Top 549 Quotes & Sayings by Charlie Munger - Page 7

I think there's an awful lot of twaddle and bullshit on EVA. The whole game is to turn retained earnings into more earnings. EVA has ideas about cost of capital that make no sense. Of course, if a company generates high returns on capital and can maintain this over time, it will do well. But the mental system as a whole does not work.

People always underestimate the ability of earth to increase its carrying capacity.

I don't have the slightest interest in gold. I like understanding what works and what doesn't in human systems. To me that's not optional; that's a moral obligation. If you're capable of understanding the world, you have a moral obligation to become rational. And I don't see how you become rational hoarding gold. Even if it works, you're a jerk.

It took us months of buying all the Coke stock we could to accumulate $1 billion worth - equal to 7% of the company. It's very hard to accumulate major positions.

When I run into a paradox I think either I'm a total horse's ass to have gotten to this point, or I'm fruitfully near the edge of my discipline. It adds excitement to life to wonder which it is.

Most people early achieve and later intensify a tendency to process new and disconfirming information so that any original conclusion remains intact. They become people of whom Philip Wylie observed: "You couldn't 't squeeze a dime between what they already know and what they will never learn."

Everyone caved, adopted loose [accounting] standards, and created exotic derivatives linked to theoretical models. As a result, all kinds of earnings, blessed by accountants, are not really being earned. When you reach for the money, it melts away. It was never there. It [accounting for derivatives] is just disgusting. It is a sewer, and if I'm right, there will be hell to pay in due course. All of you will have to prepare to deal with a blow-up of derivative books.

Wrigley is a great business, but that doesn't solve the problem. Buying great businesses at advantageous prices is very tough.

I think democracies are prone to inflation because politicians will naturally spend [excessively] - they have the power to print money and will use money to get votes. If you look at inflation under the Roman Empire, with absolute rulers, they had much greater inflation, so we don't set the record. It happens over the long-term under any form of government.

Berkshireis in the business of making easy predictions If a deal looks too hard, the partners simply shelve it.

What do you want to avoid? Such an easy answer: sloth and unreliability. If you're unreliable it doesn't matter what your virtues are. You're going to crater immediately. Doing what you have faithfully engaged to do should be an automatic part of your conduct. You want to avoid sloth and unreliability.

You don't want to be like the motion picture exec who had so many people at his funeral, but they were there just make sure he was dead. Or how about the guy who, at his funeral, the priest said, "Won't anyone stand up and say anything nice for the deceased?" and finally someone said, "Well, his brother was worse."

I think the notion...that liquidity is this - of tradable common stock - is a great contributor to capitalism - I think that is mostly twaddle... The liquidity gives us these crazy booms, which have many problems as well as virtues.

Good businesses can survive a little bad management.

This is an amazingly sound place. We are more disaster-resistant than most other places. We haven't pushed it as hard as other people would have pushed it. I don't want to go back to Go. I've been to Go. A lot of our shareholders have a majority of their net worth in Berkshire, and they don't want to go back to Go either.

The liabilities are always 100 percent good. It's the assets you have to worry about.

Some years ago one oil company bought a fertilizer company, and every other major oil company practically ran out and bought a fertilizer company. And there was no more damned reason for all these oil companies to buy fertilizer companies, but they didn't know exactly what to do, and if Exxon was doing it, it was good enough for Mobil and vice versa.

The great lesson in microeconomics is to discriminate between when technology is going to help you and when it's going to kill you. And most people do not get this straight in their heads. But a fellow like Buffett does. For example, when we were in the textile business, which is a terrible commodity business, we were making low-end textiles-which are a real commodity product. And one day, the people came to Warren and said, "They've invented a new loom that we think will do twice as much work as our old ones."

I have concluded that most PhD economists under appraise the power of the common-stock-based "wealth effect," under current extreme conditions... "Wealth effects" involve mathematical puzzles that are not nearly so well worked out as physics theories and never can be... What has happened in Japan over roughly the last ten years has shaken up academic economics, as it obviously should, creating strong worries about recession from "wealth effects" in reverse.

We don't claim to have perfect morals, but at least we have a huge area of things that, while legal, are beneath us. We won't do them. Currently, there's a culture in Americathat says that anything that won't send you to prison is OK.

I don't invest in what I don't understand. And I don't want to understand Facebook.

The first chance you have to avoid a loss from a foolish loan is by refusing to make it; there is no second chance.

We only want what success we can get despite encouraging others to share our general view about reality.

Let me know what your problem is, and I will try to make it more difficult for you.

As I talk about strengths and weaknesses in academic economics, one interesting fact you are entitled to know is that I never took a course in economics. And with this striking lack of credentials, you may wonder why I have the chutzpah to be up here giving this talk. The answer is I have a black belt in chutzpah. I was born with it.

To some extent, stocks are like Rembrandts. They sell based on what they've sold in the past. Bonds are much more rational. No-one thinks a bond's value will soar to the moon.

Part of that, I think, is being able to tune out folly, as distinguished from recognizing wisdom. You've got whole categories of things you just bat away so your brain isn't cluttered with them. That way, you're better able to pick up a few sensible things to do.

A board member should be perfectly willing to leave at any time and willing to make the tough calls.

To say accounting for derivatives is Americais a sewer is an insult to sewage.

Being rational is a moral Imperative. You should never be stupider than you need to be.

The interesting thing is the field is so big - it's enormous. One thing a modern civilization needs is energy.

In fact I've probably never seen such a wide moat.

I think corporate managers should learn to be better investors because it would make them better managers.

The stupid and dishonest accountants allowed the genie of totally inappropriate accounting to descend on derivatives books. And once this has happened - people get status, etc. - it's impossible to get it back into the bottle.

A few public hangings will really change behavior. One of our Presidents said if he could execute three people each year for no cause, it would make it a lot easier to govern. When someone said that's not enough, he said, "Oh yes it is, because I'd publish the list of people under consideration."

Without numerical fluency, in the part of life most of us inhibit, you are like a one-legged man in an ass-kicking contest.

We’re partial to putting out large amounts of money where we won’t have to make another decision.

Intense interest in any subject is indispensable if you're really going to excel in it.

We get these questions a lot from the enterprising young. It's a very intelligent question: You look at some old guy who's rich and you ask, 'How can I become like you, except faster?'

I think liberal art faculties at major universities have views that are not very sound, at least on public policy issues - they may know a lot of French however.

The idea of excessive diversification is madness.

I have a name for people who went to the extreme efficient market theory-which is "bonkers". It was an intellectually consistent theory that enabled them to do pretty mathematics. So I understand its seductiveness to people with large mathematical gifts. It just had a difficulty in that the fundamental assumption did not tie properly to reality.

I think there's something to be said for developing the disposition to own stocks without fretting.

It's simplicity itself that its future will be way worse than its past.

If you take sales presentations and brokers of commercial real estate and businesses... I'm 70 years old, I've never seen one I thought was even within hailing distance of objective truth.... 'incentive-caused bias,' causes this terrible abuse. And many of the people who are doing it you would be glad to have married into your family compared to what you're otherwise going to get.

I agree with Peter Drucker that the culture and legal systems of the United Statesare especially favorable to shareholder interests, compared to other interests and compared to most other countries. Indeed, there are many other countries where any good going to public shareholders has a very low priority and almost every other constituency stands higher in line.

Litigation is notoriously time-consuming, inefficient, costly and unpredictable.

Don't confuse correlation and causation. Almost all great records eventually dwindle.

If you turn on the television, you'll find the mothers of the most obvious criminals that man could ever diagnose, and they all think their sons are innocent. That's simple psychological denial. The reality is too painful to bear, so you just distort it until it's bearable. We all do that to some extent, and it's a common psychological misjudgment that causes terrible problems.

In the 1930s, there was a stretch where you could borrow more against the real estate than you could sell it for. I think that's what's going on in today's private-equity world.

If you, like me, lived through 1973-74 or even the early 1990s... There was a waiting list to get OUT of the country club - that's when you know things are tough. If you live long enough, you'll see it.

Creative accounting is an absolute curse to a civilization. One could argue that double-entry bookkeeping was one of history's great advances. Using accounting for fraud and folly is a disgrace. In a democracy, it often takes a scandal to trigger reform. Enron was the most obvious example of a business culture gone wrong in a long, long time.

I think gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939, but civilized people don't buy gold, they invest in productive businesses.

I also want to raise the possibility that there are, in the very long term, "virtue effects" in economics- for instance that widespread corrupt accounting will eventually create bad long term consequences as a sort of obverse effect from the virtue-based boost double-entry book-keeping gave to the heyday of Venice. I suggest that when the financial scene starts reminding you of Sodomand Gomorrah, you should fear practical consequences even if you like to participate in what is going on.

A different set of incentives from rising in an economic establishment where the rewards system, again, the reinforcement, comes from being a truffle hound. That's what Jacob Viner, the great economist called it: the truffle hound - an animal so bred and trained for one narrow purpose that he wasn't much good at anything else, and that is the reward system in a lot of academic departments.

I've been associated with Warren ( Buffett) so long, I thought I'd be just a footnote.

The whole concept of dividing it up into 'value' and 'growth' strikes me as twaddle. It's convenient for a bunch of pension fund consultants to get fees prattling about and a way for one advisor to distinguish himself from another. But, to me, all intelligent investing is value investing.

We bought a doomed textile mill [Berkshire Hathaway] and a California S&L [Savings & Loan; Wesco] just before a calamity. Both were bought at a discount to liquidation value.

The SEC does way more good than harm - the last thing I would do is get rid of the SEC...if accounting were thoroughly fixed, a lot of other sins would go away. We're paying a huge price for deterioration of accounting.

Understanding how to be a good investor makes you a better business manager and vice versa.