Charlie Munger, the former vice chairman of Berkshire Hathaway, was the partner of Buffett, the Oracle of Omaha, and one of the greatest investors in the world.
Buffett once frankly admitted: 'With the power of his thoughts, he broadened my horizons and allowed me to evolve from an ape to a human being at an extraordinary speed. Otherwise, I would be much poorer than I am now.'
Munger's investment wisdom stems not only from his innate talent, extensive reading, and relentless pursuit of rationality, but also from some non-academic, intergenerational life lessons passed down through his family. Munger once personally recounted three small stories related to his family, all of which are imbued with wisdom and collectively point to one truth: The key to life is to seize a few major opportunities that belong to you, and when they come, you must grasp them with full force. Seizing just a few opportunities is sufficient to secure lifelong prosperity.
Story One: The Lesson Learned from My Great-Grandfather
I have heard stories about my great-grandfather since I was young, and these stories have greatly helped me. My great-grandfather was a pioneer who arrived in Iowa penniless but young and strong. He served as a captain during the Black Hawk War. Later, he settled in Iowa. My great-grandfather was very astute; whenever land prices fell, he purchased large tracts of land at low prices. Eventually, he became the wealthiest man in the town and even opened a bank.
When economic crises struck and others panicked and sold off their assets, he bought more land at bargain prices. He leased the land to hardworking and frugal Germans, never worrying about collecting rent. My great-grandfather only did a few things right. Life is like this; there won’t be a million great opportunities waiting for you.
My great-grandfather was highly respected and had a large family, living a very happy life. When he first settled in Iowa, an acre of land cost less than a dollar. He lived there until modern prosperity emerged on that fertile land.
My great-grandfather used to say, 'Heaven provides sustenance. Living to the age of 90, Heaven has given me several big opportunities. The reason I’ve lived a long and happy life is mainly because I seized those few major opportunities when they came.'
Every summer, when his grandchildren gathered around him, my great-grandfather would recount his stories over and over again. From a very young age, I understood that significant opportunities, those that belong to me, are rare. The key is to prepare oneself so that when those few opportunities arise, I can seize them.
Throughout my investment career, I have encountered very few good opportunities. Don't complain about the scarcity of opportunities. Just a few major ones, if seized, are enough. When you finally get the chance, you must dare to place a big bet. This method I learned from my great-grandfather. Although I never met him, his stories were told to me by my mother.
Sometimes, similar opportunities may arise in the market, just as if your uncle left you a company. When such opportunities present themselves, be sure to seize them with both hands. Good opportunities are rare, and once they appear, decisive action is required—be bold yet meticulous, and do everything possible to capture them.
At a very young age, I learned this lesson from the stories of my great-grandfather. Throughout my life, I have been in dialogue with ancient thinkers. The wisdom of sages and philosophers is something many contemporary individuals cannot easily grasp. Through conversations with these great minds, we can learn a great deal. Meeting them is simple: just open a book, and they will come to you.
Story Two: Wisdom Learned from My Father’s Client
My father was a lawyer in Omaha, and he once served a client whose husband owned a soap factory. After her husband passed away, my father helped her sell the business.
During the depths of the Great Depression in the United States, this woman was one of the wealthiest individuals in Omaha. After selling the soap factory, she owned a mansion in an upscale neighborhood and had more than $300,000. In 1930, $300,000 was an enormous sum. At that time, a small hamburger cost five cents, a large one ten cents, and for just twenty-five cents, one could have enough to eat for a full day. And she had $300,000!
She didn’t hire an investment advisor or seek help from anyone; she was a truly remarkable elderly woman. She simply divided the money into five parts and purchased five stocks. I certified her will, so I remember three of the stocks: General Electric, Dow Inc., and DuPont.
After purchasing the stocks, she never touched them again. She didn’t pay a penny to any investment advisor. She bought the stocks and simply let them be. She also purchased some municipal bonds. By the 1950s, when she passed away, she had amassed $1.5 million. During this entire period, she paid no fees whatsoever. I asked her, “What were you thinking when you made your decisions?” She replied, “I believed electricity and chemistry would have significant growth potential.” What she did was straightforward: buy and hold. I have always admired this elderly woman; she is exactly the type of person I appreciate, and there are very few like her.
Story Three: Lessons Learned from My Grandfather
My grandfather was a respected federal judge, and my father was a successful lawyer. During the Great Depression, my grandfather extended a helping hand to save a small bank operated by my uncle Tom in Stromsburg, Nebraska.
Due to dire economic conditions and crop failures caused by drought, the bank’s farmer clients were unable to repay their loans. Tom accumulated $35,000 in unrecoverable loan certificates and came to plead for my grandfather’s assistance. The judge took a significant risk, using half of his savings to purchase a first-mortgage loan worth $35,000 in exchange for the bank’s non-performing loans, thereby enabling Tom to reopen the bank after President Roosevelt’s banking reforms. The judge eventually recovered most of his investment, but that was many years later.
Her grandfather also sent his musician son-in-law to pharmaceutical school and funded him to purchase a well-located pharmacy that had gone out of business due to the Great Depression. The pharmacy later became highly profitable, securing a comfortable life for her aunt.
Munger's small story is worth reading repeatedly, as it conveys the true essence of investing in a very down-to-earth manner. As Munger said at the Daily Journal's shareholders meeting, 'At Berkshire Hathaway, at the Daily Journal, we have always performed better than average because we have consistently known that by working especially hard, we can accurately identify a few opportunities, and those few opportunities are enough.'
(This content is excerpted from 'Poor Charlie's Almanack' and 'The Tao of Charlie Munger.')
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