way . You know the old saying : to the man with a hammer , the world looks like a nail . This is a dumb way of handling problems .
He quoted Franklin , who said , “ An investment in knowledge pays the best interest .” Munger was an avid reader who advised that wisdom comes from constant learning . In a 2007 commencement address at USC Law School , Munger aptly advised : “ In my whole life , I have known no wise people who didn ’ t read all the time — none , zero .” Munger called himself a “ certified biography nut ” and joked how his kids think of him as “ a book with a couple of legs sticking out .” He admitted that it sounded “ funny ,” but he said reading the old great works was a bit like “ making friends of the eminent dead .”
Munger loved Adam Smith , the 18th century Scottish economist and moral philosopher widely regarded as the architect of modern economics and founder of the classical school of economic thought . Munger admired the idea of the invisible hand , which Smith described as the market mechanism that guides self-interested individuals to promote the public good , even without intending to do so .
As a student of economics and psychology , Munger appreciated that self-interest is both the motive of man and the magic of mankind : let merchants ply their trades and prices will deliver goods to their best uses . He recognized that markets , while imperfect and prone to errors , tend to allocate resources efficiently and reward value creation . Munger also understood that self-interest , when tempered by ethical standards and social norms , can be a powerful force for innovation and progress .
Munger quoted John Maynard Keynes “ all the time .” He was especially fond of a paraphrase of the 20th century British economist by his teacher , Alfred Marshall , who said : “ It is better to be vaguely right than exactly wrong .” Munger used this quote to stress the importance of focusing on business fundamentals over market predictions and to criticize overconfident belief in strong form stock market efficiency . He believed that investors should aim for a reasonable estimate of the intrinsic value of a business , rather than a precise forecast of performance , and seize opportunities when prices fall below value .
Munger also liked this Keynes quote :
“ The market can stay irrational longer than you can stay solvent .” Besides the phrase ’ s appealing pith and punch , it implies the virtues of both conservatism and patience — speculative bubbles are dangerous , timing the market perilous . This quote encourages investors to approach finance with a sense of humility , recognizing the limits of their ability to predict short-term market movements . It aligns with Munger ’ s broader philosophy of pragmatism and the usefulness of focusing on a small number of big longterm opportunities , rather than many short-term ones .
Munger was also influenced by Charles Darwin , the 19th century British naturalist and biologist . He was fond of Darwin ’ s theory of evolution by natural selection , which was popularized by a phrase attributed to him by a later writer : “ It is not the strongest of the species that survives , nor the most intelligent ; it is the one most responsive to change .” Munger also liked Darwin ’ s assertion that “ Ignorance more frequently begets confidence than does knowledge .” These points capture Munger ’ s views on the importance not only of learning , but adaptability and humility in the face of uncertainty and complexity .
Munger devoured business biographies as well , especially tales of valuable entrepreneurial pivots . A favorite example is the story of the cash register , which Munger called one of the “ greatest contributions to civilization .”
A struggling merchant , John Patterson , bought a crude cash register to use in his store , which instantly swung from loss to profit because the device made it harder for employees to steal . Patterson was so impressed with the invention , he went into the cash register business , founding in 1884 the National Cash Register Company ( NCR ), which became one of the most successful companies in history that created enormous value for its customers .
Munger ’ s prodigious reading and lecturing gained a wide following from academics and journalists to entrepreneurs and innovators , including The Wall Street Journal , The Economist and Forbes , as well as Robert Cialdini , Bill Gates and Malcolm Gladwell . A wonderful collection of 11 Munger lectures , along with other notes and commentary , is published by Peter Kaufman as Poor Charlie ’ s Almanack , a tribute modeled on Franklin ’ s Poor Richard ’ s Almanack .
Enduring Legacy
One of Munger ’ s most amusing quips came just after his 90th birthday , when a friend asked him how it felt to be 90 , and he sighed , saying , “ Oh , to be 80 again .” Around his 80th birthday , another friend gave him an inspiring present : a 1744 edition of Cato Maior de Senectute , or Cato the Elder on Old Age , a book by Cicero in praise of aging that Ben Franklin had translated from the Latin . The erudite Munger had not known of this book and “ went into orbit ” on reading it . Its message of living a long life to the fullest and then sharing the accumulated wisdom resonated , and Munger proceeded to live life that way for two more decades .
One of Munger ’ s best-known witticisms was : “ All I want to know is where I ’ m going to die , so I ’ ll never go there ,” and it is possible to lament that he ultimately went there and succumbed . Yet the quip was not about the fear of death , which Munger did not suffer , but a lesson in perhaps his most powerful mental model , the practice of inverting . Reading the ancient eminent mathematician Jacobi taught Munger — who then taught the rest of us — the mantra “ invert , always invert .” Munger advised that “ many hard problems are best solved when they are addressed backwards ,” which often means first stating what to avoid rather than what to seek .
Munger ’ s absence from the scene is a seismic change , but to cite a favorite quote of yet another strong influence on Munger and Buffett , Professor Benjamin Graham : “ Plus ça change , plus c ’ est la même chose .” Everything changes , but things also stay the same . A final Munger comment on Berkshire still rings true : “ We ’ re not looking for a lot of change at Berkshire . We like things the way they are .” Munger ’ s legacy endures , even if he is now among our “ eminent dead ” friends .
Lawrence A . Cunningham is special counsel in Mayer Brown ’ s New York office and the author or editor of many books , including The Essays of Warren Buffett , Quality Investing and Berkshire Beyond Buffett . He is a member of the Museum ’ s Board of Trustees , as well as the Financial History editorial board .
www . MoAF . org | Winter 2024 | FINANCIAL HISTORY 15