Charlie Munger: 13 Secrets To Getting Rich

that was the secret how much money warren and i had tiny little bits of money we always understood our incomes and we invested and we live long enough you end up rich it's not very complicated now there is a part of life which is how do you scramble out of your mistakes without them costing too much and we've done some of that too if you look at berkshire hathaway think of its founding businesses a doom department store a doom new england textile company a doom trading stamp company out of that came berkshire hathaway now we handled those losing hands pretty well when we bought into them very cheaply but of course the success came from changing our ways and getting into the better businesses it isn't that we were so good at doing things that were difficult we were good at avoiding things that were difficult finding things that are easy by the way when we bought the daily journal that was easy what we're doing now in this software business is difficult but due to the accident of these good associations and the fact that these old colleagues have lived so long we're doing pretty well in the new business it has potential and it's fun to do the other great secret is that we're good at lifelong learning warren is so much better in some ways in his 70s and 80s than he was younger that it's almost awesome if you keep learning all the time you have a huge advantage and we both just like it and we have a wonderful group of friends really wonderful from whom we can learn a lot yeah it's not my nature when you get little surprises as a result of human nature to spend much time feeling betrayed i'm always want to just put my head down and adjust so i don't allow myself to spend much time ever with any feelings of betrayal so you're asking the wrong person because if i if some flickering idea like that came to me i'd get rid of it quickly i don't like any feeling of being victimized i think that's a counterproductive way to think as a human being i am not a victim how did a survivor you are indeed in terms of uh humility i've frequently said that when they passed that out i didn't get my full share and that was a serious problem when i was young and i only cured it partly by becoming very rich and generous it takes both to overcome a debate like that so the young people in the room don't copy this if you're not willing to pay the price well and i i don't put up but if humility means that you know the edge of your own confidence and you aren't arrogantly stepping over the boundary i'm very good at that but within my area of competency my best friend would not adore me for my humility one of these guys at the berkshire meeting from one of the foreign publications said why do a couple of guys in a little place in omaha do so much better than all these powerful minds and great institutions and i said well i think warren and i know the edge of our competency better than other people do and that's humility in the umbrella sense and that is a very important thing to know i say over and over again it's not a competency if you don't know the edge of it you are a disaster if you don't know the edge of your own competency warren frequently says i'd rather deal with a guy with an iq of 130 who thinks it's 125. a guy with an iq of 180 that thinks it's 200. second guy will kill you and so it is very important to know the edge of your own competency it's amazing how if you just get up every morning and keep plugging have some discipline and keep learning and it's amazing how it works out okay i don't think it's wise to have an ambition to be president of the united states or a billionaire or something like that because the odds are too much against you much better to aim low i did not intend to get rich i wanted to get independent i just overshot and and by the way while you're clapping some of the overshooting was accidental there's a big you can be very deserving and very intelligent very disciplined but there's also a factor of luck that comes into this thing and the people who get the good the outcomes that seem extraordinary that the people who have discipline and intelligence and good virtue plus a hell of a lot of luck why wouldn't the world work like that real opportunities that come to you are few it's a very fortunate life that is just bathed in opportunity all the way most people just get a few times when they can make a huge difference by seizing a huge activity when you find one my dear grandchildren and you can clearly recognize it seize it boldly and don't do it small assume that your really major opportunities in life are going to be few and when you get a lollapalooza for god's sakes don't hang by like a timid little rabbit don't hang back they aren't that many of the really big good ones if you take the whole history of berkshire hathaway if you take out the 20 best transactions our record is a joke well 20 best transactions over 40 some years that's one every two years and we work at it all the time life is not just bathing you in unlimited opportunities even if you work at being able to find them and seize them it's not real brilliance in other words you talk about prodigy what it takes to extend the boundaries of physics neither of us has we have learned how to outperform people who are a lot smarter yeah we can't play top-notch chess no we can't no but we know how to do what we do well luckily i got at a very early age the idea that the safest way to try and get what you want is to try and deserve what you want it's such a simple idea it's the golden rule so to speak you you want to deliver to the world what you would buy if you were on the other end there is no ethos in my opinion that is better for any lawyer or any other person to have by and large the people who've had this ethos when in life and they don't win just money just honors in a million months they win the respect the deserved trust of the people they deal with and there is huge pleasure in life to be obtained from getting deserved trust and the way to get it is to deliver what you'd want to buy if the circumstances were reversed warren and i have not made our way in life by making successful macroeconomic predictions and betting on our conclusions our system is to swim as competently as we can and sometimes the tide will be with us and sometimes it will be against us but by and large we don't much bother with trying to predict the tides because we plan to play the game for a long time i recommend to all of you exactly the same attitude it's kind of a snare and a delusion to outguess macroeconomic cycles very few people do it successfully and some of them do it by accident when the game is that tough why not adopt the other system of swimming as competently as you can and figuring that over a long life you'll have your share of good tides and bad tides i think you can count on more booms and busts over your remaining lifetime how big and with what safe cyclicality i can't tell you i can tell you the best way of coping which is just to put your head down and behave creditably every day ben franklin marriage is like the most important decision you have not your business career and it'll do more for you good or bad than anything else and ben franklin had the best advice ever given on marriage he keep your eyes wide open before marriage and half shut thereafter i look at the people in my generation the nerds who were patient and rational eventually did well who lived within their income and and worked at being sensible and when they saw an opportunity grabbed it pretty fiercely and so forth i think that'll work for the new nerds of the world the people who get ahead because they're star salesman or charismatic personalities i'm not one of those so i don't know how to do that so if you're not a nerd i can't help you and i think that the odds are that most people who try to do finance are not going to succeed and there's a lot of rich had excess in it because easy money will always attract wretched access it's just the nature it's like a bunch of animals feeding on a carcass in africa by the way that's image i chose on purpose but no no so i don't think it's so pretty and i don't think that modern finance is so wonderful and in my day a lot of the finance people were more like engineers they were so chastened by the great depression and all the wretched failure that they really tried to make everything super safe and it was a very different plotting place that just tried if you weren't trying to get rich they're trying to be safe this modern world is radically different i'm not sure if i were starting out a new world in your world how well i would do it would be a lot harder than it was to get ahead in the world the way it was when i came up how are you my best advance i think you'll be happier if you reduce your expectations and if you try and satisfy them and by the way i think that's generally a very good idea it sounds silly but it's so obvious you know how many of us are fairly content with pretty moderate success that is worth knowing because that's what most of us are going to get it's an enormous advantage of course if you learn your own language that's a very useful gift and of course learning the basic math of life is another tremendous gift and if you're really good at picking up language and doing just basic arithmetic you can take enormous territory you don't need much else i have never looked at the calculus problem since i left caltech never left it never looked once never used it and i was a whiz by the way it went away totally 70 some years that was enough yeah i don't know about your calculus but mine is mindless it's gone and but this other stuff never goes away and if you keep honing it and if you get good at it then you learn something that's more important than what they teach you in college is you learn the method of learning when i want to know something i just learned it take for instance i got to the harvard law school i couldn't figure out how rare and moon was inviting people out to one weekend and they came back brainwashed zombies for the rest of their lives and i just nobody in the harvard law school could explain it to me so i saw figure it out for myself you know my mother had a little nursery rhyme a little heady red hand that said i'll do it myself said the little radiant so i said i'll figure this out well it took me a long time but i finally figured out to my satisfaction exactly what was being done and they just stumbled into this through practice evolution it wasn't calculated forethought they just assembled a bunch of psychological tricks and pounded them on these people all at once under conditions involving stress and at a certain point the brain would just snap and they had these people transformed into slaves [Music] boom well that was a very interesting thing but of course nobody wants to talk about it because it has implications people here but i think that the that habit of if they won't explain it to you figure it out for yourself has helped me enormously in life it's also hurt me because you give terrible offense when you go into somebody else's profession and act like you know more than he does i'm much smoother now than i was when i was younger i'm still pretty insufferable a happy life is very simple the first rule of a happy life is low expectations that's one you can easily arrange and if you have unrealistic expectations you're going to be miserable all your life and i was good at having low expectations and that helped me and also if when you get reverses if you just suck it in and cope that helps if you don't just fretfully stew yourself into a lot of misery there's certain behavioral rules always tell the truth and never lie to anybody about anything those are pretty good rules and they're pretty simple and a lot of the good rules of life are like that they're just very simple and do it right the first time liquid that's a really good rule

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Id: hz5FlfRNpuI

Length: 13min 41sec (821 seconds)

Published: Thu Dec 09 2021