Munger's wisdom: What insights and inspiration can investors gain from the legendary businessman?

The late Charlie Munger is a fascinating figure to learn from. Being Warren Buffet’s long-time lifelong friend and partner at Berkshire Hathaway, he had a huge influence on both the company and Warren Buffet himself. Most notably, he was instrumental in changing Warren Buffet’s and, by extension, Berkshire Hathaway's philosophy by focusing on acquiring great businesses instead of cheap businesses.

Here are some notable principles that Munger followed.

Bet less often

One of Charlie Munger’s most well-known investing principles is not buying and selling very often. He worked hard to identify positions he felt were as close as possible to a sure thing. By his own words, his preferred holding period was ‘forever’. For example, he purchased Costco in 1977 and Daily Journal Corporation in 1986, positions he held until his death.

Invert, always invert

He also popularised a mental model known as inversion, which involves approaching problems from opposite directions. For example, instead of outlining steps to achieve business success for a portfolio company, one might ask ‘what would cause this business to fail?’ or ‘what mistakes to businesses in this industry typically make?’. This type of multilateral thinking makes us consider problems from a variety of perspectives and improves our understanding of them.

Buy great companies at a fair price, not fair companies at a great price

Charlie Munger’s philosophy was to buy great companies at fair price, where he would bet big and hold it for a very long. Another aspect highlighted in this philosophy was the emphasis on buying companies with a strong brand and other unique features (‘moat’) and consistent growth.

Play to your ‘circle of competence’

Charlie Munger coined the term ‘circle of competence’ which represents innate advantage gained through earned knowledge. His focus was to invest in companies he had an advantage in understanding and would refrain from investing in companies that he didn’t fully understand. This is one of the reasons that Berkshire Hathaway did not invest in pharmaceuticals.

Be a lifelong learner

Bill Gates said that Munger is the broadest thinker he had ever encountered, because he dedicated his life to reading and learning new things everyday. As Munger put it simply, ‘Spend each day trying to be a little wiser than you were when you woke up’.

Think in multi-disciplinary mental models

Major successful investments

Here are a few of his major investments (personal portfolio / for Berkshire Hathaway):

Source: Public sources, news articles,

But he’s only human - Reflecting on his biggest investment mistake

In Q3 2021, Charlie Munger's Daily Journal significantly increased its holdings in Alibaba, quadrupling its investment. This move came at a time when many shareholders were rapidly selling off their shares due to Beijing's crackdown on Alibaba's co-founder.

Alibaba's stock continued to decline. Since reaching its peak in October 2020, the stock has lost approximately 75% of its value. Munger himself called it one of his worst mistakes.

What can investors today learn from him?

Below are a few light-hearted yet important lessons from Munger