Reading Time: 6 minutes
I love reading about fellow investors and immersing myself in their biographies. For my birthday this year, I received a copy of Poor Charlie’s Almanack, and I’ve been thoroughly enjoying reading about one of the most significant financial partnerships in our country’s history. From the book, I’ve learned that Warren Buffett perfectly captures the purpose of this book by comparing it to the timeless wisdom of Ben Franklin’s Poor Richard’s Almanack. From 1733 to 1758, Franklin’s almanac dispensed useful, timeless advice on virtues like thrift and hard work. Two centuries later, Charlie Munger stepped forth to become the last word on the subject of timeless wisdom.
Charlie’s Hardships
Munger’s life journey is a testament to the power of resilience, discipline, and the profound value of an accountability partner. While his immediate family was not dramatically affected by the Great Depression, he saw firsthand the struggles of those less fortunate, from hobos seeking handouts to individuals willing to sweep driveways for a sandwich. This experience, which he observed as a young boy in Omaha, likely made a lasting impression on him.
Just like many of our clients today, Charlie Munger faced his own significant ups and downs. After leaving Omaha for the University of Michigan, his education was interrupted when he enlisted in the Army Air Corps. Later in life, he endured a painful divorce and, at just 29, the terminal illness and death of his adored son, Teddy, from leukemia. A friend recalls Charlie visiting his dying son and then walking the streets of Pasadena, crying. These difficult, emotional experiences are something we can all relate to, and they highlight why having a trusted partner is so critical during life’s inevitable hardships.
Despite his lack of a bachelor’s degree, the Army measured Charlie’s IQ at the top of the curve, and he used his God-given abilities to get into and succeed at Harvard Law School, graduating magna cum laude in 1948. This success provided him with the financial independence to pursue his own path, eventually leaving law to focus on investing. This is a journey many of our clients can relate to—building a successful career to achieve the financial freedom to pursue what matters most, whether that’s an entrepreneurial venture or an early retirement.
The Importance of an Accountability Partner
Like many of our clients, Charlie was smart and successful on his own. He built a law practice and even a successful investment partnership, which compounded at a gross rate of 28.3% for its first 11 years. However, the real turning point came when he partnered with Warren Buffett. Warren was unenthusiastic about Charlie’s continued practice of law, saying it was a far less promising business than investing. It was Warren’s logic and influence as an accountability partner that helped Charlie decide to leave his law practice at the earliest opportunity.
This partnership was tested in the brutal bear market of 1973 and 1974. Despite Munger’s conviction that his major investments were “virtually sure of eventually being salable at prices higher than the quoted market prices,” the partnership was hit hard, falling 31.9% and 31.5% in back-to-back years. The emotional stress of managing other people’s money through a difficult downturn led Charlie to a key realization: he no longer wanted to manage funds directly for investors. This difficult experience was the final push he needed. It solidified his resolve to follow Warren’s example, and he eventually joined him to build equity through stock ownership in a holding company, which became Berkshire Hathaway. Their partnership, founded on mutual respect and shared principles, provided the discipline to navigate these storms and achieve extraordinary long-term success.
Lessons from Charlie Munger
As I read Munger’s biography, several lessons jumped out at me that align perfectly with our core values at Intelligent Investing.
Integrity: Do the Right Thing When No One Is Looking
During a family ski trip, Munger took a 10-minute detour to fill the gas tank of a borrowed Jeep, even though it was still half full. When his son asked why, given they were pressed for time to catch their plane, Munger admonished him, “When you borrow a man’s car, you always return it with a full tank of gas”. This anecdote perfectly illustrates our core value of integrity—doing the right thing when no one is looking. Our moral compass enables us to put your interests first.
Excellence: Do the Job Right the First Time
Another powerful lesson Munger taught his children was, “Do the job right the first time.” This can be a humbling lesson in an impatient world. However, at Intelligent Investing, we never settle and constantly want to improve our clients’ experience by listening to our clients’ feedback and implementing it immediately.
Responsibility and Resilience
When Munger’s son lost his grandmother’s car keys in five feet of murky lake water, Charlie didn’t just give him a new set. Instead, his solution was simple: “Go out with your friends and keep diving till you get those keys and don’t come home without them”. This lesson in responsibility and resilience aligns with how we approach behavioral coaching. We help you stay accountable to your financial plan, ensuring you don’t panic when markets get difficult. We want to help you remove the emotion out of investing and help you maintain the course towards your financial goals.
Contrarian Thinking and the “Circle of Competence”
Munger also raised his children to be skeptical, even contrarian. His daughter, Molly Munger, said this was a particularly helpful way of thinking to carry into the maelstrom of the late 60s. As advisors, we consider ourselves to be professional skeptics. We look for what is tried and true and has always worked—such as diversification, asset allocation, and keeping emotions at bay. We believe this is a far more reliable path to success than chasing the latest trends.
This contrarian mindset is closely linked to one of Munger’s most valuable lessons for investors: understanding your “circle of competence.” Munger argues that true intelligence isn’t about knowing everything, but rather about knowing the boundaries of what you know. He suggests that if you stay within this circle—a defined area where you have real expertise—you significantly increase your chances of success.
Durability and Partnership
One of Munger’s most affectionate memories with his father was shopping for durable clothes at Brooks Brothers. His father admired the store because it was a durable institution and its merchandise was too, and fairly priced. Munger’s father said, of a brown tweed coat, “This will always keep its crease”. This belief in durability is a first-rate virtue, and it is something we strive to do for each of our clients. We have built a durable, repeatable process that is designed to help you navigate market cycles and achieve your long-term goals.
At Intelligent Investing, we believe a trusted advisor should serve as your financial accountability partner. This means being on the same side of the table as you, working together to achieve your financial independence and freedom—whether that’s pursuing an entrepreneurial business, retiring early, or simply gaining peace of mind. Just as Warren Buffett spoke the truth to Charlie, even when it may have stung a little, we strive to speak the truth in love to our clients. You can learn more about this core value and the others that guide our work by visiting our Core Values page.
Leveraging Technology and Fiduciary Duty
Understanding your financial position and staying disciplined is one thing; staying on track is another. Our proprietary software, Intelligrations®, intelligently integrates your financial life to help minimize stress and maximize your life. We help you organize your financial “junk drawer” and proactively manage your entire portfolio, including held-away assets like 401k and 403b accounts. Intelligrations® helps align your financial plan, risk tolerance, and portfolio in real-time, helping you focus on what truly matters.
As an independent, fee-only fiduciary, our responsibility is to always act in your best interest. This removes conflicts of interest and places us on the same side of the table as you. We are incentivized to ensure you are in the right portfolio based on your unique goals and risk tolerances.
Let’s Connect
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As Charlie put it, we would love to be in your “Circle of Competence” especially if you don’t have or trust your current advisor. Our passion truly is to minimize your financial stress and maximize your life. To get started on organizing your “financial junk drawers”, click here to schedule a complimentary call or coffee.
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