“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent”
- Charlie Munger
In a world of short term noise, meme stocks and leveraged trades, where the Billionaire Investor crowd almost all run short term trading strategies or systematic quant funds, Charlie Munger stood out with his partner Warren Buffet as one of the few genuine long term investors. Famously dismissive of the Efficient markets Hypothesis, his aphorisms and sometimes caustic opinions on other parts of financial markets are being, rightly, revisited this week with his passing. I have often noted the advice that “if you want to sound smart at a conference, quote Warren Buffet”, but always added my own twist - “if you want to sound really smart, quote Charlie Munger”. It was Charlie who persuaded Warren to swap from a philosophy of finding fair companies at wonderful prices to finding wonderful companies at fair prices and also his idea to buy into insurance companies to benefit from a pool of permanent capital, allowing them the luxury of being long term investors with “a holding period of forever”.
However, my favourite lesson from Charlie Munger is the notion of ‘Inversion’. As he put it, instead of thinking ‘How can I help India? (his example), I think how could I really mess it up? And then I don’t do that.’ It’s simple but perfect.
Ironically, perhaps, as the new era of cash at a proper level makes people reconsider the point and underlying purpose of trading versus investing, the many obituaries to Charlie this week have brought the experience and wisdom of one of the great investors into deserved prominence for the next generation.
RIP Charlie.
