy is easily the worst, because you can’t even have fun with it. It’s a total net loss. »
We often think that greed runs the world, but Charlie Munger targeted envy as the main culprit. We may have everything, but if our neighbor or our brother-in-law has more than us, we will not be satisfied. Munger liked to say that he was successful in his life because he didn’t let envy define his career, and that he was happy to get rich in the long run and let others try to succeed. ‘get rich quickly. The happiest people don’t necessarily have everything, he said. They just appreciate what they have.
About predictions:
“People have always wanted someone to predict the future for them. Long ago, kings hired people to read the entrails of sheep. Listening to forecasters today is as crazy as when the king hired a man to read the entrails of sheep. »
Charlie Munger was not a great admirer of economic forecasts, which he rarely ventured to make. Decades spent following the markets had inoculated him against predictions of all kinds. It hasn’t served him badly: $40 invested in Berkshire Hathaway stock in the late 1970s would be worth $546,869 today.
About wars:
“Think about it. During World War II, Japan tortured our soldiers to death. They paraded them. The Germans put people in ovens. It’s just horrible. And what did we do after the war? We gave them money to rebuild. We said: ‘Let’s forget the past. » The result was a magnificent global economic system and a victory for human rights. »
The world works best when it is propelled by necessity and improvement, not by the past and recriminations.
On admitting your mistakes:
“I like it when people admit they were completely stupid. I know I will get better results if I stick to my mistakes. This is a great trick to learn. »
One of his worst business moves, he said, was investing in Chinese online retailer Alibaba, whose stock market value has collapsed 75% since its peak in 2021. , one of the investments that made him most proud was purchasing millions of dollars worth of Bank of America and Wells Fargo stock in March 2009, at the height of the financial crisis, in the investment account of a Los Angeles hospital where he was in charge of the finances. “It was a once-in-40-years opportunity,” Munger said afterward.
On opportunity costs:
“Intelligent people make decisions based on opportunity costs. »
The person who spends $980 a month to drive a car of the year is actually spending $170,000. This is the amount she would have in her investment account after 10 years if we assume annual returns of 7%. Munger doesn’t tell us what to do or what to choose. He tells us how to calculate.
On stock market falls:
“If you are not prepared to respond with equanimity to a 50% market decline two or three times a century, you do not have the skills to be a shareholder, and you deserve the mediocre results you will obtain compared to to people who have the right temperament…”
Munger is not putting on white gloves here to say that investing correctly is first and foremost a question of behavior. Stock markets around the world sometimes fall. It can not be helped. What’s the point of panicking? Humans have a hard time dealing with pain, he said. So we rush to the jar of aspirin. In investing, this hurts returns and makes us poorer in the long term. The sooner we realize this, the sooner we can let our investments work in peace. No matter what the market does.
About curiosity:
“Become a lifelong self-taught person by reading voraciously; cultivate your curiosity and strive to become a little wiser every day. »
Have a good rest, Mr. Munger.