Last week, I wrote about my biography-a-week plan, inspired by Charlie Munger, so this week, I want to focus on Mr. Munger and his endlessly inspirational leadership. Charlie Munger, vice chairman of Berkshire Hathaway Inc., was born on January 1, 1924, in Omaha, Nebraska. Munger worked for Warren Buffett’s grandmother but didn’t meet Mr. Buffett until he was 35 years old. He has served the Berkshire Hathaway organization since 1978, and at the age of 99, still helps Mr. Buffett manage the company’s legendary stock portfolio. Another fact about Mr. Munger and his extraordinary intellect? He entered Harvard Law School without an undergraduate degree (he dropped out of college to serve in the military during WWII) and still graduated magna cum laude.
Here are 10 lessons from the incredible Charlie Munger:
- Keep learning your whole life. Munger believes learning must be an ongoing, perpetual activity that lasts a lifetime—not one that ends at the completion of formal education. Munger once said: “You’d be amazed at how much Warren reads—at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
- Study the models of science. Munger says science, and especially the science of evolution, plays a key role in understanding humans—what motivates them, what inspires them, what makes them who they are.
- Don’t be afraid to destroy some of your best-loved ideas. Munger once said: “If Berkshire has made modest progress, a good deal of it is because Warren and I are very good at destroying our best-loved ideas. Any year that you don’t destroy one of your best-loved ideas is probably a wasted year.”
- Understand the power of incentives. Munger has spoken at length about the power of incentives and how they can influence your success in business, life and investing. For instance, if you’re considering investing in a stock, he says it’s important to consider whether the managers have an ownership stake in the company. The decisions these managers make will impact the long-term success of the business, and if they have stock ownership, as an investor, your incentives and their incentives will align.
- Forever seek “worldly wisdom.” According to Munger: “I constantly see people rise in life who are not the smartest—sometimes not even the most diligent—but they are learning machines. They go to bed every night a little wiser than when they got up and wake up every morning able to attack the problems they faced the day before.” To achieve what Munger calls “worldly wisdom,” we must acquire information from new perspectives and different angles. Munger didn’t just study investing and finance. He also studied psychology, biology, and historical leaders like Benjamin Franklin, John D. Rockefeller, and Andrew Carnegie.
- Never be overly confident. “To a man with a hammer, everything looks like a nail,” Munger said. Overconfidence increases the probability of mistakes because you tend to only see your way of looking at the situation, rather than being open to new ideas. It’s like that time-honored saying: Smugness leads to arrogance, and arrogance is the precursor to disaster. Once you think you know it all, your slide to mediocrity has already begun.
- Embrace humility. It’s not enough to simply avoid overconfidence. Munger says we must also embrace humility. “It is astonishing how much long-term advantage people like us have gotten by trying consistently not to be arrogant,” he explained. For leaders, Munger believes humility is one of the best character traits to possess. Humility keeps the mind nimble, and it creates leaders who ask questions—not just of their team but also of themselves. A humble leader is open to transformative change and thoughtful, flexible decision-making.
- Know the importance of patience. “The big money is not in the buying or the selling, but in the waiting,” Munger said. Patience, he believes, helps leaders avoid impulsive decisions and lead with rationality and calm. It helps avoid the temptation of quick, short-term gains for the sustainable, lasting prospect of long-term success.
- Don’t worry about what everyone else is doing. Munger says at Berkshire Hathaway, leaders don’t really worry about what anyone else is doing and focus on investing their way. If you watch everyone else and what they’re doing, he says you lose the inner roadmap that brought about your success in the first place. You’ll be mired down in the unproductive game of comparison, and in the end, you won’t win. Instead, Munger says focus on the principles and values that matter to you most, then lead with those as your guide.
- Don’t hire consultants. Berkshire Hathaway doesn’t have one, single system of operation. Instead, it has many systems that work in different ways but are all based on the guiding principle of simplicity. When Berkshire Hathaway purchased See’s Candies, Buffett and Munger wrote a one-page deal with former See’s Candies CEO Chuck Higgins, and it’s never been touched since.The simplicity of that deal is also a reminder to stay true to the business and stay away from outside consultants. With consultants trying to tell leaders how to lead, Buffett and Munger say the intensity on both sides is rarely equal. Consultants deal in “play money,” they say, while a CEO is dealing with something close to their heart—the business. The executive team will find it difficult to get much done if they’re working with a consultant who is disconnected from the soul of the organization, the very thing that makes it special.
So, what’s the message? Here’s what Munger told CNBC’s Becky Quick during an interview in 2019. Quick asked Munger for the secret to a long and happy life. The secret, he said, is “easy, because it’s so simple.” He told her people often ask him, ‘How can I become like you, except faster?’” His answer? “Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in fast spurts. But you build discipline by preparing for fast spurts… Slug it out one inch at a time, day by day. At the end of the day, if you live long enough, most people get what they deserve.”
This article is adapted from Blefari’s weekly, company-wide “Thoughts on Leadership” column from HomeServices of America.
