Image: Poor Charlie’s Almanack by Len Lantz (CC BY-NC-ND)
Synopsis: Len's Star Rating: 7 out of 10. A collection of quotes and speeches by Charles Munger with some additional, limited background on his life and investment style.
BY LEN LANTZ, MD, author of unJoy / 7.22.2022; No. 92
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Star Rating – 7 out of 10
Rating guide: 1 = horrible, 5 = average and 10 = wow
Author
Charles Munger
About the author
Charles “Charlie” Munger, JD, is a former real estate attorney who became a billionaire through his business partnership with Warren Buffet and leadership role as vice chairman of Berkshire Hathaway, a multinational conglomerate with a focus on long-term holdings of publicly traded companies.
General description
Poor Charlie’s Almanack is a book that mostly contains past speeches by Charles Munger. The first third of this book is devoted to background on Charles Munger and Warren Buffett, including their relationship and investing approaches, quotes by Charles Munger, and reflections on him by close associates. The remaining portion of the book is devoted to eleven separate speeches by Charlie. Of note, Talk Eleven was created but never delivered.
In calling this book an almanac, Charles Munger shows his appreciation and admiration of Benjamin Franklin, who published an almanac called Poor Richard's Almanack. However, this book is not written with an eye toward a yearly calendar as most almanacs are. The book resembles a coffee table book, with full-color images, glossy pages, and sidebars with additional information, and the content is not organized for casual reading.
Unique and most important aspects
This book is for Charlie’s admirers or people who want to glean something about what made him an uncanny, successful investor. I am well aware that many people are in love with this book, however, it is probably a reflection of their respect for Charles Munger rather than an objective measure of the quality of the book. I found Poor Charlie’s Almanack to be both interesting and frustrating to read. What I found most interesting about this book was Charlie’s hunger for wisdom and his ability to think accurately and unconventionally. This book certainly contains good advice, and Mr. Munger makes a persuasive case for all professionals – especially those in business – to conduct themselves at all times with integrity. Mr. Munger has a broad range of interests across multiple disciplines and appears to read college textbooks for fun. He demonstrates himself to be an unconventional thinker, and he offers convincing criticism of the postsecondary education system that is stunted by its lack of multidisciplinary approaches. Most importantly, Charles Munger shares the importance of psychological factors to better understand business and investing.
What I found frustrating about this book is that it is physically very awkward to read. It is large and heavy (over 5 pounds), and the glossy pages reflect light, making it hard to see the text. As the book mostly contains speeches and quotes, it lends itself to a poor organization of useful ideas. There is much redundancy of content and anecdotes as Charlie repeats his best ideas in his speeches. The reader has to hunt around for the pearls of wisdom. The sidebars feel forced in many cases and, at times, contain irrelevant information. Mr. Munger makes references to having a checklist of ways he evaluates businesses to invest in but that is mostly a tease as he does not reveal what he actually does. Instead, he suggests that investors – especially large ones – study and emulate Berkshire Hathaway. Peter Kaufman, the editor of this book, attempts to stitch together Charlie’s approaches in a section titled “An Investing Principles Checklist” but it is certainly not the checklist that Charles Munger uses.
Important features of this book include:
The importance of understanding and applying the basic elements of different fields of learning
The approach of inversion in solving difficult problems
The “lollapalooza” of second and third order effects when several forces/models combine and lead to massive success or failure
The necessity of basic fluency in math to discern the impact of certain businesses and products
The strategy of creating moats around each business to strengthen and protect it
The recommendation to operate within your circle of competence
The argument that markets are not totally efficient
The power of the right incentives
The concept of comparative advantage in trade
The mention of the invisible foot of government (in contrast to the invisible hand of the free market)
Best quotes
“If you take the best text in economics by Mankiw, he says intelligent people make decisions based on opportunity costs – in other words, it’s your alternatives that matter. That’s how we make all our decisions. The rest of the world has gone off on some kick – there’s even a cost of equity capital. A perfectly amazing mental malfunction.”
“So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction that you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.”
“The way complex adaptive systems work, and the way mental constructs work, problems frequently become easier to solve through ‘inversion.’ If you turn problems around into reverse, you often think better. For instance, if you want to help India, the question you should consider asking is not: ‘How can I help India?’ Instead, you should ask: ‘How can I hurt India?’ You find what will do the worst damage, and then try to avoid it. Perhaps the two approaches seem logically the same thing. But those who have mastered algebra know that inversion will often and easily solve problems that otherwise resist solution. And in life, just as in algebra, inversion will help you solve problems that you can’t otherwise handle.”
Who would enjoy this book?
Readers who mainly are interested in learning more about Charlie Munger and are open to hunting for his pearls of wisdom would likely enjoy Poor Charlie’s Almanack.
Who would not enjoy this book?
Readers who are looking for an organized account of the life, advice, and strategies of Charlie Munger are unlikely to enjoy Poor Charlie’s Almanack.
Conclusion
Poor Charlie’s Almanack is a collection of quotes and speeches by Charles Munger with some additional, limited background on his life and investment style.