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There is one phone call that changed the entire trajectory of my life. One conversation that transformed how I think about investing, about business, about wealth creation itself. And if I had not picked up that phone, if I had
Warren Buffett reveals how a phone call from Charlie Munger transformed his investing philosophy and led to his extraordinary success.
Key Takeaways
- Investing in great businesses with durable moats is superior to buying cheap, mediocre companies.
- Intangible assets like brand loyalty and customer trust can be more valuable than book assets.
- Long-term compounding and rational capital allocation drive superior investment returns.
- A multidisciplinary approach using diverse mental models improves investment decision-making.
- Changing one’s mindset and embracing new ideas is crucial for evolving as an investor.
What the video covers
- Warren Buffett recounts a pivotal phone call from Charlie Munger that changed his entire approach to investing and wealth creation.
- Buffett initially followed Benjamin Graham's value investing method focused on buying undervalued 'cigar butt' stocks.
- He explains the limitations of Graham's approach, especially as his capital grew and the strategy required constant trading.
- Buffett describes meeting Charlie Munger in 1959 and how Munger introduced him to broader mental models beyond just numbers.
- The turning point came with the acquisition of See's Candies, which challenged Buffett's traditional valuation metrics.
- Charlie Munger emphasized the value of intangible assets like brand loyalty, pricing power, and customer emotional connection.
- Buffett shifted to investing in high-quality businesses with durable economic moats that compound value over time.
- He highlights the importance of rational capital allocation, shareholder partnership, and thinking about risks as well as rewards.
- Buffett credits Munger's wisdom for helping him evolve from a good investor to a legendary one with a long-term mindset.
- The video concludes with Buffett encouraging viewers to apply these principles to transform their own financial futures.
Chapters
- 00:00The Life-Changing Phone Call
- 01:29Early Investing Lessons and Graham's Approach
- 02:58Limitations of Cigar Butt Investing
- 04:33Meeting Charlie Munger
- 05:56Years of Debate and Influence
- 07:13The See's Candies Acquisition
- 08:25Understanding Intangible Assets and Brand Value
- 11:08Shifting to Quality Businesses with Moats
- 12:20Capital Allocation and Long-Term Compounding
- 18:31Legacy of Charlie Munger’s Wisdom
Full Transcript — Download SRT & Markdown
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dismissed what I heard, I would not be sitting here today with the success I have achieved. I would probably still be doing what I was doing before, making decent money.
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Sure, but missing the bigger picture entirely. The man on the other end of that phone was Charlie Munger.
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And what he told me that day went against everything I thought I knew about investing.
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It challenged the very foundation of how I had built my career up to that point.
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And at first, I did not want to hear it. I resisted. I argued. I thought he was wrong, but Charlie had a way of being right about things that mattered. And eventually, I had to admit that he was right about this, too. That
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phone call did not just change my investment strategy. It changed my entire philosophy. It took me from being a good investor to becoming something more.
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And today, I am going to tell you exactly what Charlie said, why it was so revolutionary, and how you can apply the same wisdom to transform your own financial future. But first, let me take you back to who I was before
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that conversation. Because you need to understand where I was coming from to appreciate how much everything changed. It was the late 1960s, and I had been investing for over two decades at that point.
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I had started buying stocks when I was 11 years old. Back in 1942, I remember that first purchase like it was yesterday. My sister Doris and I pooled our savings and bought three shares of Cities Service preferred at $38.25
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per share. The stock promptly dropped to $27. And Doris let me know every single day how unhappy she was. When it recovered to $40, I sold and took my profit.
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I was so relieved. Then I watched it climb to $200 per share over the next few years.
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That early lesson taught me something about patience. But I had not yet learned the deeper lesson about quality.
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I had studied under Benjamin Graham at Columbia, learned his methods inside and out, and built my entire approach around what Graham taught.
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Graham was brilliant. He literally wrote the book on security analysis. He developed a systematic approach to investing that took it from gambling to something more scientific.
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And Graham's approach was simple. You find stocks trading below their liquidation value. You buy them cheap.
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You wait for the market to recognize the value. You sell. You repeat. Graham called these cigar butt investments. The idea was that you could find a discarded cigar on the street with one puff left in it.
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It was free. And that one puff was all profit. You were not looking for great businesses.
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You were looking for statistical bargains. Companies trading below their net current asset value. Companies where the stock price was lower than the cash on the books minus all the liabilities.
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It did not matter if the business was mediocre or even declining. As long as you paid less than the assets were worth, you would make money when the gap closed.
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And you know what? It worked. I made very good returns using Graham's methods. My partnership was compounding at over 20% per year.
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I was becoming wealthy. I was gaining a reputation as a skilled investor. I thought I had figured it out. I thought I had found the formula that would carry me through my entire career.
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I was proud of my discipline, proud of my analytical rigor, proud of my ability to find bargains that others missed.
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But there was a problem I did not fully appreciate at the time. The strategy worked, but it had limits.
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It required constant activity. You had to keep finding new cigar butts because the old ones burned out quickly.
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The businesses were mediocre by design, so they did not compound on their own. You made money on the initial arbitrage, but then you had to go hunting again. It was like being on a treadmill. You could never stop running. And as my capital
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base grew, the strategy became harder and harder to execute. There are only so many cigar butts lying around. And when you have hundreds of millions of dollars to invest, buying tiny positions in obscure undervalued companies does not move the
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needle anymore. I had met Charlie Munger several years before that pivotal phone call. We were introduced by mutual friends at a dinner in 1959.
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The introduction was casual. Someone said, "You two should meet. You think alike about a lot of things." I was skeptical.
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I thought I had a fairly unique way of looking at investments, but within minutes of our first conversation, I knew this was someone special.
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Charlie was a lawyer in Los Angeles at the time, but he had a brilliant mind for business and investing.
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More than that, he had a way of cutting through complexity to get at the essential truth of a situation.
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We hit it off immediately. We would talk for hours about companies, about valuation, about life.
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Charlie was different from anyone I had met in the investment world. He read voraciously across every discipline: history, psychology, physics, biology, mathematics. He believed that understanding the world broadly made you a better investor.
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He called it a latticework of mental models at the time. I thought it was interesting, but not essential.
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I was focused on the numbers. Graham had taught me that the numbers were what mattered. Qualitative factors were fuzzy and unreliable. Charlie was planting seeds in my mind, but they had not sprouted yet.
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Over the years between our first meeting and that pivotal phone call, Charlie and I stayed in close contact.
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We talked regularly, shared investment ideas, and debated constantly. Charlie would push back on me in ways that no one else did.
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He would challenge my assumptions, question my conclusions, and force me to defend my positions.
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Most of the time, I held firm. I was confident in Graham's methods. They had worked for me for years. Why would I change?
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But Charlie kept chipping away. He would point out the limitations of cigar butt investing. He would ask me why I was spending so much time on mediocre businesses just because they were cheap.
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He would suggest that I was leaving a lot of money on the table by ignoring great businesses that traded at fair prices.
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Then came See's Candies. This was 1972. Charlie and I had an opportunity to buy See's Candies, a California chocolate company, for $25 million.
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Now, by Graham's standards, this was a terrible investment. See's had about $8 million in tangible assets.
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We were being asked to pay three times book value. Graham would have walked away immediately. You never pay three times book value.
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That is speculation, not investing. I was hesitant. Everything I had learned told me this was too expensive.
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We were paying a huge premium to asset value. There was no margin of safety in the traditional sense.
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But Charlie saw something I almost missed. He called me and said something I will never forget. He said, "Warren, you are thinking about this wrong. You are looking at the assets on the balance sheet.
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But the real asset is not on any balance sheet. It is in the minds of the customers.
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See's has something that cannot be replicated. It has a brand that people love. It has pricing power. It has customer loyalty that has been built over decades.
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You could not recreate what See's has for $100 million. And here we can buy it for $25 million.
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The assets you see on the balance sheet, the equipment, the inventory, the buildings, those are not what makes See's valuable.
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What makes See's valuable is that when a man wants to impress his wife on Valentine's Day, he brings home a box of See's candies. And the wife knows what that box represents.
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She knows the quality, the tradition, the love that goes into it. That emotional connection is worth more than all the factories in the world.
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I pushed back. I said, "Charlie, the book value is $8 million. We would be paying a huge premium.
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What if we a
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What if competition comes in and undercuts us on price?" And Charlie said something that crystallized everything.
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He said, "Warren, a great business at a fair price is far better than a fair business at a great price. You've been hunting for cigar butts your whole career.
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One more puff and they are done. But a great business keeps generating value year after year. It compounds. The longer you hold it, the more wealth it creates.
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Stop thinking about assets. Start thinking about earning power. Stop thinking about what you could get if you liquidated the business. Start thinking about what you will earn by owning it for the next 20 or 30 years." That hit me like a thunderbolt.
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I had spent my entire career focused on assets, on book value, on liquidation value. Charlie was telling me to focus on something completely different.
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Not what a company owns, but what it earns. Not the past, but the future.
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Not the balance sheet, but the income statement. Not the tangible, but the intangible. It was a complete inversion of everything I had learned from Graham.
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And at first, I resisted it. My whole identity as an investor was built around Graham's principles.
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Admitting that there might be a better way felt like betraying my mentor, betraying the methods that had made me successful.
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But I could not stop thinking about what Charlie said. I ran the numbers on See's Candies again and again.
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The company was earning about $2 million per year in pre-tax profits. At $25 million, we were paying about 12 and 1/2 times earnings. That was not cheap by Graham's standards.
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But it was not crazy, either. And Charlie was right that the business had remarkable characteristics.
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See's had been raising prices every year without losing customers. People were loyal. They came back again and again. The product did not require constant reinvention. The capital requirements were minimal. Most of the profits were free cash that could be
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taken out of the business and deployed elsewhere. We bought See's Candies. And you know what happened? It turned out to be one of the best investments we ever made.
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We paid $25 million for it in 1972. Since then, See's has generated over $2 billion in pre-tax earnings for us. $2 billion from a $25 million investment.
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And we still own it. It is still generating profits. The returns have been astronomical.
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And we did not have to do anything. We did not have to find new cigar butts. We did not have to constantly trade in and out. We just held a great business and let it compound every year.
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See's raised its prices every year. Customers kept buying every year. The profits flowed in.
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The formula was simple and it worked decade after decade. But here's what most people do not understand. See's Candies itself was important, but it was not the main lesson. The main lesson was the shift in thinking that See's
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represented. After See's, I started looking at every investment differently. I stopped asking what are the assets worth and started asking what is the earning power worth.
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I stopped looking for cheap prices and started looking for great businesses. I stopped thinking about liquidation value and started thinking about franchise value. That shift, that evolution in thinking is what led me to make the investments that really built
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my wealth. It led me to Coca-Cola. It led me to American Express. It led me to Apple.
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Without Charlie's phone call, without that mental shift, I might never have bought any of those companies. They all traded at premiums to book value.
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Graham would have rejected them all. But they were great businesses with durable competitive advantages, and holding them for decades has generated returns that cigar-butt investing could never have matched.
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Let me tell you specifically what Charlie helped me understand about great businesses. Because this is the core of what changed.
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A great business has what I call an economic moat. It has something that protects it from competition, that allows it to earn superior returns on capital year after year. That moat might be a brand, like See's Candies or Coca-Cola.
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When people think of cola, they think of Coca-Cola. When people want chocolate for a special occasion, they reach for See's.
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That association lives in their minds and cannot be easily displaced. The moat might be a network effect, like American Express or Visa. The more merchants accept the card, the more valuable it is to consumers.
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The more consumers use the card, the more valuable it is to merchants. This creates a self-reinforcing cycle that is almost impossible for competitors to break.
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The moat might be switching costs like enterprise software companies. Once a business has invested in implementing a system, trained all their employees, and integrated with their other processes, they are extremely reluctant to switch.
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The pain of changing is so high that customers stay even when competitors offer better prices.
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The moat might be cost advantages from scale. A company that produces millions of units can spread its fixed costs more widely than a competitor producing thousands.
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This allows them to offer lower prices while still earning healthy margins, making it nearly impossible for smaller players to compete.
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Whatever the source, the moat protects the business from having its profits competed away. This is the key insight. In a capitalist economy, profits attract competition.
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When a business earns high returns, other entrepreneurs see those returns and try to enter the market.
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They undercut prices. They copy the product. They try to steal customers. Over time, competition erodes the profits until the returns are no better than average. This is how capitalism is supposed to work.
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But businesses with moats are different. The moat prevents competition from entering. The brand cannot be copied. The network effects cannot be replicated overnight.
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The switching costs protect the customer base. The scale advantages create barriers that smaller players cannot overcome.
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So, the profits persist year after year, decade after decade. Businesses without moats might earn good returns for a year or two, but eventually competition catches up.
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New entrants see the profits and pile in. Prices get cut. Margins compress. The good returns disappear. That is why cigar-butt businesses never compound.
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They do not have moats. Any profits they generate attract competition that erases those profits.
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You get one puff from the cigar and then it is gone, but a business with a moat can sustain high returns on capital for decades.
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And when you combine high returns on capital with reinvestment opportunities, you get compounding. The business earns a high return, reinvests those earnings at similarly high returns, and the whole thing snowballs. Einstein supposedly said that compound interest is the eighth wonder of the world.
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Whether he actually said it or not, the principle is true. And Charlie helped me understand that the way to really harness compound interest is to own great businesses that can compound their earnings over long periods of time, not to trade in and out
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of statistical bargains, not to chase the next cigar butt, but to find wonderful companies and hold them essentially forever. Charlie also taught me something crucial about management.
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Graham did not care much about management. In his framework, you were buying assets at a discount.
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So, the quality of management was almost irrelevant. As long as they did not steal the furniture, you would be fine.
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The margin of safety was in the assets, not in the people. But when you are buying earning power instead of assets, management matters enormously.
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The people running the business will determine whether that earning power is maintained, grown, or destroyed.
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A great business with poor management will deteriorate over time. The moat will erode. The competitive advantages will be squandered.
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The profits will disappear. But a great business with excellent management will thrive. The moat will be reinforced.
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New opportunities will be found. Capital will be allocated wisely. Shareholders will be treated as partners. Charlie drilled into me that you want a partner with managers who are honest, competent, and think like owners.
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You want people who allocate capital rationally, who do not waste money on empire building or foolish acquisitions, who treat shareholders as partners rather than marks.
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You want managers who are candid about problems, who admit mistakes, who set realistic expectations.
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You want people you would want running the business if you could not check on them for 10 years.
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Over the years, this insight has been just as valuable as the insight about moats. Some of our best investments have been in companies with exceptional management, and some of our biggest mistakes have come from misjudging the people in charge.
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There's another thing Charlie said during our conversations around that time that has stuck with me for 50 years.
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He said, "Warren, the goal is not to be the smartest person in the room.
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The goal is to be consistently not stupid. Avoiding big mistakes is more important than finding big winners. If you can just avoid the disasters, the good decisions will compound on their own." That sounds simple, but it is profound.
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Most investors spend their time trying to find the next great stock, the next 10 bagger.
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But the math of compounding is asymmetric. If you lose 50%, you need to gain 100% just to get back to even. Big losses destroy the compounding process.
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They set you back years. So, Charlie taught me to think just as much about what could go wrong as about what could go right.
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To invert the problem, instead of asking how do I make money, ask how might I lose money, and then avoid those situations.
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This principle of inversion has been invaluable before I make any investment. I ask myself what could go wrong. What if the economy enters a recession?
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What if a new emerges? What if technology disrupts the industry? What if management makes a major mistake? What if interest rates spike? I think through all the ways I could lose money.
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And if the downside scenarios are too severe, I pass on the investment, no matter how attractive the upside looks.
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This has kept me out of many disasters over the years. It has also caused me to miss some winners.
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But on balance, avoiding the losers has been more valuable than catching every winner. The math just works that way.
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This brings me to another crucial lesson from that era of my partnership with Charlie. We both came to understand that there is a huge difference between a business that grows and a business that requires constant capital to grow. Some
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businesses grow, but consume every dollar of profit in the process. They need new factories, new equipment, new inventory. They grow revenues and earnings, but never generate free cash.
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Those are not great businesses for shareholders. An airline might grow traffic every year, but it has to keep buying expensive planes.
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A retailer might grow same-store sales, but it has to keep investing in inventory and store upgrades.
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The growth is real, but the cash never materializes. The great businesses are the ones that grow without requiring much additional capital. They generate excess cash that can be returned to shareholders or reinvested in new opportunities.
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See's Candies is the perfect example. It did not require much capital to grow. We did not need to build new factories or invest heavily in equipment.
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The earnings were truly free cash that we could deploy elsewhere. Every year, See's sent us millions of dollars that we could use to buy other businesses, other stocks, other opportunities. The business was essentially a cash machine that funded
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our other investments. Let me tell you about how this thinking led to some of our biggest investments in 1988.
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I started buying shares of Coca-Cola. By Graham standards, Coca-Cola was expensive. It was trading at 15 times earnings, well above the market average.
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The price to book ratio was high. There was no margin of safety in the traditional sense.
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If you looked at the balance sheet, there was nothing there that justified the price.
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But Charlie's framework revealed something different. Coca-Cola had the strongest brand in the world. It had distribution that reached virtually every country on Earth.
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The sun never set on the Coca-Cola empire. It had pricing power, the ability to raise prices faster than inflation.
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It had a product that people loved and that did not require constant capital investment to produce.
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It was a compounding machine. The more I studied Coca-Cola, the more I saw exactly what Charlie had taught me to see.
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The moat was enormous. The brand was unassailable. The customer loyalty was unmatched. The business model was elegant in its simplicity.
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Make concentrate, sell it to bottlers, let them do the capital-intensive work of bottling and distribution.
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The returns on capital were extraordinary. And the growth runway was massive. Billions of people around the world were just beginning to experience the economic development that would let them afford consumer products like Coca-Cola.
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Invested over a billion dollars in Coca-Cola at the time. It was one of the largest investments I had ever made.
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People thought I was crazy. They pointed to the high price to earnings ratio. They said I was abandoning the value principles that had made me successful.
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They did not understand that I was applying value principles just a more sophisticated version of them.
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And the returns have been extraordinary. The dividend alone now exceeds our original investment every couple of years.
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The total return has been many multiples of what we put in. And we still hold every share.
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I have no intention of selling. This investment would not have happened without Charlie's influence.
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Graham would have told me to find something cheaper. Charlie told me to find something better. The same logic led us to American Express after a scandal in the 1960s temporarily depressed the stock.
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We bought a large position. The company had an incredible franchise, the ability to charge merchants for the privilege of accepting their card plus annual fees from card holders, plus interest on balances. It was a toll booth on consumer spending.
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Every time someone swiped an American Express card, the company earned a fee every year.
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Card holders paid to renew their membership. The brand was so strong that people paid extra to carry the card.
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They were proud to have it in their wallet. Competition could not easily replicate those advantages.
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We still own American Express today. Over 50 years later, the position has compounded beyond what anyone might have imagined.
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And of course, there is Apple. I resisted technology for most of my career. I did not understand it.
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I could not predict which companies would win. The industry changed too fast. Today's leader became tomorrow's footnote.
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I watched great technology companies rise and fall. I saw IBM lose its dominance. I saw Microsoft get challenged. I saw Nokia go from industry leader to irrelevant.
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The technology industry seemed too unpredictable for me. But when I studied Apple, I realized it was not really a technology company in the way I had thought about technology companies.
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It was a consumer products company with the most loyal customers in the world. The iPhone was not just a phone.
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It was an ecosystem that people could not leave. The switching costs were enormous. If you had all your photos on iCloud, all your apps purchased through the App Store, all your music on Apple Music, all your devices synced through your
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Apple ID, you were not going anywhere. The brand was beloved. People did not just like their iPhones, they loved them. They identified with them. They lined up overnight to get the newest model. Charlie would have recognized immediately that this was a franchise,
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not just a gadget maker. The moat was customer loyalty and ecosystem lock. And the management was exceptional.
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The capital allocation was brilliant, with massive share buybacks that increased our ownership percentage every year without us doing anything.
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We invested heavily in Apple, and it became our largest position. The returns have been phenomenal.
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Apple alone has generated more profit for us than most entire investment careers. All of these investments share the same DNA. They are great businesses with durable competitive advantages, run by capable management, generating returns that compound over time. None of them
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would have passed Graham's strict value criteria. All of them have generated wealth that cigar-butt investing could never have matched.
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That is the lesson of Charlie's phone call. That is the transformation in thinking that changed everything.
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Now, I want to be clear about something. I am not saying Graham was wrong.
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Graham's methods work. They kept me from losing money when I was young and did not know much.
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The discipline of demanding a margin of safety, of refusing to overpay, of thinking independently, those principles are timeless.
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What Charlie helped me see was that Graham's methods were incomplete. They were designed for a different era when information was scarce and markets were less efficient at pricing assets.
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In that environment, you could find companies trading below liquidation value all the time. But as markets became more efficient, those opportunities became rare.
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And even when you found them, the returns were limited by the mediocrity of the businesses themselves.
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Charlie expanded my framework. He did not replace Graham. He built on Graham's foundation. He kept the discipline and the rationality.
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But he added a new dimension, quality. The quality of the business matters as much as the price you pay.
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In fact, over long holding periods, the quality matters more. If you buy a great business and hold it for 20 years, the compounding of returns will overwhelm almost any reasonable price you paid at the beginning.
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But if you buy a mediocre business, no matter how cheap, you will be stuck with mediocre returns.
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Charlie passed away recently, and there is not a day that goes by when I do not think about him.
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Our partnership lasted over 60 years. We talked almost every day. We made decisions together. We laughed together. We disagreed and debated and eventually reached conclusions together.
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He was more than a business partner. He was my closest friend. That phone call back in the early '70s was just the beginning of a conversation that lasted a lifetime.
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And even though Charlie is gone, his wisdom lives on in how I think, how I invest, how I live.
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He changed my life with one simple insight. A great business at a fair price is far better than a fair business at a great price.
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Everything else flowed from that. Every great investment, every dollar of wealth created, every lesson I have to share with you today, it all traces back to that phone call, that moment when my old friend challenged everything I thought I knew
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and made me see the world in a new way. Let me tell you what else I learned from Charlie over our decades together. He taught me that the best investment you can make is in yourself. Read constantly. Think deeply. Develop mental
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models across multiple disciplines. The more you understand about how the world works, the better your decisions will be.
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Charlie read more than anyone I have ever known. History, biography, science, psychology. He was always connecting ideas from different fields. He would use physics to understand business or psychology to understand market behavior.
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This cross-disciplinary thinking gave him insights that specialists missed. I adopted the same approach. I read five or six hours a day, every day.
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Annual reports, newspapers, books, magazines, anything that helps me understand businesses and the world. This habit has been more valuable than any single investment.
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The knowledge compounds just like money does. Charlie also taught me about patience, real patience.
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Not the kind where you are anxiously checking stock prices every in the buying and selling, but in the waiting.
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Most investors are too active. They trade too much. They get bored and do something just to feel like they are making in But activity is the enemy of returns.
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Every transaction has costs, taxes, and the risk of making a mistake. The best strategy is to find great businesses and then do nothing. Just hold them, let them compound.
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Resist the urge to tinker. This is harder than it sounds. When the market drops, you want to sell.
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When a stock is up big, you want to take profits. When you hear about a hot new investment, you want to chase it.
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Charlie taught me to resist all of these impulses. Sit on your hands, do nothing.
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Let time work for you. The hardest thing in investing is often doing nothing at all. There is one more lesson from Charlie that I want to share. And it might be the most important of all.
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Charlie taught me that integrity matters in business, in investing, in life. He would say that you should never do business with someone you do not trust, no matter how good the deal looks.
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If you lie down with dogs, you get up with fleas. Over the decades, I have turned down many opportunities that looked attractive on paper because I did not trust the people involved. That has saved me from countless disasters.
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The numbers can always be manipulated. The projections can always be made to look good, but character reveals itself over time.
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Work with people of integrity and good things happen. Work with people who cut corners and eventually you get burned. Charlie lived by this principle his entire life.
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He was the most honest, direct person I ever knew. He would tell you exactly what he thought, even if you did not want to hear it.
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That honesty made him an invaluable partner. I always knew where I stood with Charlie. I always knew I could trust his judgment. That trust is irreplaceable.
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Now, let me bring this back to you because everything I have shared today has practical applications for anyone trying to build wealth.
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The core lesson from Charlie's phone call is this. Stop looking for cheap prices and start looking for great businesses. Do not buy mediocre companies just because they are trading at low multiples. Find businesses with real competitive advantages, advantages that will persist
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for decades, and pay a fair price for them. You do not need to find hundreds of investments.
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You need to find a few great ones and hold them for a long time.
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Quality beats quantity every time. Second, understand the power of compounding. Compounding works best when it is uninterrupted.
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Every time you sell an investment and pay taxes, you are resetting the compounding clock.
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Every time you make a bad investment and lose money, you are destroying years of potential gains.
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Be patient. Think long-term. Let your investments compound without unnecessary interference. The greatest fortunes have been built by people who bought great assets and held them for decades, not by people who traded in and out trying to catch every
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move. Third, focus on what you can understand. Charlie and I have a circle of competence. We know what we understand and what we do not understand.
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We stay within our circle. We do not pretend to know things we do not know.
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This has kept us out of trouble countless times. When the dot-com bubble was inflating, we did not understand those businesses, so we stayed away. When complex financial derivatives were generating huge profits for Wall Street, we did not understand them, so we
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avoided them. In both cases, staying away from things we did not understand protected us from massive losses. Know your limits. Stay within them.
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There's no shame in saying, "I do not understand this." So, I will pass. Fourth, invest in yourself. Read, learn, think.
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The more you know, the better your decisions will be. And, unlike other investments, the returns on investing in yourself can never be taken away.
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No one can tax your knowledge, no one can inflate away your skills. Build your human capital first, and the financial capital will follow.
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Charlie used to say that every day you should try to be a little wiser than when you woke up. That constant improvement is what separates excellent outcomes from average ones.
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Finally, find great partners. I would not be where I am today without Charlie Munger.
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His wisdom, his integrity, his willingness to tell me when I was wrong. All of these made me a better investor and a better person.
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Find people who challenge you, who push you to think harder, who hold you accountable. The right partners multiply your capabilities.
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The wrong partners can drag you down. Choose carefully. And once you find great partners, treat them well. Honor your commitments to them. Build relationships that last decades, not months. I miss Charlie every day, but I am grateful for the decades we had
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together. And I am grateful that I picked up the phone that day, that I listened even when I did not want to hear it, that I had the humility to admit I was wrong and change my approach, that willingness to learn, to evolve, to
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accept better ideas when they come along. That is what separates good investors from great ones.
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It is not about being right all the time. It is about being willing to change when the evidence demands it.
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Charlie gave me the evidence, and changing my mind was the best decision I ever made.
Topics:Warren BuffettCharlie Mungervalue investingSee's Candieseconomic moatinvestment philosophyBenjamin Grahamcompound interestbrand loyaltycapital allocation
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