Source: Smart investors.
I believe that learning from other people's valuable experience and lessons is a wise move. I do not believe that closing your eyes and ears can make dreams come true. - Munger
Editor's note.
This is an interview that enables us to get a very close sense of Munger's wisdom and humor.
We may not have another Munger, but fortunately, we can still see him through the eyes of Pabrai.
On March 20, 2024, Monish Pabrai, who is considered the most successful Munger follower, was interviewed by Robert Pittenger from YPO United Mosaic, sharing many interesting stories with Munger, his models of thinking and principles for dealing with things, and Munger's handling of his estate, among other topics.
Pabrai emphasized the significance of cloning and copying for human beings beyond imagination.
YPO (Young Presidents' Organization) is a global CEO community headquartered in the United States, composed of chairmen and CEOs of enterprises under 45 years old.
Buffett joked, "I keep telling them, break the age record for me and let me join, but they don't agree."
Pabrai has been a member of YPO since 1997, and Peter Kaufman, the editor of The Poor Charlie's Almanack, is also a member.
When Kaufman invited Munger to speak at YPO, Pabrai saw him for the first time, around 2004.
As of April 30, 2024, Pabrai manages over $900 million in private partnerships and co-funds (Pabrai Wagons Fund) assets through Dhandho Fund and its affiliated advisor Dalal Street LLC, due to his outstanding performance and friendship with Munger, among other reasons.
In India's value investing market, Pabrai has also gained a large following because he is "very clever and the best storyteller of all time."
Pabrai regrets selling Maotai and Ferrari too early, even though both investments earned several times to twenty times the profits.
When investing in China, he said he would choose Tencent first because of its good business nature, founder and team characteristics.
Pabrai always keeps a "game mentality" in dealing with his career and life. He once told Munger about being banned from a Las Vegas casino because the other side discovered that they could not defeat his system. Munger listened with great interest, as probability thinking is one of his models of thinking - that is, betting selectively based on the size of the probability.
Smart Investors collated the highlights of this interview and shared it with everyone. Translation and annotation of this article are from ShawnQ.
The original English interview was published on Pabrai's own YouTube account.
Take a simple idea and take it seriously.
Robert, I want to start with a quote from Charlie Munger, "Take a simple idea and take it seriously." Could you talk to us about the meaning of this quote and how you apply it to your life and investment?
Around 2004, I met Charlie for the first time.
"Take a simple idea and take it seriously" is a famous saying of Munger's. But even before I heard about Charlie, even before I heard this quote, I've always been trying to live by this in my life because it's so powerful.
In our lives, there will be some Aha moments, some wisdom or knowledge that may not be understood by many people, or they may not give these wisdom and knowledge the attention they deserve.
This can be the root of a huge competitive advantage, one thing I learned early on, is the power of cloning and copying.
When I was in my early 20s, I read a book by Tom Peters. He was a management guru in the 80s. In the book, he gave an example:
There are two gas stations in California located on opposite corners of a busy intersection. Both gas stations are self-service. You come, you gas up, you leave.
One of the owners might come out once an hour, pick a car at random, wash the windshield or check the oil, offer some extra service, no charge.
The guy across the street saw all this and said to himself: Hmmm... That's kind of dumb. You can't do this for every customer or you'll go broke because you're not charging for it.
He never cloned or copied that practice. Over time, the gas station providing the random extra service did better and better and the gas station across the street did worse and worse.
Even as he saw business decline, the gas station across the street never changed his behavior.
What I found mind-boggling is that Tom Peters said, "You can go to your nearest competitor and say here are all my business secrets, here is everything that works for me, you could listen to it, but very little of what you hear, you're going to use."
I said, this is too much, the world does not work that way. I was only in my early 20s at the time, with not a lot of life experience, didn't know how things worked, but I made a commitment to myself to prove Tom Peters wrong in two ways:
First, I wanted to find examples where humans saw smart things happening and then cloned or copied it (to success).
Second, every time I saw someone doing something smart, I would copy it, (if successful) to prove him wrong.
From my early 20s to now almost 60, I found that Tom Peters was mostly right.
I still don't know why this is, humans have this aversion to cloning, they somehow feel that (if) the idea wasn't their own, it's beneath them.
And I found that when I force myself to clone those things that I think are smart, it gives me a huge advantage. It's an example of a "simple idea." I found that only a very few people are great at cloning, they own the world, they do fabulously well.
For example, Microsoft cloned almost everything. They spent billions of dollars in R&D with no result. What worked for them was:
They saw Lotus, and then created Excel; Saw WordPerfect, then created Word; Saw Mac, then created Windows, and so on.
Even now, OpenAI is collaborating with AI. Google did a lot of work in AI, Microsoft did almost nothing, but they're leading. Sam Walton is another great cloner.
In fact, Jim Sinegal, the former CEO of Costco, cloned the entire model from the Sol Price where he had previously worked. Someone asked him, "What did you learn from Price?" His answer was, "That's a wrong question. Everything I know is learned from Price. There's nothing I know that doesn't come from Price."
His answer was, "That's a wrong question. Everything I know is learned from Price. There's nothing I know that doesn't come from Price."
These people take a simple idea very, very seriously.
Just reading about an idea and being impressed by it is not enough. When you see that something grabs you, you have to go all in and fight the tendency to maintain the status quo.
When you see that something grabs you, you have to go all in and you have to fight the normal tendency of the status quo.
Whether it's Charlie or Warren, their success comes from their persistent pursuit of some simple ideas.
For example, when they acquired See's Candies in California in the 1970s, it was a (conceptual) leap for them. They paid three times the book value for the company. They thought they had paid too much and they didn't know how good the business was.
The only thing Warren does every year is let management run the business on their own. However, on January 1st of each year, he raises all prices, far more than the rate of inflation. For example, if inflation is 3%, he raises prices by 10%, and if inflation is 3% or 4% the following year, he raises prices by another 10%.
To his surprise, he continued to raise prices significantly while sales continued to rise. It turns out that a company can have such strong pricing power.
At that time, neither Warren nor Charlie understood the power of branding, but they both became enthusiastic students, exploring "what is this phenomenon? What does it mean? How can we apply it to other businesses?"
Today we see that this is the foundation of Berkshire Hathaway. Many people start businesses because they see a market gap, they see that some products or services should exist but don't, or not enough.
Once we get involved, with the idea of persistent pursuit of simple ideas, many good things will happen.
ShawnQ Note:
Pabrai believes that being good at imitation can bring great advantages. Whether as individuals, enterprises, or society, we tend to hold negative attitudes toward copying others, for various reasons, such as overconfidence bias, avoidance of inconsistency bias, and so on.
Enterprises like to proclaim themselves as innovators, not followers, which often leads to a situation where even if a company sees a competitor verifying an idea with actual action, it still doesn't want to follow and continues to remain stagnant.
Pabrai's so-called cloning does not mean blindly copying without thinking, nor does it mean that there is no innovation or independent thinking. Human beings truly innovate from 0 to 1 very rarely. Some companies are good at pioneering innovation, while others are good at incremental innovation. There is no superiority or inferiority between the two, and both can create huge value for society.
In his first book, Pabrai mentioned Chipotle Mexican Grill. Chipotle has no complex technology or business secrets, just letting customers choose from a variety of fresh ingredients to add to their Mexican roll.
The market could accommodate four or five similar Mexican fast food companies, but for a long time there was only Chipotle, and only a few companies in different tracks tried to imitate this model.
It can be seen that due to human resistance to imitation, there are still opportunities in many fields.
In "The Super Investors of Graham-and-Doddsville", Buffett clearly expressed why his success is not survivorship bias, and listed various disciples who follow the value principle.
In reality, only a few business schools teach investment methods based on Graham-Buffett (including Columbia University, University of Florida, University of Missouri, and Stanford's Jack McDonald), and Harvard Business School does not have a systematic value investment project.
Why?
Firstly, theories such as efficient markets, CAPM, etc. have more academic aesthetic appeal and are highly favored by academia.
Secondly, Buffett's establishment of a partnership fund does not conform to the mainstream of the industry, and it tests investment ability, making it difficult to quickly expand asset scale to earn management fees.
Therefore, even though Berkshire Hathaway’s shareholder letters and annual meeting videos are all open to the public, few people really explore them, and few real value investors exist.
"Accept a naive idea and take it seriously" essentially emphasizes the importance of practice! We often read some very reasonable quotes or ideas, but just stop there. No wonder universal truth will not have a substantial impact on our lives.
On the contrary, our deep understanding of a "principle" can only come from practice, correcting our behavior and cognition through practice, and then further strengthening the effective parts.
The "intangible" power of Munger's ideas.
Robert. For many years, how did Charlie change Warren's thinking process in investing?
Pabla. In this year's Berkshire Hathaway shareholder letter, Warren paid tribute to Charlie in one page. He talked about how Charlie is the architect of Berkshire Hathaway and Warren is the general contractor. He said that Berkshire Hathaway was built according to Charlie's blueprint.
Warren learned from Ben Graham, and he was deeply influenced by Ben Graham. Graham's entire investment framework was formed during the Great Depression and market crash. He looked for stocks that were most wrongly priced and cheapest, because he always focused on not losing money and reducing risk.
Charlie realized in some of his early business ventures that some companies would only make you make difficult decisions, while others could easily operate and make big money.
There is no real connection between whether business is difficult or not and how much money you can make. In fact, the two are negatively correlated.
He told Warren: "You made a big mistake when you bought Berkshire Hathaway, but I will try my best to help you make up for it. You need to buy good companies at a fair price, not general companies at a good price."
Buffett respects Ben Graham very much, and for him, this is a huge transformation. He used the method created by Ben Graham to make funds compound at a high rate of return, with an annualized return rate of up to 30%.
For Buffett, abandoning his already effective method and turning to Charlie Munger's embrace is due to the power of Charlie's ideas. The extraordinary thing about Charlie is that he lets Warren reach the other side at his own pace. He never criticizes any decision Warren makes.
Even today, Warren still bears the imprint of a "bargain hunter", which occasionally emerges. Charlie can see this, but he won't say it in front of him.
This is interesting because I noticed that Charlie has been working on the board of Costco for nearly 30 years. I know that every institution he serves as a director and participates in has been improved, such as Harvard-Westlake, University of California, Berkeley, Stanford University, or University of Michigan.
But the interesting thing about his methods is that he can improve these institutions at the same time without letting them feel imposed upon. He coaxes these institutions to develop in a certain direction in a deceitful way, and these institutions don't even realize that they are being tricked into moving in a specific direction.
On March 10th, I met James Sinegal, the founder of Costco, at Charlie's memorial service. I asked him: "Charlie has been working on the board for 30 years. Can you point out anything that would be different about Costco if Charlie wasn't there?"
He couldn't think of anything because Charlie pushed them into a field in a very subtle way so that they thought it was their own idea. He always pushes them to think for the long term.
Kaishike is not a retailer, but a purchasing agent for customers. This is a completely different mindset. He reinforced this mindset in a way that they weren't even aware of the influence.
ShawnQ Note:
I looked up the historical records of Buffett's and Munger's early management of their respective hedge funds: Buffett's hedge fund had an annualized return rate 7 percentage points higher than Munger's, and the volatility was much lower than that of Munger's fund.
(Based on pre-tax returns, the average annualized return rate of Buffett's hedge fund from 1957 to 1969 was 31.6%, and the average annualized return rate of Munger's hedge fund from 1962 to 1976 was 24.3%; Buffett's fund never had a loss during his management period, while Munger's fund had declined 31.9% and 31.5% respectively during the two years of 1973-1974.)
In this context, Munger made Buffett's investment philosophy undergo a qualitative transformation, indicating that what Buffett valued was not just Munger's investment ability, but the depth and breadth of his thinking, which allowed him to avoid many "blind spots".
"To get me out of Graham's limiting theory, it takes a powerful force. Charlie's thoughts are that force, and he expands my horizons." as Buffett said.
Parbialy revealed that Munger's understanding of "buying good companies at reasonable prices" came from his early entrepreneurial experience. On the one hand, the complexity of a business is sometimes advantageous to value investors because it increases the difficulty of evaluating a business and is more likely to cause pricing errors.
However, from the perspective of net investment returns, complex and difficult businesses are not necessarily good businesses. Businesses that can grow steadily over the long-term are often less competitive and do not rely too heavily on the abilities of management. We should not confuse the two.
From Parbialy's account, we can also see Munger's trait of being hard on himself but lenient on others. He has a strong belief in his own investment approach and the development direction of the company, but he does not impose his beliefs on others. Instead, he exerts influence in a subtle way.
This is inspiring for us in educating children and persuading others: it is often difficult to succeed by imposing beliefs on others in a preachy manner. Guiding others to think and act in a "seductive" way, making them form their own beliefs, will lead to more solid values.
But how do you do it? I think this is a course for lifelong learning, which is beyond "wisdom" rather than "intelligence".
One of Munger's mental models - reciprocity.
Robert: Can you talk about Charlie's mental models and how he makes decisions?
Parbialy: I guess Charlie probably reads 200 to 500 books a year on various topics. Sometimes when I visit him, he's reading a book about global warming. There were many times when I saw him reading a physics book. His interests are very broad.
Charlie's brain is amazing in two ways: first, through all his reading and life experience, he has engraved certain mental models in his brain about how the world works, which may be different from what we imagined. For example, the model I gave you about human aversion to cloning is not the conclusion you usually reach. There is also another mental model, which is the human tendency for reciprocation.
Charlie believes that since the hunting and gathering era, the human tendency for reciprocation has been deeply imprinted in our brains. But there is also a quirk in that the mental models that have been etched into our brains do not have calibration engines.
Life is sometimes advantageous to value investors because it increases the difficulty of evaluating a business and is more likely to cause pricing errors.
However, from the perspective of net investment returns, complex and difficult businesses are not necessarily good businesses. Businesses that can grow steadily over the long-term are often less competitive and do not rely too heavily on the abilities of management. We should not confuse the two.
From Parbialy's account, we can also see Munger's trait of being hard on himself but lenient on others. He has a strong belief in his own investment approach and the development direction of the company, but he does not impose his beliefs on others. Instead, he exerts influence in a subtle way.
This means that if I do you a favor, you only know that Monish is a good person who helped me with a favor. You can't calibrate how big a favor he helped. You just have a good impression of Monish. When you don't have a calibration mechanism and happen to have a good impression of someone, salespeople will use this anomaly in human cognitive thinking.
When I was starting a business, I also used this point. For example, if someone approaches the Paibelei Investment Fund and says,"Hey, I'm interested in your fund. Can you send me some information?"
Most of my competitors send everything digitally because it is efficient. We also send digitally, but we also send physical packages.
In the physical package, there are several other good things: a very nice cross pen, a book, and other items. The minimum investment amount for the fund is several million dollars.
When the recipient receives my pen, that very beautiful pen, they will feel some obligation, and the only way to balance this obligation is to remit several million dollars. If they don't remit several million dollars, returning the pen will be troublesome, and they need to pack it and send it to the post office.
If I send out 100 such packages, maybe one or two will be sent back saying,"Thank you for the package. I'm not interested in the fund. Regards."
But 98% to 99% of people will not send the package back, and these 98% to 99% of people will have a good impression of Monish, and a considerable proportion of them will also remit money. Because there is no calibration engine, one side spends $50 and the other side spends several million dollars.
Charlie probably has 50 to 100 such models, maybe more. The great thing about Charlie's brain is these models. I've never seen anyone else do this, which is why no one has a brain like Charlie's.
I'll ask him some questions, like some new stocks or problems I encountered in the Dakshana Foundation, and he'll immediately associate three models and give an answer.
He can build these models in his brain and know which three models are applicable and how they will interact when applied together, which is a talent. He is the Yoda (the Yoda master in Star Wars, describing someone with calm and profound demeanor and immortal wisdom) of this aspect, which gives him a great advantage.
Warren said that Charlie has the best mind for analyzing any business. Whenever he mentions any business to him (Munger), his reaction is very quick. Most of the time he can say"no" quickly and give a good reason for refusing. This allows him to eliminate a lot of noise from his life.
ShawnQ commented:
The existence of mutual favor tendency in business transactions and daily life can be used reasonably and positively, but it can also be used by those who have ulterior motives to mislead us.
But in any case, the existence of mutual favor tendency and the lack of calibration mechanism mean that doing more altruistic things is always beneficial. Sometimes, a little effort can bring unexpected results.
In investment, refusing the "bad ball" may be more important than missing the "good ball".
Robert, you invested in some companies in Turkey a few years ago, when no one was paying attention to Turkey. I'm curious, did you report those investments to Charlie?
Pabulei: Every time I mentioned Turkey to him, Charlie was very negative. He immediately said,"I don't want to do that. I don't want to hear it."But I still insist on talking to Charlie.
We have a soda bottling factory in Turkey, and I know Charlie knows a lot about soda because they are a major shareholder of soda. I said,"Charlie, tell me how this will lose money?"
He replied,"This (investment) will succeed."I said,"But you are very negative."He said,"No, that will succeed, that's okay."I saw him change.
His idea about things like Turkey is that he needs to do a lot of work and visit many times before he tries the adventure.
Later I thought that I needed to focus because we are engaged in a business that is not called a "bad ball" (In baseball games, the role of the ball judge is to determine whether a ball is a good ball, a bad ball, or a strike based on the ball thrown by the pitcher and the position it flies over the home plate). This is not like baseball, where a strikeout results in an out. The sales volume of the company's overall sales in 2023 was 18,000 kiloliters, a significant increase of +28.10% year-on-year. In terms of product structure, product operating income of 10-30 billion yuan is respectively 401/1288/60 million yuan.
(In investment), you can let countless "good balls" slip by. If Charlie says no to Turkey and Turkey performs well, it doesn't matter. What is important is that he should not say "good" to something that performs poorly. That's what he thinks.
ShawnQ Note:
In investment, it is important to communicate with the wise men we trust, but the final decision must be based on our independent thinking and confidence in opportunities, rather than external evaluations, even if these evaluations come from "authorities". This also reminds us to focus on the fields where we feel "comfortable" and insightful.
FOMO (fear of missing out) is one of the most difficult emotions for all investors to overcome. Don't regret rejecting countless "good balls", the most important thing is not to easily accept "bad balls".
In other words, hitting 3 out of 5 swings is better than hitting 3 out of 20 swings.
"Altruism" and "win-win"
Robert, can you talk about his sense of humor? I heard that even when he was in the hospital for the last time, he still had a sense of humor.
Pabulea and the nurse were joking around. The nurse asked him, "Are you okay?" and he said, "Oh, I'm dying, how about you?"
Just a month before Charlie died, I had dinner with him for the last time. I didn't know it was the last time I would see him. It was just him and me, on a Saturday, at his house.
His thinking is as sharp as ever, but he told me that many parts of his body didn't feel right. On the day before he died, he was trying to complete a final donation for a non-profit organization. I don't think Charlie believed in God, he was an agnostic. He didn't believe there was anything after death, he believed that this life is everything.
When he was interviewed a month before he died, they asked him, "If someone wants to write something on your tombstone, what do you want to write?" He said, "I tried to be useful."
"Trying to be useful" is a simple idea, but he took it very seriously. He extracted everything he could from his mind and body until the very last day.
On his last day, he was with his family, but he was still trying to help some non-profit organizations do better. This did not benefit him in any way. He didn't want to promote it for legacy or anything else. This is just a selfless act.
Even his relationship with Warren was also built on many selfless acts.
There is a book called "Give and Take" (also translated as "The Most Popular Thinking Course at Wharton School of Business" or "Revolutionary Methods for Achieving Success"), written by Adam Grant, which is a worthwhile read.
Adam Grant said that there are three types of people in the world: givers, takers, and matchers. Givers are those who always try to do things for others without seeking any return. They just want to help you.
There's no need to explain takers. You only want to have nothing to do with takers. They only want to squeeze from you, but never give back, and they are selfish.
Matchers think they're smart. For example, they might say, "Robert did X things for me, so I'm going to do X things for him."
Adam pointed out in the book that givers will eventually have the world because they create too much goodwill for the people around them. Charlie had never read that book, but he was a giver. He never tried to figure out what he could get out of it or what was good for him.
I can tell you a funny story that contains some wonderful experiences. I used to play bridge with Charlie at the Los Angeles Country Club. He plays every Friday and I play once or twice a month with him and his friends.
Usually, we have lunch at around 12:30 pm in the restaurant at the Los Angeles Country Club, where the food and atmosphere are very nice. Then we play bridge for 3 or 4 hours.
Once, I sat at a table of four people, facing Charlie Munger and Rick Guerin. They were good friends, and it was Rick who made them aware of See's Candies.
(Rick Guerin, one of the early partners of Berkshire, went with the other two to visit companies and make investment decisions. In 1973-1974, the US stock market plummeted 70% within 2 years. Guerin was forced to sell his holdings of Berkshire stock to Buffett because of margin financing. Guerin was a longtime friend of Munger's and served as Vice-Chairman of the Daily Journal's board of directors.)
I said to them, 'You may think this is just a game of bridge, just a lunch, but let me tell you, this is a defining moment. A random Indian guy from Mumbai is sitting with two historical figures. I know you don't think so, but it is for me.'
Tell me about your interesting trades in the 60s. You did so many trades back then, it was like shooting fish in a barrel.
They looked at each other, and Rick Guerin said, 'Tell him about the redheaded nurse.' The language Charlie and I used when we spoke was colorful, and I don't think there were three sentences that didn't include some form of the word f***.
Then Charlie said, 'Oh yeah, Rick, that's a good story.'
He told me of a maverick businessman in Southern California who had invented a liquid glue that, if you had a leak in your radiator, you could pour into the radiator and it would automatically seal any leaks.
To expand sales, he would often go to different auto repair shops, call the mechanics, and then shoot a hole in the car radiator, pour the liquid in, and show that there were no leaks. That's how he made his sales.
This guy died of a heart attack, and his grieving wife discovered that he had left his company and all his assets to a redheaded nurse, with whom she didn't even know he had been involved.
He left the business and all his assets to his wife, but made the mistress the executor of his will. Both women were furious. The company itself was bankrupt and owed some debt, and had no value beyond the debt.
Charlie and Rick wanted to buy the company. There were two $80,000 notes that belonged to the wife's two aunts; they could have bought these notes at a discount from these two ladies.
Because the stock was worth nothing, they could have spent $100,000 instead of $160,000. But Charlie told Rick that they shouldn't take advantage of these women and should buy them at full price. He spoke to the wife and her two aunts and said, 'Listen, we want to buy this business, which isn't worth much. We're willing to pay you $80,000 each and need your signatures. We also need the nurse's cooperation as she is the executor of the will.'
The nurse wouldn't sign anything because she wasn't getting anything and was angry. So Charlie arranged to have lunch with her at the California Club. He had never seen her before and wanted to calm her down and explain why they were doing what they were doing.
The California Club is a prestigious and ancient institution, solemn and dignified. Charlie always sat at the same table. I saw him for the first time at the California Club. The nurse came straight from the company in her nurse's uniform, which was too small for her. Everyone in the restaurant thought Charlie was having lunch with a porn star, which was startling.
They thought, this is Mr. Munger, a very respectable citizen of Los Angeles, how could he be with a porn star? Charlie was himself surprised by her appearance, anyway, he said, 'I guess I kept myself under control. I tried to keep my eyes from wandering. I settled her down and then we consummated the deal.' They bought the company for $160,000.
Two years later, Rick Guerin needed money, and they each owned 50% of the stock. He told Charlie, 'Listen, I need some cash, a couple of hundred thousand. I want to sell you my half of the business so you can have 100% ownership.'
Charlie asked him, 'What do you think it's worth? What do you want for your half?'
Rick said, 'I want $200,000 for my half.'
"No, you're wrong," Charlie said. "Your share is worth 300,000, and this is a 300,000 check."
He didn't take advantage of the two women, he didn't know them, but still paid them the full price; he didn't take advantage of Rick Guerin. Think about it! The seller proposes a price, and you propose a price that is 50% higher than the price proposed by the seller.
Charlie is like that, he always wants to make sure that if you do business with him, you feel like you're getting a better deal. Once you do something like this for Rick, you cement a friendship, trust, and all sorts of things for life or longer. Now Rick will do anything for him.
I think this story is very interesting and gives us a lot of good insights. In business, when we think about things in the context of win-win instead of just making transactions, things will go more smoothly.
(In business, when we think about things in that context of win-win as opposed to transactional, we get a lot of tailwinds)
ShawnQ note:
Regarding humor, Munger said, "Warren and I are both like that by nature. We're both a bit nerdy, not particularly good as young boys, and we both cherish humor. We both like to delve into the principles behind things, and we're also very lucky to attract so many great partners and associates.
If we had bad characters, we might have gone crazy doing this. If you don't have a sense of humor by nature, I don't think you can achieve it by trying hard later, I think it's human nature.
People love to ponder the meaning of life and Munger's answer is simple: be a "useful person." He doesn't agree with the nihilistic view of life and believes that "if you are born with talent, you must be useful." We have a responsibility to make our limited contribution to our family, community, and society, which is "meaning."
"Self-interest" and "other-interest" are the two ends of the survival and development strategy of human beings in social life. "Give and Take" uses a lot of statistics, psychology, and behavioral science to prove that people with altruistic motives can better develop themselves and proposes a set of methodological systems to avoid altruists becoming stepping stones for others.
How to make more givers? First, become a giver and develop a habit of sharing. As Munger said, "The best way to get something is to deserve it yourself."
"Win-win" is one of Munger's most valued principles, and the companies he invests in often reflect this trait. Munger and Guerin's story offers several insights:
Whether it's family, friends, colleagues, or partners, making win-win a guiding principle of action, even if you "lose small" in the short-term, will lead to "big gains" in the long-term.
If we care genuinely about each other and consider others, those who are truly worth deepening our friendship with will show empathy, win our long-term trust and respect.
In terms of investment, companies that think with win-win mentality and decision-making are worth investing in because they can actively reduce current profits in order to achieve long-term success. For platform companies, which have many stakeholders, balance of interests among them is particularly important. How to establish win-win and enhance trust, rather than maximizing benefits by squeezing upstream, is a common challenge for such companies.
Frequently reading and constantly updating "The Tao of Charlie Munger".
Robert: What surprised you most about Charlie all these years?
Pauley: Well, he’s a good business person and a good investor and a good partner. And he has eight kids, lots of in-laws, lots of grandchildren and great-grandchildren, all different personalities.
Charlie loves a saying of Ben Franklin's: "Keep your eyes wide open before marriage, and half shut thereafter."
I noticed that he uses vastly different frames and modes of thought when dealing with different people. I'll watch him interact with someone, and then when that person leaves, he'll understand something unusual about that person.
I learned a lot of things. He is not only a knowledgeable person but also a wise person who understands the nature of various people and how to work among them with ease. He sees and understands the subtle differences between many things, which is helpful to him.
Robert: How can we become better investors like Charlie?
Pabalie: There is a book called "Poor Charlie's Almanack." They have a new version, but the old version is better and has fewer illustrations.
In the latter half of the book, you can see eleven speeches he gave. These speeches contain his wisdom for his whole life. If someone can read and understand those speeches, they will be better than any four-year degree in any other place.
One of the speeches is about human misjudgment psychology. He examines different mental models and explains that because of all the evolutionary processes, our brains are far from purely rational.
If we can understand how the instrument operates between our two ears, we will have a great advantage. Much of his wisdom is condensed in these eleven speeches.
If I reread these speeches every year, I swear I will read something I have never read before. There are some paragraphs I have never read before. There will be different things that will surprise me at different times.
What I want to say is that it is not only a good way to improve oneself as a business leader, but also a good way to improve oneself as a spouse, father, grandfather, son, or daughter.
Munger on the disposition of estates
Robert: Charlie, how do we manage the money we leave behind?
Pabarie: (Many years ago), Charlie's wife had an accident. She fell down the stairs in their Minnesota home and suffered a year or 18 months of pain, had a lot of surgery, and then died.
She had always wanted to leave half of her estate to her eight children, and the year she died was the only year without an estate tax in US tax law.
At that time, Charlie's net worth was about $2 billion, and in 2010, he transferred about $125 million in Berkshire Hathaway stock to each of his children, which is now worth about $400 million.
From a charitable perspective, his children have done a lot of amazing things, which are not all the same but very impressive.
Munger once told me that he only focused on how to give the remaining half (of the estate) away. He has made many different donations.
I believe that when he passed away, there might have been tens of billions already. I don't know what he planned to do with that money, and I don't think he intended to leave more to his children. He must have had a plan, but I'm not quite sure.
Grateful for the convergence of Munger in life
Robert: Before you leave, is there anything else you want to share?
Pabarie: I've always enjoyed speaking with YPO, and of course, it's great to talk about Charlie. I miss him very much. I have been reflecting. Our friendship lasted for 15 years, which was unexpected for me.
I always remember walking into Charlie's house, and he was designing some architectural drawings. When he saw me, his eyes sparkled. He was particularly happy and excited to see me, and the time we spent together was always enjoyable.
I always believe that I have a strong conviction about my judgment of Charlie. His evaluation of me is very firm and positive. Whenever I fall into self-doubt, I will think of Charlie's high evaluation of me. (This makes me feel) Life is good, everything is fine.
I always come back to this. I miss him very much and I am grateful to have crossed paths with such an outstanding person in my life. I will never see another person like him again.
When they were crafting Charlie, they broke the mold, so we will never see another Charlie Munger. But he left us with a large body of work, and it's really good to be able to see these works.
The End
Editor/Somer