6 Lessons From Charlie Munger on Investing and Business

2. Build your board with people you admire.

Davis recalled Munger’s thoughts on choosing directors, saying, “Those people are the face of your clients — and keeping people in front of you that you don’t want to disappoint will always make you behave better.”

3. Earn people’s trust.

Munger advised living life “in a web of deserved trust,” Davis recalled.

“He said that the nature of trust, of behaving in a certain way, it makes other people better as well,” and advised treating people in a way that they’re given “a reputation to live up to,” Davis said.

4. Be patient.

Munger “talked about how difficult it is to do nothing … And he said, it’s often not that making a good decision is rare and valuable, but then sticking with it, not getting shaken out, letting it unfold over a very long period of time,” Davis said.

“So Charlie was very comfortable doing nothing for long periods of time, and often in the investment industry, professionals are uncomfortable with that, because it looks like they’re doing nothing.

“But Charlie and I used to admire the man who built the Suez Canal, the architect named Ferdinand de Lesseps. And he had a quote that Charlie and I both liked … Patience sometimes requires more strength of character than does action. And for investors, patience is sort of the fundamental pillar.”

5. Keep learning.

Munger believed in “constant learning,” Davis said. 

“And a subset of constant learning is unlearning things over time. In other words, the more something has worked, the more you believe it — and often in the nature of investing, the harder it becomes to change your mind.

“And yet, facts and circumstances change over time. And you have to be not just good at bringing in new ideas, you have to be good at discarding old ideas that no longer work.

6. Engage in ‘constant self-criticism.’

By this, Davis said, Munger referred to “the humility to constantly be asking yourself, ‘What if I’m wrong? What do I really know? What is really my edge in this? What do I understand that others don’t?’

“And again, that’s not a skill set that comes easily — constant self-criticism — because of course, it can lead to things like self-doubt and self-loathing. So there’s a fine line between conviction and self-criticism. And that line Charlie believed was absolutely essential for success over time as an investor.”

Pictured: Charlie Munger; Credit: Bloomberg