Knowing what you don't know is more useful than being brilliant. Charlie Munger More Quotes by Charlie Munger More Quotes From Charlie Munger I think democracies are prone to inflation because politicians will naturally spend [excessively] - they have the power to print money and will use money to get votes. If you look at inflation under the Roman Empire, with absolute rulers, they had much greater inflation, so we don't set the record. It happens over the long-term under any form of government. Charlie Munger governmentlongthinking Mimicking the herd invites regression to the mean. Charlie Munger regressionmimickingmean Clever derivatives broke dozens of companies. It killed them. Bankrupt. We don't need these kinds of innovation in finance. It's OK to be boring in finance. What we want is innovation in widgets. Charlie Munger innovationcleverneeds A foreign correspondent, after talking to me for a while, once said: "You don't seem smart enough to be so good at what you're doing. Do you have an explanation?" Charlie Munger smartenoughtalking ... some important factor doesn't lose its "share of force" just because some "expert" can better measure other types of force. Charlie Munger importantexpertsshare If you have the opportunities of Berkshire, an investment in gold is dumb. Charlie Munger dumbgoldopportunity It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a mispriced bet - that they can occasionally find one. And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time they don't. It's just that simple. Charlie Munger hard-workwiseopportunity Common stock investors can make money by predicting the outcomes of practice evolution. You can't derive this by fundamental analysis - you must think biologically. Charlie Munger analysispracticethinking It's human nature to extrapolate the recent past into the future, but it's terrible that managements go along with this. Charlie Munger human-naturemanagementpast A lot of our respected financial institutions are just casinos in drag. Charlie Munger casinosinstitutionsfinancial Black-Scholes is a know-nothing system. If you know nothing about value - only price - then Black-Scholes is a pretty good guess at what a 90-day option might be worth. But the minute you get into longer periods of time, it's crazy to get into Black-Scholes. For example, at Costco we issued stock options with strike prices of $30 and $60, and Black-Scholes valued the $60 ones higher. This is insane. Charlie Munger blackinsanecrazy If you always tell people why, they'll understand it better, they'll consider it more important, and they'll be more likely to comply. Charlie Munger importantifspeople It's a rare business that doesn't have a way worse future than it has a past. Charlie Munger waypast Don't confuse correlation and causation. Almost all great records eventually dwindle. Charlie Munger causationcorrelationrecords In investment management today, everybody wants not only to win, but to have a yearly outcome path that never diverges very much from a standard path except on the upside. Well, that is a very artificial, crazy construct. That's the equivalent in investment management to the custom of binding the feet of Chinese women Charlie Munger crazyfeetwinning It's my guess that something like 5% of GDP goes to money management and itsattendant friction. I define it broadly - annuities, incentive pay, all trading, etc. Nobody else has used figures that high, but that's my guess. Worst of all, the people doing this are among the best and the brightest. Hundreds and thousands of engineers, etc. are going into hedge funds and investment banking. That is not an intelligent allocation of the brainpower of the civilization. Charlie Munger gdpintelligentcivilization Over the very long term, history shows that the chances of any business surviving in a manner agreeable to a company's owners are slim at best. Charlie Munger slimchancelong Anytime anybody offers you anything with a big commission and a 200-page prospectus, don't buy it. Occasionally, you'll be wrong if you adopt "Munger's Rule." However, over a lifetime, you'll be a long way ahead - and you will miss a lot of unhappy experiences. Charlie Munger unhappymissinglong Economics is in many respects the queen of the soft sciences. It's expected to be better than the rest. It's my view that economics is better at the multi-disciplinary stuff than the rest of the soft science. And it's also my view that it's still lousy. Charlie Munger queensviewsstuff The tradition of always looking for the answer in the most fundamental way available - that is a great tradition, and it saves a lot of time in this world. Charlie Munger fundamentalsanswersworld
