Charlie Munger was the vice chairman of Berkshire Hathaway. In this conversation with Stripe's John Collison, recorded last year, he shares the ingredients for long-term business success, his thoughts on American society writ large, and what makes Berkshire special.
Principles & Lessons:
1) Beware of “Conventional Asininity.” Charlie remarks, “In the messy world of running businesses and institutions...the conventional religion is asinine.” He advises that much mainstream finance follows worn-out formulas or chases consensus, which leaves glaring errors uncorrected. His response is to note these failings—“I collected asininities as things I should avoid”—and thereby gain an advantage through independent, rational thinking.
2) Cultivate a Multidisciplinary Mindset. In Charlie’s words, “I early got the idea I would learn the big ideas in pretty much all the disciplines.” He specifically praises probability math, biology, and mental models from other fields. By weaving together key insights (e.g. from marine architecture for dorm rooms), “You can figure out what works” rather than remaining inside rigid boundaries. “If you don’t look, you won’t find,” he says, underscoring the importance of active curiosity.
3) Seek Win-Win Transactions, Not “Me-Win” Schemes. Asked why he prefers cost-efficient, customer-friendly businesses, Charlie explains that “It’s obviously the right way to live and the right way to do business.” As a negative example, he cites predatory operators who push “scumball” products like opioids or certain unscrupulous financial offerings. By contrast, in well-run enterprises such as Costco, it’s “safer and more profitable averaged out” to treat customers and partners fairly.
4) Aim for a “Seamless Web of Deserved Trust.” Charlie repeatedly extols the Mayo Clinic as a metaphor: “No bureaucracy at all...everyone trusts everyone else.” He points out that Berkshire tries to minimize headquarters staff and run on transparency and reliability, saying, “Of course we want high-grade people we can trust.” This saves massive cost, time, and confusion—an ethos he summarizes by insisting that a brief phone call among trusted partners outperforms “a 40-page contract prepared by the finest law firm.”
5) Know the Edge of Your Competence and Invest Sparingly. Emphasizing that a few big successes often matter more than endless small plays, Charlie notes, “You get four pounces in a lifetime that really work big time.” He sees many financial players “pretend to be expert in everything,” which is unsound. Instead, “Figure out what you know and what you don’t know,” and, as he jokes, “I don’t want to play against other people in a game where they’re much better than I am.”
6) Focus on Systems That Are Net Positive for Society. He distinguishes businesses “worth dealing with” from those that exploit consumers. Examples of good systems include Costco—where “safety is first, customer service is second”—and NetJets, which is “safer and more efficient” for travelers. He warns that short-term chasing of profits (e.g., via addictive products or manipulative trading) may look lucrative, but “I would not want that money...I think it’s immoral.”
7) Accept That Growth and Innovation Often Obsolete Former Greats. Reflecting on airlines or Kodak, Charlie repeatedly highlights that “most businesses are going to perish,” often from unforeseen technological change. Asked about brand moats, he admits “It’s not automatic that everything will work forever,” so prudent investors must stay alert to shifts in technology, economics, or consumer preference that can rapidly wreck old monopolies.
8) “Figure Out What Works and Do It.” Charlie repeatedly cites Lee Kuan Yew of Singapore and praises his “relentless” approach to bettering society: test solutions, discard what fails, double down on what succeeds, and don’t be shy to adopt new ideas. The same method underlies Poor Charlie’s Almanack. “It’s so simple,” he says. “That’s all I’ve done—avoid things that don’t work and keep trying what does. And if you remain sensible about it, you often end up with good results.”
Transcript