Charlie Munger, a business magnate who passed away at 99, credited a significant portion of his success and extended lifespan to one key advice: “Steer clear of chaos at all costs.”
In an interview with CNBC’s Becky Quick scheduled for airing on his 100th birthday in January, Munger emphasized this life lesson.
In a world colored by success stories and advice on thriving, one man’s wisdom stands out among the crowd. Charlie Munger, the late billionaire and partner to Warren Buffett, left behind more than a fortune; he shared the secrets to a long and prosperous life. Let’s embark on a journey through the life lessons of this extraordinary individual.
Setting the Stage
Munger, who graced the earth for 99 years, attributed his triumphs to a singular piece of guidance: “Avoid chaos at all costs.” This golden rule emerged from an interview with CNBC’s Becky Quick, a conversation meant to mark his centenary birthday in January.
Munger’s Legacy
A titan in the business realm, Munger’s alliance with Warren Buffett spanned almost half a century. Their partnership flourished, reflected in Munger’s estimated net worth of $2.3 billion and Buffett’s staggering $120 billion fortune, placing him among the world’s wealthiest individuals.
When probed about the key to a fulfilling life, Munger initially humbly dismissed any secret knowledge. Yet, he disclosed that his knack for avoiding catastrophic pitfalls stemmed from an ingrained cautiousness, steering clear of evident risks in personal and professional domains.
The Perils of Chaos
Munger’s emphasis on evading chaos resonates profoundly. He asserted that chaos, often underestimated, lurks around, beckoning individuals toward turmoil. His definition of “chaos” extended beyond common perception, encompassing vices like alcohol, relationships, and financial leverage.
The Leverage Dilemma
Buffett clarified Munger’s notion of leverage, illustrating it as borrowing funds for stock investments or business acquisitions. Munger hinted that their investment firm, Berkshire Hathaway, could have soared in value had they embraced this strategy instead of reinvesting earnings.
Prudence Over Risk
However, embracing such a tactic would have borne considerable risk. Munger emphasized that while he and Buffett could absorb losses, smaller Berkshire shareholders lacked the same resilience. Thus, they adopted a cautious approach, prioritizing long-term investments to safeguard their stakeholders’ interests.
Steering Clear of Vices
Expanding on the concept of chaos, Munger advocated steering clear of habits that lead many upright individuals astray. He cautioned against excessive smoking and alcohol consumption, highlighting their potential to spiral into alcoholism, a caution drawn from the prevalence of such issues in his own family.
A Life Strategy
Summing up his life philosophy, Munger emphasized his intent to dodge conventional paths to failure. He likened this approach to a game of poker, stating that if shown the wrong strategy, he would avoid it. His cautious nature shielded him from numerous pitfalls in life.
Charlie Munger’s wisdom echoes beyond his years. His insights into navigating life’s complexities, evading chaos, and embracing caution reverberate through his life story. His legacy isn’t just wealth; it’s a treasure trove of guidance for a fulfilling and successful life.
Munger, famously known as the long-term business associate of fellow billionaire Warren Buffett, shared a partnership spanning nearly 45 years. This collaboration proved immensely fruitful: Munger’s net worth was recently estimated at $2.3 billion by Forbes. Meanwhile, Buffett, aged 93, boasts a staggering estimated net worth of $120 billion, securing his place as the seventh-wealthiest individual globally.
When asked about the secrets to a lengthy and prosperous life, Munger initially hesitated, stating, “I’m unsure of the secret.” However, he elaborated, attributing his ability to dodge major catastrophes in life to his unwavering caution, consistently sidestepping evident risks in personal and professional spheres.
Munger stressed, “Chaos is far more prevalent than you realize. It’s deceptively easy to succumb to chaos. The key is to evade it relentlessly.”
What exactly defined “chaos” according to Munger? Buffett shed light on this, stating, “My partner Charlie stipulates three pathways through which an intelligent person could face ruin: alcohol, relationships, and financial leverage.” This statement came during CNBC’s “Squawk Box” in 2018.
Regarding leverage, Buffett referred to the tactic of borrowing funds to invest in stocks or acquire another enterprise. Munger, during his conversation with Quick, mentioned that Berkshire Hathaway—Buffett’s investment firm where he served as vice chairman for decades—could have doubled its value if they had employed this strategy rather than merely reinvesting past earnings.
However, this approach would have carried substantial risk. Munger highlighted that while he and Buffett could withstand substantial losses without much trouble, the same couldn’t be said for Berkshire’s smaller shareholders. Hence, they intentionally steered Berkshire in an exceedingly cautious direction, favoring long-term investments over short-term gambles to safeguard their stakeholders.
Expanding on the concept of “chaos,” Munger clarified his stance on personal vices: Any habit capable of leading “many respectable individuals into grave trouble” should be avoided. This encompassed excessive smoking and alcohol consumption leading to alcoholism, drawing attention to the prevalence of such issues, even among his immediate family.
Munger summed up his life approach, stating, “My life strategy was always to evade all conventional paths to failure. Show me the incorrect approach to poker, and I’ll steer clear. If you demonstrate the wrong approach in any other aspect, I’ll avoid it. Naturally, I’ve avoided much because of my cautious nature.”