Learning to Change Your Previous Conclusions Is a Key

Learning to Change Your Previous Conclusions Is a Key

He seemed to have a tremendous faith in himself to prove that study and the search for wisdom could be fun. Enjoying his lifestyle, collecting mental models all-around of many disciplines, Charlie likes to play bridge. A self-taught person, he collects and has cultivated a taste for books. He is not focused on certain decisions or standards of thinking. He has repeated many times “both Warren and I are very good at changing our prior conclusions. We work at developing that facility because without it, disaster often comes.” This creation of culture for reality recognition is a characteristic of Charlie, but you have to remain very strange to understand that, to change your point of view on any issues, and to confirm that your previous conclusions were incorrect. As opposed to denying the new facts and information, he tries to be objective as much as he can.

Charlie understands that a lot of faults and mistakes are coming from psychology. Charlie: “When people get bad news, they hate the messenger.” Faults and massive mistakes happen if people ignore the psychology. At the same time, Charlie likes some rules being called “no-fault rules clxxiii.”

Charlie: “I like the Navy system. If you’re a captain in the Navy, and you’ve up for twenty-four hours straight and have to go to sleep, and you turn the ship over to a competent first mate in tough conditions, and he takes the ship aground—clearly through no fault of yours—they don’t court martial you, but your naval career is over.

“You can say, ‘That’s too tough. That is not law school. That’s not due process.’ Well, the navy model is better in its context than would be the law school model. The navy model really forces people to pay attention when conditions are tough—because they know that there is no excuse.

“It does not matter why your ship goes aground. Nobody is interested in your fault. It is just a rule that we happen to have—for the good of all, all effects considered. I like some rules like that. I think that the civilization works better with some of these no-fault rules. But that stuff tends to be anathema around law schools. ‘It’s not due process. You’re not really searching for justice.’ Well, I am searching for justice when I argue for the Navy rule—for the justice of fewer ships going aground. Considering the net benefit, I don’t care if one captain has some unfairness in his life. After all, it is not like he is being court marshaled. He just has to look for a new line of work. And he keeps vested pension rights and so on. So it is not like it is the end of the world. So I like things like that. However, I’m in a minority clxxiv.”

Rational Charlie is self-minded; he is usually sizing up the world skeptically. He is a tall man; Charlie could speak hours long on his favorite subjects. Both an energetic and very silent partner, he is very colorful both in his action as a silent advisory to Buffett and in his speech, with a clear way of thinking. He has an unusual way of behaving compared with money managers on Wall Street: no emails and phone calls, no special wishes in organizing meetings, and no obsession for beating the market. Quietly sitting in his room reading and thinking is his way of life. By organizing his life to tune out distractions and make fewer decisions, Charlie is focused on making more quality decisions and avoiding rapid solutions on everything. How could it be different? Ruling with principle first while being able to play tomorrow? Berkshire Hathaway has cash reserves that could have been spent during the bottom of a panic market.

Charlie Munger, being a vice chairman of Berkshire Hathaway, runs a company called the Daily Journal Corporation (DJCO). This California publisher more than tripled its value since the financial crisis of 2008. Charlie is well known for his colorful and very controversial comments, not just on Buffett and Berkshire, but also on the world’s mistakes in both economic and financial matters.

I like that definition of Berkshire Charlie answered to Ms. Loomis from Ms. Loomis of Fortune asked a question on behalf of a shareholder in the audience: “How would you explain Berkshire and its value premise to the investor’s thirteen-year-old daughter?”

Mr. Munger took his first crack: “We like to stay sane while others go crazy. That is competitive advantage.” He also noted that the company tries to be a good steward to its subsidiaries and a good partner.

“This was a very good idea,” he said drolly. “I wish we’d done it on purpose clxxv.”

Charlie combined the right ethics and morals with intelligence and great intellect. Charlie was definitely born skeptical, so it’s no wonder he sees the world through his own prism, with all of the mistakes and frauds, but at the same time he likes to be surrounded with people and friends who are sincere to him and others.

Knowing the most typical important mistakes and misjudgments in life and value investing, he immediately understands what a person has to say about him, if one is jealous or envious. Mostly people just want to know how to become rich and how to make it very fast without time and persistence.

Reporter: “What do you think is the least talked about or most misunderstood moat around the business?”

Mr. Munger: “Everybody would really like to have a misunderstood moat. You’re the greediest fellow that’s spoken. All you want to know is if I have a moat that you can understand that other people don’t. Have a modest wish. You are going to ask an ninety-one-year old man how to do it? Reminds me of one of my favorite stories. A young man comes to Mozart and says, ‘With your help I want to compose symphonies.’ He says, ‘Look, you were doing symphonies when you were ten years of age. I’m twenty-one.’ Mozart says, ‘Yes, but I wasn’t running around asking other people how to do it clxxvi.’” This is very Charlie.