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The Non-Idiot’s Guide to Life, According to Iconic Investor Charlie Munger

by | Aug 2, 2021 | Life

Warren Buffet gets a lot of the attention in the investing world. Most people don’t know his badass 91-year-old partner Charlie Munger.

Charlie is a strange chappy. A famous investor named Bill Miller once approached Charlie on a street in New York expecting a warm embrace, as they’d met before. The response from Charlie demonstrated what kind of no BS character he is.

“Who the hell are you?”

Charlie doesn’t have time for idiots. He’s direct and to the point. But he’s not an a**hole. In fact, he is known to be extremely generous to his fans. At conferences he’s often seen to hang out for two hours afterwards and talk to people as though he’s a nobody. He shares whatever food he has with them and allows them to ask hundreds of questions. Not bad for a 91-year-old.

Writer William Green wrote about his experience with Charlie Munger. The title of the chapter inspired by Charlie’s obsession for anti-idiocy is called “The Non-Idiot’s Guide to Life.”

Charlie shows us how he avoids becoming an idiot as an investor. His lessons can be applied to life and will surprise you.

Fall in love with disasters

Most people think about change like this: “Is this going to be wonderful?” Charlie does the opposite. If he had to get married again, for example, he’d ask himself “is this going to be a disaster?”

If you’re asked “how do you save starving children in Africa?” then with Charlie’s technique you would ask the question like this: “How do I ruin the lives of starving children in Africa?” (Drastic, I know.)

Then you list down all of those things. Now you simply don’t do any of them. It’s a do-not-to-do list. Once you know what to avoid, it’s easier to know where to focus. It’s subtraction before addition.

One reason I write about many of my own disasters online is because I want to learn from them, so I never indulge in the stupidity that caused them in the first place. Writing becomes a reminder of what not to do. These reminders silently whisper to me during tempting moments to be an ass and act unkind for no good reason.

Reverse the issue by starting with the disasters, and then come up with the solutions. You’ll get a more accurate picture when you do.

Learn to recognize twaddle

Charlie is known for the satellite dish on top of his head that can spot lies from ten feet away. He doesn’t think he’s smart. He simply thinks he can spot twaddle (foolish behavior). Once twaddle is identified, Charlie takes his investor’s money and sprints in the other direction.

I have a high bullsh*t detector similar to Charlie. Instead of striking good looks, my grandpa, who was a potato farmer, gave me the good genes of smelling horse manure disguised as lies.

Recently, a guy on LinkedIn asked me about my investing strategy out of nowhere. The question was framed as rhetorical. Along the lines of “do you like making money with not a lot of work?”

Like, dah.

He was two years out of university. Straight away I said, “Thanks for the question, mate. I don’t do network marketing.” Then he tried to deny it. He said “Nah, I don’t do network marketing man. You’ve got it all wrong. Simply curious about you.”

Ahhh schucks. What a sweetie pie, huh? The kind you bring home to momma. Two minutes later I googled him. I went to his Instagram. About ten pictures down I saw a photo of a conference.

The background of the image featured the logo of network marketing giant Amway. The logo represented one of their sales teams. As it turned out, I happened to know the founder of the network marketing team he worked for. I threw in a “Say hello to Dom (his idol) for me.” The subliminal sales pitch that preyed on my fears and assumed I was an idiot, didn’t work.

At least if you’re not going to be smart, be honest.

Spotting dishonesty helps you avoid idiots.

Collect other people’s foolish behavior

Charlie is a documentarian. Not in investing, though, in bonehead actions he witnesses. He has a whole library of them. It’s an extension of his philosophy in knowing what not to do, as it’s half the battle.

Foolish behavior gets me off too. It’s one reason I love bad bosses. They spend their days turning innocent people into roadkill. Eventually they get fired. All of their actions act as a guidebook to people leadership. My former bad boss taught me all you need to do is care about people you lead and they’ll fearlessly work to exceed your expectations.

Collecting foolish behavior is entertaining, too, according to Charlie. I can attest to the late-night fun it offers.

Write down all the bonehead actions you witness. Don’t repeat them.

Get up on stage in front of thousands of people and admit you’re a stupid horses’ ass

Wait, what?

Charlie says, “I like people admitting they were complete stupid horses’ asses. I know I’ll perform better if I rub my nose in my mistakes.”

When I make a mistake I sometimes try to hide it. On stage in front of 40,000 people, Charlie admitted to his loyal investors who gave up their hard-earned money to place into his company Berkshire Hathaway, “We failed you by not buying Google.” “We blew Wallmart, too, when it was a total cinch.”

Admitting your mistakes creates accountability. It leaves an imaginary bookmark in your brain that says don’t do that again or you’ll become an idiot.

Admit your mistakes. Forget about regrets. Move on.

Focus on avoiding stupidity

Other people are trying to be smart. All I’m trying to be is non-idiotic. I find that all you have to do to get ahead in life is to be non-idiotic … It’s harder to be non-idiotic than most people think — Charlie Munger

One stupid behavior that springs to mind is trolls. If a troll throws horse manure at you on Twitter, then don’t engage them. Their point is to get your attention and abuse it, not improve your life. They don’t pay your bills either.

Another example is following the crowd. Dogecoin continues to be promoted on social media as the savior of the financial system. All you have to do is google it to see it’s a meme. Doge was created as a joke. Nobody is denying it, not even the original founder.

I get asked from time to time if I got in early on Doge. Putting my life savings into a coin with a dog’s face on it, that’s designed as a joke, is clearly stupid behavior. That’s not investing. That’s idiocy. Even Elon laughs about Doge.

Ask yourself “is this a stupid idea?” Then ask google “is this a stupid idea?” Chances are if you’re about to invest tonnes of money on a joke, google will flash a large neon sign in your direction that gives all the warnings you need.

A google search can break the pattern of stupid behavior.

Charlie’s Anti-Stupidity Techniques

In a speech Charlie gave during the 80s titled “Prescriptions for guaranteed misery in life,” he gave a few pearls of wisdom. They have helped him avoid becoming another ‘stupid’ Wall Street gambler, using other peoples’ money to win at the stock market casino. Here they are.

  • Be reliable.
  • Don’t hold onto resentments.
  • Forget about the temptation of revenge.
  • Be willing to compromise.
  • Stay away from the addiction of envy.
  • Don’t drink alcohol.
  • Learn from good and bad experiences in life.
  • Get comfortable with letting go of beliefs.
  • When you get struck down, don’t stay down. Life will have at least three severe reversals. Get back up.
  • Don’t invest with crooks and idiots.

Bottom Line

The best investors in the world like Charlie know what not to do.

Charlie takes it a step further and encourages us to avoid idiot behavior by writing down foolish acts we witness, subtracting what not to do before adding good ideas, becoming a human lie detector, staying away from obvious signs of stupidity that even google knows, admitting when you make a mistake in public, and reverse engineering problems to start with disasters.

Biggest lesson: Start with ‘how is this going to be a disaster?’ Then apply the lens of optimism to get better answers in life.

This article is for informational purposes only, it should not be considered financial, tax, or legal advice. Consult a financial professional before making any major financial decisions.

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