Charlie Munger's Final Insights: 13 Principles of Investment from 99 Years of Life

By the end of November 2023, legendary investor Charlie Munger(Charlie Munger) passed away peacefully in California at the age of 99. Over nearly half a century of partnership with Warren Buffett, his investment philosophy and outlook on life have had a profound influence on the global financial industry.

Just before his passing, Munger appeared on the renowned business podcast Acquired to honestly share his investment experiences and perspectives on the world. This was the only time he appeared on a podcast show. Here is a summary of the investment principles and life wisdom he presented:

Drawing the Line Between Speculation and Investment

Charlie Munger strongly criticized the widespread short-term trading practices among individual investors. He pointed out that investors focusing solely on stock price fluctuations are actually engaging in gambling rather than investing. If Munger had been in charge, he would have significantly increased taxes on short-term profits to reduce market speculation.

Success in Venture Capital May Be an Illusion

Munger believes that repeated success in VC investments is nearly impossible. All projects are packaged attractively, and investors must make judgments within a very limited timeframe. In such an environment, intuition and luck play a larger role than data and analysis. Munger also assessed that most venture investors are ultimately betting on probabilities.

The Future of China’s Economy Is Brighter Than Other Economies

Munger predicted that China’s economic growth potential over the next 20 years will surpass that of other major developed countries. He emphasized that large Chinese companies are superior in technology and competitiveness while being much more affordable in terms of valuation. Therefore, he considered including a certain proportion of Chinese assets in his portfolio a reasonable decision.

Deep Understanding Is a Prerequisite for Big Bets

Holding the same stock for years and thoroughly understanding the company is key to successful investing. Munger advised that when you believe you have enough advantage, you should boldly invest large sums. Handling top investment opportunities with small amounts is seen as shirking the responsibility of an investor.

Berkshire’s Leverage Strategy

Munger reflected that if Berkshire Hathaway had utilized an appropriate level of leverage early on, its current asset size could be three times larger than its original scale. However, he also expressed concern that excessive leverage could undermine the defensive position. This highlights the importance of balancing profitability and stability.

Underappreciated Investment Opportunities in Japan

Munger viewed Japan as a land of clear investment opportunities. Even in a decade-long ultra-low interest rate environment of around 0.5%, Japan’s long-established companies are trading at low prices. These companies offer stable dividends and possess strong asset portfolios. He believes that with proper financing and dividend strategies, sufficient returns can be generated.

Changing Approaches to Finding Investment Opportunities

While there were many missed opportunities in the past, Munger said that it is becoming increasingly difficult to discover such opportunities today. Opportunities like Haribo or Hermès are rare, so he adopted a strategy of pursuing only those within his actual discovery range. Instead of chasing large opportunities recklessly, he focuses on areas where he can realistically hold an advantage.

Recognize the Value of Strong Brands

Munger preferred investing in companies with genuine brand power, such as Apple(Apple). He emphasized that excellent brands should be purchased at the right price, and capturing such rare undervalued opportunities is key to success. It’s not just about famous companies, but about selecting those with real value and economic moats(moat).

Even Low-Priced Companies Can Be Worth Holding for a Period

Munger said that if a company’s stock is severely undervalued, it might be worth holding even if its business model isn’t outstanding. Deeply undervalued assets are more likely to undergo valuation adjustments over time.

Leadership Evaluated by Manufacturing Capability

Munger highly praised BYD’s Wang Chuanfu(王传福) for his focus on product manufacturing. He regarded Wang as a more skilled manufacturing executive than Elon Musk, believing that this operational strength determines a company’s competitiveness.

Limitations of Organizations Trapped in Old Frameworks

Munger criticized Walmart(Walmart) for being too deeply entrenched in outdated thinking. When organizational space is filled with old notions, it becomes difficult to accept new ideas. This exemplifies how organizational rigidity can seriously hinder innovation.

Cautious Mentoring Attitude

Munger said he does not give easy advice to young people. In an increasingly complex world filled with scams and madness, he believes that carefully choosing when and whom to help is necessary to provide genuine assistance. Instead of trying to be a mental mentor, selecting relationships that can truly be helpful is a more responsible approach.

Family Relationships Are the Foundation of Life

Munger’s final insight was about maintaining harmonious family relationships. He emphasized that maintaining friendly relations with each family member and helping each other through difficult times are the most important aspects of life. He is optimistic that this is not as difficult as it seems and that many marriages in the U.S. are actually lasting smoothly.

These 13 insights left by Charlie Munger go beyond simple investment techniques; they offer philosophical perspectives on viewing markets and profound advice on living life. Whether an investor or not, they encourage reflection on how to stay true to one’s principles while adapting to changing times.