Charlie Munger died this week. He was 99 years old and just a little over a month away from the big 100. He had planned a huge party for New Year’s Eve, his birthday happily landing on January 1st. Sadly, that party will never come.

Some of you likely have no idea who Charlie Munger was. Chances are, however, you know his best friend and business partner. Warren Buffet and Charlie Munger worked together for 45 years as Chairman and Vice Chairman, respectively, of Berkshire Hathaway. But to assume that Charlie Munger was just Warren’s sidekick would be a major mistake.

"Berkshire Hathaway could not have been built to its present status without Charlie's inspiration, wisdom and participation," ~Warren Buffett said in a statement

I’m not here to write a eulogy for Charlie Munger. Many great writers have already done that over the last few days with aplomb. You can read a few of my favorites here:

Charlie Munger’s Life was About Way More than Money
Charles Munger, who helped build one of the greatest fortunes in U.S. history, has died

What I do want to talk about this month is how Charlie (and Warren) shaped me as a person, an investor, and the financial advisor that I am today.

Bobby Bowden, legendary football coach of the Florida State Seminoles (and West Virginia University before that), famously said that when it comes to building a winning football team, there are four distinct stages. Those are, paraphrasing Bowden:

First, you lose by a lot.
Then you lose by a little.
Then you start to win by a little, and…
With any luck, you start winning by a lot.

I’ve always had a similar idea to the way most people experience investing.

First, you think it’s easy and get a few wins under your belt, but ultimately lose a lot and make some really silly mistakes.
Then you think it’s hard and you start to win a little more but still lose quite a bit and get frustrated.
Finally, you start to learn from all of the greats that came before you that investing is extremely difficult and you should take what the markets give you…
You discover you will ultimately win the most over a long period of time.

Charlie Munger was amongst the many greats that I have learned from over the years, and I’m thankful that what he taught all of us will be so easily accessible to the next generation.

Here's my summary of the most important things that I’ve taken from Charlie over the last 25 years of my professional career.

RETIREMENT IS FOR THE BIRDS AND AGE IS JUST A NUMBER

Charlie Munger was a busy man, right up to his death. In addition to his duties at Berkshire Hathaway, Munger was on the board of Costco, the Chairman of the Daily Journal, and an active developer of real estate in Southern California, amongst many other activities. Munger liked to be useful and he liked to work. “You don’t call it work when you enjoy it. That doesn’t mean I enjoy all of my work – I don’t – but I enjoy most of it. My days are not as full as when I was 40 or 50, but I haven’t slowed down a lot. I’ve just changed a little.”

Charlie also loved to talk with others and offer wisdom. He didn’t suffer fools, and he learned that spending his days with the people he loved, his friends and family, was the most important thing in his life.

I spend the majority of my time working with clients on identifying what their goals for their wealth might be. Most simply say that they hope they can retire someday. Hopefully, with my encouragement, I will get them to work a lot longer than they think is possible.

I don’t like the word “retirement”. The cliché world of graduating from college and working for 40 years and then retiring to the golf course with your gold watch is as old-fashioned as telephones and fax machines, in addition to stripping you of one of the most important things that make you human – your identity and your “usefulness”, to steal a Mungerism.

Don’t get me wrong, I’m not encouraging you or my clients to NOT save money and work at something you/they absolutely despise for the rest of their lives…I’m saying you should be building wealth for the most important thing it can actually provide you – freedom and choices. I call it financial independence, and that is the most important goal anyone should be striving for as they build their wealth.

Find something you’re good at that you (mostly) enjoy doing, invest in yourself, find different ways to increase your income throughout your life, enjoy every day with your family and friends, and then do it for AS LONG AS YOU POSSIBLY CAN.

Which leads me to…

TIME IS YOUR BEST FRIEND

Nothing epitomizes the Berkshire Way more than the following statement: buy great companies at a reasonable price and then hold them forever.

Warren Buffet is best known as a strident follower of Benjamin Graham and his value investing approach - for example, the old mantra of finding a cigar on the street with a few puffs left in it. What Charlie Munger did for Berkshire, and consequently, for Warren Buffet, was provide an understanding that you needed to elevate that mantra and really look for good businesses (hopefully at a reasonable price) and then allow the benefits of compounding to build your wealth over many years.

This is not a trivial change.

"The big money is not in the buying and the selling but in the waiting." ~Charlie Munger

WISDOM, ETHICS, AND BEING HUMBLE

Charlie Munger was the personification of wisdom. He was brilliant, yes. But the wisdom part is so much more important.

Jason Zweig of the Wall Street Journal said, “more than almost anyone I’ve ever known, Munger also possessed what philosophers call epistemic humility: a profound sense of how little anyone can know and how important it is to open and change your mind.”

I’ve already mentioned that Munger did not suffer fools well, and he wasn’t necessarily someone who lacked confidence. He graduated magna cum laude from Harvard Law without ever attending college. But he knew better than anyone that being rigid with his ideas was a prescription for failure.

“Confucius said that real knowledge is knowing the extent of one’s ignorance…Knowing what you don’t know is more useful than being brilliant.” ~Charlie Munger

Charlie demanded of himself, the people he worked with, and the senior management of the businesses he owned that they deal with the utmost fairness with everyone they came in contact with. Not just their customers, mind you, but everyone. Munger called it “a seamless web of deserved trust”. You take care of your employees, your customers, your investors, and (maybe most notably) your competitors, too.

“If you’re structurally adversarial to those adjacent to you in the ecosystem, maybe you prosper for five years…but not for 75 years!” ~Charlie Munger

In a world where everyone is trying to define success as not only striving to win at all costs, but also making sure your competitors lose in the worst way possible, this dose of advice is more prescient today than any other.

He was blunt. He was honest. And he was wise. And that leads me to the final item…

CHARLIE’S SIX SIMPLE RULES

Don’t envy
Don’t resent others
Stay cheerful, no matter how bleak things seem
Only deal with reliable people (see the “seamless web of deserved trust” above)
Do what you’re good at (noting that this is very different than “follow your passion”)
Spend less than you make

“It’s remarkable how much long-term advantage people like us have gotten for trying to be consistently not stupid, instead of trying to be intelligent.” ~Charlie Munger on Berkshire Hathway’s remarkable investment performance

Warren Buffet (left) with Charlie Munger in Omaha

Noble Wealth Pro Tip of the Month

Two very random things collided for me this week to inspire my tip of the month. First, a dear friend was forced to rush off to Indiana last week to tend to his mother as her health had drastically deteriorated. Second, I had a rare opportunity to walk through a book store with my wife last night with enough time to actually just wander around.

Nothing will make you realize how much organizing you need to do to prepare your family for your death than having to tend to a parent and making sure that their affairs are in order. I do this quite often with clients and, quite frankly, it is very difficult to motivate my younger clients to get these items handled. In fairness, it’s difficult to motivate myself to get these things done.

But getting them done is very, very important. You need a Will, a Living Will, a Healthcare Directive, durable powers of attorney in place, possibly a Trust. Those things are obviously important and they require a lawyer and they cost money. One thing that gets neglected, though, is what I call a “break glass in case of emergency” document that everyone should have to help their surviving family navigate their personal lives. Things like passwords to your bank and investment accounts, phone numbers for your financial advisor and accountant, how to access your social media, etc. We live in a very different, digital world today, and these details are going to be needed by our families if something happens to us.

Then I saw this item at the book store last night and it was pretty fantastic. Despite the humorous title, which I appreciate, I am very serious about this.

You can pick one up at your local bookstore or here at Amazon. This is something everyone should be using in addition to their estate planning documents.

Things We’re Reading and Enjoying

Same as Ever: A Guide to What Never Changes, by Morgan Housel

Frequent readers of our newsletter/blog know that Morgan Housel is my favorite author, and his new book is not disappointing (so far).

Every investment plan under the sun is, at best, an informed speculation of what may happen in the future, based on a systematic extrapolation from the known past.

Same as Ever reverses the process, inviting us to identify the many things that never, ever change.

With his usual elan, Morgan Housel presents a master class on optimizing risk, seizing opportunity, and living your best life. Through a sequence of engaging stories and pithy examples, he shows how we can use our newfound grasp of the unchanging to see around corners, not by squinting harder through the uncertain landscape of the future, but by looking backwards, being more broad-sighted, and focusing instead on what is permanently true.

Everybody Loves Our Town: An Oral History of Grunge, by Mark Yarm

I was able to pick this up on my recent trip to Seattle. Given my age, this book details a profoundly influential time period for me with music. And I loved every minute of it.

Everybody Loves Our Town captures the grunge era in the words of the musicians, producers, managers, record executives, video directors, photographers, journalists, publicists, club owners, roadies, scenesters and hangers-on who lived through it. The book tells the whole story: from the founding of the Deep Six bands to the worldwide success of grunge’s big four (Nirvana, Pearl Jam, Soundgarden and Alice in Chains); from the rise of Seattle’s cash-poor, hype-rich indie label Sub Pop to the major-label feeding frenzy that overtook the Pacific Northwest; from the simple joys of making noise at basement parties and tiny rock clubs to the tragic, lonely deaths of superstars Kurt Cobain and Layne Staley.

-MERRY CHRISTMAS & HAPPY HOLIDAYS FROM YOUR TEAM AT NOBLE WEALTH PARTNERS

“There is nothing noble about being superior to your fellow man. True nobility is being superior to your former self.” - Ernest Hemingway

NWP Monthly Digest | December 2023