4 ms·

Allow me to be a bit marginal here and ask you, what was not-so-obvious in this annoyingly long talk? I scrolled to random places a dozen times, read through a

by mojuba 16y ago

Allow me to be a bit marginal here and ask you, what was not-so-obvious in this annoyingly long talk? I scrolled to random places a dozen times, read through a few paragraphs each time, and found nothing that would be surprising to me. You can't get rich by following his "worldly wisdom" alone. You need (a) at least a 7-figure initial capital and (b) extreme intelligence and courage in order to get a miniscule chance of becoming a 9/10-figure rich. Any counter-arguments are welcome.

zemaj 16y ago
I can't speak for others, but to me the not-so-obvious was simply understanding/exploring the mental models Charles Munger uses to view and manipulate the world.
jakarta 16y ago
Looking across different disciplines for mental models can be extremely useful when identifying potential investments. It might be something that is just intuitive to you, but it is not for most people -- especially business students. A good example would be Michael Burry, who had Munger's talk on human misjudgment click when analyzing the housing/mortgage market. Munger's talk about human misjudgment was rooted in psychology and how perverse incentives can cause certain breakdowns to occur which lead to disastrous decision making. Let's say Burry and another analyst were looking at the same set of data during that period (early 2000s). The analyst might have just seen a great trend - loans are up, deposits are up, employment is up, house prices are up. Everything is climbing which makes it so banks appear more safe as an investment. Burry on the other hand, saw that data but came to a much more alarming conclusion. Right off the bat he started wondering what incentives create such prosperity and by digging deeper he was able to uncover that loan standards were being relaxed, that people were increasingly levering up, and that some banks were giving no-doc loans. So what did Burry do? He figured out the best way to go short - the credit default swap trade and he was really the first guy to do it as a means of protecting against subprime mortgages. Along the way he generated huge returns. You are right - you cannot get rich from worldly wisdom alone. But, if you incorporate mental models into your investment process you can often at least help protect against the downside. That in turn helps increase your ability to generate good returns.
muhfuhkuh 16y ago
> (a) at least a 7-figure initial capital I don't think Michael Dell, Li Ka-Shing, Slim Helu, or Larry Ellison actually started out with anywhere near that sum of initial capital. From everything I've read, they started in ghettos and middle-to-working-class voids, or as immigrants. I've read that it just takes extreme, almost Asperger's level of apathy toward risk (AKA chutzpah, balls, juevos, etc), and business acumen from a young age. Oh, and often a cold, utilitarian view of relationships, but not always.
- mojuba 16y ago
  Bill Gates wouldn't have taken off without his mother's help who arranged a contract with IBM for her son in the beginning. And I'm sure there are similar stories for the others too. Let's take Ellison's Government project called "Oracle" that the Govt. never used - looks very suspicious and we know very little about how exactly this turned into a private company. I don't believe in their cheesy "self-made" stories with $1000 put into the company that eventually turns into a multi-billion corporation. That's just impossible.
  - muhfuhkuh 16y ago
    It is? Well then what the hell are we doing wasting our time on this damn board, then? We should be looking into Build-a-Bear and 10-minute oil change franchises. I guess Sam's 5&10 shop was just as much BS as Betty Crocker, too. I noticed you left out Dell's story. Did his orthodontist dad brace up all the kids in his hometown to afford the million to put down on Michael's computer-makin' biz? Sometimes a businessman starts out with squat. If there is no "there" there, then what are we doing here?
  - pg 16y ago
    The DOS deal was not the beginning of Microsoft. It was already a well-established company.
- starkfist 16y ago
  To be a world class investor you need to start out with a huge bankroll. Horatio Alger stories are more prevalent with entrepreneurs. However, the list you gave doesn't really match up with your description. None of those people are "immigrants," Li Ka-Shing was from a wealthy family, Dell was the son of a stockbroker and orthodontist, etc.
dpatru 16y ago
You can get rich by following his advice to place a few big, good bets. Also, many of us would be happy to grow a 5 to 6-figure net worth into a 7 to 8 figure net worth. Munger's advice may seem like common sense, but common sense is not so common.

by mojuba 16y ago

zemaj 16y ago

I can't speak for others, but to me the not-so-obvious was simply understanding/exploring the mental models Charles Munger uses to view and manipulate the world.

jakarta 16y ago

Looking across different disciplines for mental models can be extremely useful when identifying potential investments. It might be something that is just intuitive to you, but it is not for most people -- especially business students. A good example would be Michael Burry, who had Munger's talk on human misjudgment click when analyzing the housing/mortgage market. Munger's talk about human misjudgment was rooted in psychology and how perverse incentives can cause certain breakdowns to occur which lead to disastrous decision making. Let's say Burry and another analyst were looking at the same set of data during that period (early 2000s). The analyst might have just seen a great trend - loans are up, deposits are up, employment is up, house prices are up. Everything is climbing which makes it so banks appear more safe as an investment. Burry on the other hand, saw that data but came to a much more alarming conclusion. Right off the bat he started wondering what incentives create such prosperity and by digging deeper he was able to uncover that loan standards were being relaxed, that people were increasingly levering up, and that some banks were giving no-doc loans. So what did Burry do? He figured out the best way to go short - the credit default swap trade and he was really the first guy to do it as a means of protecting against subprime mortgages. Along the way he generated huge returns. You are right - you cannot get rich from worldly wisdom alone. But, if you incorporate mental models into your investment process you can often at least help protect against the downside. That in turn helps increase your ability to generate good returns.

muhfuhkuh 16y ago

> (a) at least a 7-figure initial capital I don't think Michael Dell, Li Ka-Shing, Slim Helu, or Larry Ellison actually started out with anywhere near that sum of initial capital. From everything I've read, they started in ghettos and middle-to-working-class voids, or as immigrants. I've read that it just takes extreme, almost Asperger's level of apathy toward risk (AKA chutzpah, balls, juevos, etc), and business acumen from a young age. Oh, and often a cold, utilitarian view of relationships, but not always.

mojuba 16y ago
Bill Gates wouldn't have taken off without his mother's help who arranged a contract with IBM for her son in the beginning. And I'm sure there are similar stories for the others too. Let's take Ellison's Government project called "Oracle" that the Govt. never used - looks very suspicious and we know very little about how exactly this turned into a private company. I don't believe in their cheesy "self-made" stories with $1000 put into the company that eventually turns into a multi-billion corporation. That's just impossible.
- muhfuhkuh 16y ago
  It is? Well then what the hell are we doing wasting our time on this damn board, then? We should be looking into Build-a-Bear and 10-minute oil change franchises. I guess Sam's 5&10 shop was just as much BS as Betty Crocker, too. I noticed you left out Dell's story. Did his orthodontist dad brace up all the kids in his hometown to afford the million to put down on Michael's computer-makin' biz? Sometimes a businessman starts out with squat. If there is no "there" there, then what are we doing here?
- pg 16y ago
  The DOS deal was not the beginning of Microsoft. It was already a well-established company.
starkfist 16y ago
To be a world class investor you need to start out with a huge bankroll. Horatio Alger stories are more prevalent with entrepreneurs. However, the list you gave doesn't really match up with your description. None of those people are "immigrants," Li Ka-Shing was from a wealthy family, Dell was the son of a stockbroker and orthodontist, etc.

dpatru 16y ago

You can get rich by following his advice to place a few big, good bets. Also, many of us would be happy to grow a 5 to 6-figure net worth into a 7 to 8 figure net worth. Munger's advice may seem like common sense, but common sense is not so common.