Collection: Charlie Munger - #30 'How To Outperform The Market'


Video Link: https://youtu.be/gejrKfwvVIg


In this episode, Charlie Munger discussed briefly on how Warren Buffett and him outperform the market in Berkshire Hathaway.


In this episode, you’ll learn:

  • How Warren Buffett and Charlie Munger outperform the market?

  • Charlie Munger advice on seizing opportunities.

To check out all Collection: Charlie Munger <click here>

[Transcript]

CHARLIE MUNGER 00:08

Now at a place like Berkshire Hathaway or even the Daily Journal, we’ve done better than average. And now there’s a question, why has that happened? Why has that happened? And the answer is pretty simple. We tried to do less.


We never had the illusion we could just hire a bunch of bright young people and they would know more than anybody about canned soup and aerospace and utilities and so on and so on and so on. We never had that dream. We never thought we could get really useful information on all subjects like Jim Cramer pretends to have. (Laughter)


We always realized that if we worked very hard we can find a few things where we were right. And that a few things were enough. And that was a reasonable expectation. That is a very different way to approach the process. And if you had asked Warren Buffett the same thing that this investment counseling did, “Give me your best idea this year.”, and you had just followed Warren’s best idea, you would find it worked beautifully. But he wasn’t trying to know the whole – he would give you one or two stocks. He had more limited ambitions.


I had a grandfather who was very useful to me, my mother’s grandfather, and he was a pioneer. He came out to Iowa with no money but youth and health and took it away from the Indians. He fought in the Black Hawk – he was a Captain in the Black Hawk Wars, and he stayed there and he bought cheap land and he was aggressive and intelligent and so forth and eventually he was the richest man in the town and owned the bank, and highly regarded, and a huge family, and a very happy life. He had the attitude – having come out to Iowa when the land was not much more than a dollar an acre, and having stayed there until that black topsoil created a modern rich civilization, and some of the best land in the world – His attitude was that in a favored life like his, when you were located in the right place, you just got a few opportunities if you lived to be about 90.


And that the trick in coming out well was seizing a few opportunities that were your fair share that came along when they did. And he told that story over and over again to the grandchildren that hung around him all summer, and my mother who had no interest in money remembered the story and told it to me. But I’m not my mother’s natural imitator and I knew Grandpa Ingham was right. And so I always knew from – when I was a little boy that the opportunities that were important – That were gonna come to me were few and the trick was to prepare myself for seizing the few that came.


This is not the attitude that they have at a big investment counseling thing. They think if they study a million things they can know a million things. And of course the result is that almost nobody can outperform an index. Whereas I sit here with my Daily Journal stock, my Berkshire Hathaway stock, my holdings in Li Lu’s Asian fund, my Costco stock, and of course I’m outperforming everybody.


(Laughter) And I’m ninety-five years old. And I practically never have a transaction. And the answer is that I’m right and they’re wrong. And that’s why it’s worked for me and not for them. And now the question is do you want to be more like me or more like them? (Laughter)

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