#29: Succeed in Business and Investing

Last Tuesday we gained some pearls of wisdom from the inimitable Charlie Munger on getting ahead in life. Charlie espoused the power of reading and being a learning machine. He also benefitted greatly from using mental models and taking ideas from many different disciplines. 

Charlie encouraged independent thought and liked to invert a situation focusing not on the positive, but on what to avoid. He especially wanted to avoid the common mistakes made by others.

Today we shall dive into a sprinkling of Charlie’s advice specifically for financial, career and business success. Everyone should benefit from this common-sense wisdom, especially when,

“Common sense is not so common.”

Voltaire

WISDOM 💎

1) Be reliable.

"If you’re unreliable it doesn’t matter what your virtues are, you’re going to crater immediately.’  

2) Strive for win-win deals, high ethics and to treat people fairly. It’s the best way to do business.

“Remember that reputation and integrity are your most valuable assets – and can be lost in a heartbeat.”

3) Work hard and stay curious.

‘To get what you want, deserve what you want. Trust, success, and admiration are earned.’

Charlie Munger

Tip 1 - A SMART PLAY ✅

1) In any competitive arena you must have an edge over the competition to be successful. Charlie wouldn't invest unless he had one.

2) Much of successful investing is in the waiting. Opportunities are rare, so preparation and patience are key, followed by decisiveness at the critical moments. This passive-aggressive approach is often applied in poker. Easy in principle, difficult in practice!

3) In business the power of incentives is everything. Aligned incentives that encourage desired behaviour from customers, partners and team members is key. Charlie chatted about Costco’s success and how the membership system worked for them. It incentivised customers to spend plenty on each visit, reduced theft and encouraged loyalty.

Tip 2 - AVOID 🚩

1) People of questionable character

Charlie emphasised the importance of character, musing that he would rather make a handshake deal with someone he trusted, than have a 40-page contract drawn up from the best legal firm in the country, with someone he didn’t. “You can’t make a good deal with a bad person.”

2) Unnecessary complexity. 

Charlie liked to apply the KISS principle... Keep It Simple Stupid!

Despite Charlie and Warren's combined knowledge and skill, they stuck to their circle of competence. They liked simple businesses and if they couldn't predict the competitive advantage of a firm in 5-10 years time, they would stick the opportunity in the 'too hard' pile and move on. 

Hubris or boredom causes many high performers to fail, as they move away from the areas that brought them success.

Tip 3 - ACTION 💪

“Figure out what works and repeat it.”

It’s so simple and so helpful for success, but most won’t do it. Look at your business, career or finances and write down what's consistently worked and what hasn't. Then just,

"Repeat what works."

Charlie Munger

Thanks to Charlie for making us all a little smarter. Charlie Munger RIP