Table Of ContentCop)ri~hr © .WO~. 2006 h) PC.\ P ublication. I.. I.. C.
\ bridged ediuon .2005. 'etond prinun_g Z006
Expanded 'econd edmon W06, o,ccond priming .2007
Expanded <hirc.l cc.lataon .WO~
Expanded rhinJ t:lhllon. \Ccond prinung 200H
E'\pandcd rhird cduiun. tlurd printan_g 2009
E,pandcd thml cdiuun. fcounh prinung .2010
Expanded rh1rd cd1t11111. fi'rh printan~ 201 I
E:>.panded third cdiuun. ,i,rh pnntmg ZOI I
.-\II righto, re,cn ed. includ1ng the n_ght ro reproduce rhis work
in an) form '' hat\OC\ er "ithuut pcrmi"ion in" riting from the
puhlio,hcr. c"u!pt for bncf J)J\\J~c' in connection" ith are' ie\\.
\ m;mpt' ha1 e been m•tdt w 1dcnt1f) the O\\ ncr\ of an)
cop1 righted materialo, appc.lrlni' 1 11th i ~ book. The editor and
publio,her e'renc.l their apulogie, fur an) error' or omio,,iom
and encourage an) cop) ril(ht m1 ncr~ inadn.:rtenrly mi.,.,cd ro
conr:tct rhem.
For information 11 rite:
The Don ning Compan) Puhli,lwr'
IH-1 Bus i ne~~ Park Dri1 c. )uitc 206
\ "irginia Beach, \'A Z.14CaZ
D" ight Tompk ino,, l'rujcu Director
Stele .\l ull. General \lanagcr
Pamela Koch, Ed1wr
Scon Rule, De,igncr
Original ilhl\lrartclll\ .1nd t'aricaturc' h1
l~d \\e,)er
Libraf" of Con_gre" Catahgln_g-m-Publu.:auon Data
Poor Charlie\ almanack: rhc \\It :tnd "''dom of Charles T
.\ Iunger I edited b' Peter D. Kaufman.
p.cm.
Include-; mdc\.
f()B'\; 1-57X6-I-.1nJ. I (nrignlJI hardcm cr: alk. paper)
ISB:\-10 1-57!!C>-I-J6()-:\ (cwandcd o,ccond edition)
IS B:-:-13 97H-1-57!!6-I-J66-0 (cwJndcd ~econd edition)
IS H '\-13 97ll-1-57!!CH-5(11-5 (c,pandcd third edition)
I.
l n~·c,un e n t,.··Dct· i , i on making. 2. ln,·e,tment, --
3. llcrk\hirc r I:HnU\\<1) lnc.--l(i,tor). 4. i\ lungcr
192-1- I. Kaufmnn, Pe[cr I). II. Tide.
IJ(;-15 1 S.!\IH6 ZOOS
332.6 '02'07 -·tlcU
For Charles T. Munger
who, in his own vvords, vvould tell you:
':Acquire worldly wisdom and adjust your behavior
accordingly. If your new behavior gives you a little
temporary unpopularity with your peer group ...
then to hell with them."
Acknowledgments
Foreword by ~Vone-n E. Buffett
Rebuttal by Charles T. Afunger
Introduction by Peter D. Kaufman
Chaprer One:
A Poruaic of Charlcs'f. r-.Iungcr ..................................................................................... 2
Praising Old . \ge: ~ I unger's Reflections on Aging ..................................................... 27
Reme mbering: The Childre n on Charlie .................................................................... 39
Chapter Two:
The ~Iunge r Approach to Life, Learning, and Decision laking .......................... 52
Chapter Three:
r-.fungerisms: Charlie Unscripted ................................................................................. 82
(Highlif(lll'ijrom reawt Rn!?shire Hathaway a11d Wes-co f<lno11ciol mmllolmeetillf(S)
Chapter Four: Ele,·cn 'falks ................................................................................................ l48
1. HarYard School Commencement Speech ............................................................ ISO
2. A Lesson on Elementary, Worldly \Visdom ........................................................ ! 64
3. A Lesson on Elementary, Worldly \Visdom, Revisited ..................................... 220
4. Practical ' I 'hought About Practical' I 'hought? ......................... 278
11. The Psychology of H uman l'VIisjudgment.. ...... 440
5. l Iarvard Law School Fiftieth Reunion Address ..................... 302
Appendixes
6. l m·estmcnt Practices of Leading Charitable Foundarions ... 322
I. Recommended Reading ~ laterial.. .............. -l-99
7. Philanthropy Roundtable .......................................................... 3-W
II. Articles, Editorials. and Opinion Pieces ..... 502
8. The Great Financial Scandal of 2003 ...................................... 356
Index ......................................................................... 522
9. Academic Economics ................................................................. 374
10. USC Gould School of La'.v Commencement Address .......... ..420
Acknovvledgtnents
T
his book is a survey of Charles T. Munger: his
approach to learning, decision making, investing,
h.
h
h' " .
"
d
IS speec es, lS Zingers, an more. T he impcrus for rhe
book came from the many people who, over the years, have said they wished one ex is red-
and have done so with ever-increasing vigor at Be rkshire and Wesco shareholder meetings, at
dinner parties, on message boards, and many other places. Hearing this clamor, you r ediror,
Pete r Kaufman, suggested co Warre n Buffcrt that a book be done and was encouraged to take
it upon himself to make it happen. What you are about co read is the result.
IllustratOr and caricature artist Ed Wexler has made caricature drawings of each comribucor
to the project and has also produced several dozen other illusu ations throughout rhe
book. We hope you enjoy all of his work as much as we do. Special recognirion i'> also d ue
Whitney Tilson, who compiled the M ungerisms section; l\Iichael Broggic, rhe author of our
biographical portrait of C harl ie; and Carol Loomis, who edited ccnain sections of the hook
(and on multiple occasions saved the editor from himself.)
The production team included, from left co right (back row), Travis Gallu p, Carl Foote,
Scott Rule, D wight Tompkins, Michael Broggie, Steve Mull, (middle row) Parne la Km:h,
Eric Hartman-Birge, Paul Hartman, Charles Be lser, Ed Wexler, (front row) Whitney T ilson,
Marcus Kaufman, Peter Kaufman, Carol Loomis, Debbie Bosanek, and Doenhc Obert.
Finally, if you e njoy reading PoorC/wrlie's tllmo11ock half as much as we e njoyed putti np; it
cogether, we will consider our efforts a distinct success. In every respect, bur partic ul a r! ~
in our interacrions with C harlie, his fami ly, and the ~ lunge rs' wide circle of friends and
associates, we have been favored with calm skies and smooch sailing in rhe production of thio;
book. We hope our efforts have prove n worthy of our subjecr, a good and admirable man.
Charles Helman Lea once said, "It will generally be admitted that the true test of all books is the influence they have
upon the lives and conduct of their readers." We hope our book passes this test, exerting a lasting influence on you.
by Warren E. Buffett
and simplicity.
Subseque ntly, two centuries went by during which Ben's thoughts on these
subjects were regarded as the last word. Then Charlie l\iJunger stepped forth.
Initially a mere disciple of Be n's, Charlie was soon breaking new ground. \\'hat
Be n had recommended, Charlie de manded. If Ben suggested saving pe nnies,
Charlie raised the stakes. Jf Ben said be prompt, Charlie said be early. Life under
Ben's rules began to look positively cushy compared with the rigor demanded by
l\Iunger.
~Joreove r, Charlie consiste ntly practiced what he preached (and, oh, hem
he preached). Ben, in his will, created two small philanthropic fu nds that" ere
designed to teach the magic of compound interest. Early on, Charlie decided
that this was a subject far coo important to be taught through some posthumous
project. Instead, he opted to become a living lesson in compounding, eschevving
fri,·olous (defined as "any") expenditures that might sap the power of his example.
Comequenrly, the tnernbers of Charlie's family learned the joys of extended bus
trips" hile their" cal thy friends, imprisoned in pri,·are jets, mis~ed these enriching
expcrtcnces.
In certain areas, IH>\\·e,·er, Charlie has nor sought to impro,·e on Ben's thinking.
For example, Ben' "Ad' icc on the Choice of a ~ l iscress" essay has left Charlie in the
•·J ha\ e nothing ro add" mode that is his trademark at Berkshire annual meetings.
There was only one
partner who fit my
bill of particulars
in every way-Charlie.
"A partner who is not subservient, who
is himself extremely logical, is one of
the best mechanisms you can have."
-Buffett
As for myself, I'd like to offer some "Advice on the Choice of a
Partner." Pay attention.
Look first for someone both smarter and wiser than you are.
After locating him (or her), ask him not to flaunt his superiority so
that you may enjoy acclaim for the many accomplishments that
sprang from his thoughts and advice. Seek a partner who will never
second-guess you nor sulk when you make expensive mistakes.
Look also for a generous soul who will put up his own money and
work for peanuts. Finally, join with someone who will constantly
add to the fun as you travel a long road together.
All of the above is splendid advice. (I've never scored less than
an A in self-graded exams.) In fact, it's so splendid that I set out in
1959 to follow it slavishly. And there was only one partner who fit
my bill of particulars in every way-Charlie.
In Ben's famous essay, he says that only an older mistress makes
sense, and he goes on to give eight very good reasons as to why this
is so. I lis clincher: " ... and, lastly, they arc so grateful."
Charlie and I have now been partners for forty-five years. I'm
not sure whether he had seven other reasons for selecting me. But I
definitely meet Ben's eighth criterion. I couldn't be more grateful.
Rebuttal
Munger on Buffett
I
think there's some mythology in the idea
that I've been this great enlightener of
Warren. He hasn't needed much enlightenment. I frankly
think I get more credit than I deserve. It is rrue that Warren had a
touch of brain block from working under Ben Graham and making
a ton of money. It's hard w switch from something that's worked
so well. But if Charlie M unger had never lived, the Buffett record
would still be pretty much what it is.
It's hard tO believe that he's getting better with each passing
year. It won't go on forever, but Warren is actually improving.
It's remarkable: Most men in their seventies arc not improving,
but Warren is. Berkshire is drowning in money- we have great
businesses pounding out money. When ·w arren is gone, the
acquisition side of Berkshire will not do as well, but the rest will do
well. And the acquisition side will do just fine.
I think the top guy won't be as smart as Warren. But it's silly to
complain, "What kind of world is this that gives me Warren Buffett
for forty years and then some bastard comes along who's worse?"
Introduction
by Peter D. Kauftnan
Y
ou are about to embark on an extraordinary
journey toward better investing and decision
making. You may also arrive at a better understanding of life as
well, all thanks to the wit, wisdom, speeches, and writings of Charlie Munger-this
generation's answer to Benjamin Franklin. Charlie's unique worldview, what he
calls his "multidisciplinary" approach, is a self-developed model for clear and simple
thinking-yet his concepts and models are anything but simplistic. Notice how well
Charlie's thinking stands the test of time: The earliest talk in this collection is almost
twenty years old, yet it is as relevant today as the day he first delivered it. As you
will soon discover, Charlie's observations and conclusions are based on fundamental
human nature, basic truths, and core principles from a wide range of disciplines.
L·O·L·L·A·P·A·L·O·O·Z·A
lof.lapa•loo•za [ ,lala-pu-'lii-za J 11. slang: 1. Somethiug outstanding of its kind. 2. As personified by Charles Munger, the
critical mass obtained via a combi1ratiqn of conceutratiou, curiosity, pe1-severance, a11d self-criticism, applied through a prism
ojmultidiscipli11ary mental models.
Throughout the book, Charlie reveals his intellect, wit, values, and no end of
rherorical flair. His encyclopedic knowledge allows him to cite references from
classical orators to eighteenth- and nineteenth-century European literati to pop
culture icons of the moment. Where else would you find Ocmosthenes and Cicero
juxtaposed against Johnny Carson or today's investment managers set against
Nietzsche, Galilee, and a "one-legged man in an ass-kicking contest"? Or how about
Ben Franklin versus Bernie Cornfeld in a battle of worldly wisdom? Using self-
deprecation and imagination to great effect, Charlie cheerfully compares himself to a
counting horse, proposes "Glatz's sugared, caffeinated water" as a marketing-bereft
label for Coca-Cola, and attests, "At least when I was young I wasn't a total klutz."
\
In one talk (Practical Thought About Practical Thought?), Charlie even takes on the
challenge of building, from scratch, a two-trillion-dollar business, and then walks us
through his diverse mental models ro accomplish that mighty feat.
\
J
The quotes, talks, and speeches presented here
arc rooted in the old-fashioned Midwestern values for
which Charlie has become known: lifelong learning,
intellectual curiosity, sobriety, avoidance of envy and
resentment, reliability, learning from the mistakes of
others, perseverance, objectivity, willingness to test
one's own beliefs, and many more. But his advice
comes not in the form of stentorian admonishments;
instead, Charlie uses humor, inversions (following the
directive of the great algebraist, Jacobi, to " Invert,
always invert"), and paradox to provide sage counsel
about life's roughest challenges.
Charlie also employs historical and business
case studies to great effect. In these presentations,
he makes his points with subtlety and texture,
often using a story-like context instead of abstract
statements of theory. He regales his audience with
humorous anecdotes and poignant tales, rather than
with a blizzard of facts and figures. He well knows,
and wisely exploits, the traditional role of the storyteller as purveyor of complex
and detailed information. As a result. his lessons hang together in a coherent
"latticework" of knowledge, available for recall and use when needed.
lt is clear throughout these talks and speeches that Charlie places a premium
on life decisions over investment decisions. His mental models, drawn from every
discipline imaginable, recur repeatedly and, in no way, focus on "business portfolio
strategy" or "beta" or "Cap ~1." Rather, they center on fundamental rrurh, human
accomplishment, human foibles, and the arduous path to wisdom. Charlie once said,
"I wanted to get rich so I could be independent, like Lord j ohn l'vlaynard Keynes."
Independence is the end that wealth serves for Charlie, not the other way around.
About the Book:
\\'e open with a "portrait" biography that chronicles Charlie's progress from a modest
Omaha childhood ro prodigious financial success. :'\e\\' to the second edition, Charlie
tiH.:n offers us his reflections on aging, inspired b~ Cicero's Disro11rse of Old Age. :\ext. we
~ummarize the :\Iunger approach to life. learning, decision making, and im·esting. T his
section details both Charlie's uncon\'entional way of thinking and his extraordinary work
cthic-the twin fonts of his anwzing success. Our "i\lungerisms: Charlie Unscripted"
section presents i.l col lection of the trenchant remarks he has made at past Berkshire
llathaway and \\'c~co Financial annual meetings.
In the balance of the book, Charlie speaks to his audience ,·ia 'ipeeches and talks
he ga\ cover a t\\'CIHy-year period. In this expanded third edition of the book, we have
added a nc\\· talk Charl ie deli,·ered at the USC Gould School of Law Commencement
on i\ lay 13th, 2007. So the original "rlcn Talks" ha,·e grown co become a not-so-round
"Eic,·en Talks.'' These speeche~ and addresses co,·cr a wide spectrum of Charlie's
interests, ranging from how one acquires ,,·orldly wisdom, to ho\\ his "l\lultiple ;\lcntal
l\ lodcls" can be applied w business, w how the investment strategies used by
charitable foundations can be im proved. The clcn.:nrh talk is a spccial rendition
of "The Psychology of Iluman lisjudgment" that Charlie created especially
for this book. Each talk is well \\Orth your timc nor only for the enjoyment it
"ill pro\'ide you, bm also for what you can absorb from the rich a. sorrment
of ideas and practices that Charlie..: relics on. You'' ill probably never find a
better opportuni ty to learn from someone so srn<.~rr-and so forrhri ,ghr. In his
talks, Charlic sim ply opens up and tells it like it is. A special notc: Cha rlie's
redundancy in c:-..prcssions and c-..;amples i'i purpo~cful: for rhc J..iud or deep
"fluency" hc adnx:arc::., he kno\\·s that repetition is the heart of in-.rruction.
A word about the style and layout of the book: Charli<..: is cnormously curious
about nearly C\'crything he bumps into in life. Accordingly, as wc ourselves bumped into
pcople, places, and subjects mcntioned by Charlic in his talks, we supplemcnted his text
with related information. photographs, and other graphics. The '\idcbars" peppered
throughout the talks, for example, sen·e to explain concepts, add a '>upporring ,·oice, or
emphasize an imporranr ~Iunger idea. We hope these sidebars will not on ly inform, but
also amuse and even encourage you to further pursuc these subjccrs on your own.
I \\'ish you good reading and an appreciation of the brightness and dry humor that
those of us who know Charlie ~ J unger ha,·e comc ro treasure and expect from him.
"If you skillfully follow the
mulridisciplinary path, you
will never wish to come bac..k.
It would be like cutting off
your hands."
