Charlie Munger on finding one’s special advantages
In a Caltech event in December 2020, the 96-year-old sage Charlie Munger talked about career decisions — including the circumstances around his own decisions, and the lessons that he has learned from life.
If I were forced to summarize his wisdom on the topic into a few sentences, it’d be something like:
- First and foremost, you ought to know that most careers involve tough competition
- If you seek to win big, you must get to know what your special advantages are (otherwise the competition will beat you easily)
- How to find your advantages? Follow your interests and seeking direct feedback from hands-on experiences. The earlier, the better (because it may take decades to get “far ahead”)
- Once you discover your advantages (if any), go fish where they can be best applied
- Regardless of your ambitions (e.g., if you are pushing to win big or not), keep an eye on the tailwinds because the wind helps everyone when it blows hard
On how competitive professional life is (if you are looking to get far ahead):
Munger: Just think of how hard it is to get far ahead in life. Suppose you want to get ahead at Caltech [because] you like the academic life. If you want it, Caltech is very good at getting people tenure. If you’re very brilliant and work 80-90 hours a week for 9-10 years, you get tenure. That is not what I call an easy life. And competing with [people like] Homer Joe Stewart!
I chose to avoid it because I knew I wouldn’t win big at it. [Of course I could have been] a perfectly successful professor by ordinary standards, but I would not have been a star.
On what it means to have special advantages on something:
Munger: When I was at Caltech I took this course of Thermodynamics from Homer Joe Stewart — by the way, a lovely human being and gifted beyond compare. And one thing I learned from him was that no matter how hard I would try, I could never be as good at Thermodynamics as Homer Joe Stewart.
I think that is a very useful lesson, I knew what I could do and I couldn’t. I never even considered trying to compete with the Homer Joe Stewarts of the world in Thermodynamics.
On how hard it is to teach special advantages in poker or chess or investing for everyone. The very best seem to “embody” their special advantages, as if they were made for a given activity. Things seem to “click” and come “naturally”:
Munger: If you asked, “How could Caltech teach people how to win chess tournaments or poker tournaments?” You would find that some people at Caltech are very good at that, and others aren’t. And if you want to win at those things, you better bet on the people that are really very good at it, and not everybody is.
I don’t think Caltech can make great investors out of most people. I think great investors to some extent are like great chess players. They’re almost born to be investors.
Moderator: Because of the tolerance for risk? The patience? What are the traits?
Munger: Obviously you have to know a lot.
But partly it’s temperament, partly it’s deferred gratification. You got to be willing to wait. Good investing requires a weird combination of patience and aggression, and not many people have it.
It [also] requires a big amount of self-awareness — how much you know and how much you don’t know. You have to know the edge of your own competency, and a lot of brilliant people are no good at knowing the edge of their own competency. They think they’re way smarter than they are. Of course that’s dangerous and causes trouble.
So I think Caltech would have a hard time teaching everybody to be a great investor.
Moderator: Could it help people discover that they have that temperament? Or is this something that you mostly should try on your own?
Munger: I think you find out whether you got the qualities to win at poker by playing poker.
Moderator: That’s a very empirical approach, Charlie.
Munger: Yes, but I think it’s right.
Obviously it helps to know the basic math of Fermat and Pascal but everybody [in a sense] knows that stuff.
But having the temperament, where Fermat and Pascal is the most part of you, where it is your ear and nose, that’s a different kind of a person. And I think it’s hard to teach that.
Warren and I have talked about this. In the early days, we talked about our way of doing things, which [was] working so well. We found [that] some people got it, and that they instantly converted our way, and did very well. And some people, no matter how carefully we explained it, and no matter how successful they were, they could never adapt it. [People] either got it fast or they didn’t get it at all. That’s my experience.
So how are we supposed to find the special advantages that one might have? Charlie wasn’t asked this question, but he did offer a comment that sort of touches on that:
Munger: If you pursue any career with enough fanaticism, that’s very likely to work better than not having the fanaticism. So, if you look at Warren Buffett, he had this fanatic interest in investments from an early age. And he kept making small investments, even with his [tiny little] savings [at the time], and he finally learned how to be pretty good at it. And so if you want to succeed in investments, start early, try hard, and keep doing it. All success comes that way by and large.
My own understanding is that there are activities where feedback is faster and easier to get than others. Munger himself needed 13 years figure out that investing was the thing that he liked and was good at. To be fair, there have been hardships in his family life that have certainly delayed him. Nevertheless, if he were not born in the same town as Buffett, it could had taken him longer.
In the 2021 Daily Journal AGM, Charlie was asked a follow-up question about greatness in chess and investing. To Munger, best-in-the-world greatness is both born and practiced from young ages:
Question: I enjoyed your Caltech interview and wanted you to elaborate and provide more insights on your point of great investors and great chess players. How are they similar or different? Have you seen the television show Queen’s Gambit on Netflix?
Munger: I have seen an episode or two of the Queen’s Gambit.
What I think is interesting about chess is, to some extent, you can’t learn it unless you have a certain natural gift. And even if you have a natural gift, you can’t be good at it unless you start playing at a very young age and get huge experience. So, it’s a very interesting competitive field.
I think people have the theory that any intelligent hardworking person can get to be a great investor. I think any intelligent person can get to be pretty good as an investor and avoid certain obvious traps. But I don’t think everybody can be a great investor or a great chess player.
I knew a man once, Henry Singleton, who was not a chess champion. But he could play chess blindfolded at just below the Grandmaster level. Henry was a genius. And there aren’t many people that can do that. And if you can’t do that, you’re not gonna win the great chess championships of the world, and you’re not gonna do as well in business as Henry Singleton did.
I think some of these things are very difficult and I think, by and large, it’s a mistake to hire investment management — [that is,] to hire armies of people to make conclusions [about investments]. You’re better off concentrating your decision power on one person the way the Li Lu partnership does and then choosing the right person [of course].
I don’t think it’s easy for ordinary people to become great investors.
On how tailwinds help everyone — it doesn’t matter your special advantage (in fact, one may have none to count on), nor does it matter if you are trying to win big. The wind blows for everyone:
Munger: If you go into a career that’s very tough, you’re not going to do very well. And if you go into one where you have special advantages and you like the work, you’re going to do pretty well.
Moderator: So finding your own path is something you really recommend to everyone?
Munger: No! What I recommend to everyone — what helps everyone — is to get into something that’s going up and it just carries you along without much talent or work. If you pick a really strong place like, say, Costco, and you go to work at it, and you really are reliable and nice, you’re going to do fine in life. You’ve got a big tailwind.
But in elite education nobody wants to go to work for Costco from Harvard or MIT or Stanford. And, of course, it’s the one place where it would where be the easiest to get ahead.
On starting a career in law — it seems like he started as lawyer because, at the time, he haven’t realized what he was particularly good at:
Munger: My father had gone to the Harvard Law School, and my grandfather was a distinguished judge in Nebraska. So that was a natural course of activity for me.
I went into law because I didn’t want to be a surgeon, I didn’t want to be a doctor, I didn’t want to be a college professor. I finally got through them, there was only one, I just went down the family path. And it wasn’t the wisest decision I ever ran.
On switching from law to full-time investing — his major career change happened after he invested on the side for a decade or so:
Munger: There were things I didn’t like about law practice, but I had an army of children to support, and no family money or anything to start with. So I had to make my way in life for this army of children.
What happened was: my pitifully small earnings as a young man I kept underspending them, and I kept investing fairly boldly and fairly smartly. And at the end of my first 13 years of law practice I had more liquid investments than I made in all those years of law practice pre-tax.
I’d done that [my liquid investments] in my spare time with these little tiny sums. So it was natural for me, partly prompted by Warren Buffett’s success, to think I should just start working for myself instead of for other people. [If I had done that] in my spare time, I thought, “Well, what will happen if I do it full time?”
I would say that being a great generalist is Charlie’s “superpower.”
In the 2017 DCJO Annual Meeting (a), he warned about others trying to copy him mindlessly. Like most things, there’s no easy-to-copy recipe that works for everyone:
Questioner: As an 18 years old interested in many disciplines, I was wondering how you can thrive as a polymath in a world that celebrates specialization?
Munger: Well that’s a good question. I don’t think operating over many disciplines as I do is a good idea for most people. I think it’s fun, that’s why I’ve done it. I’m better at it than most people would be. And I don’t think I’m good at being the very best for handling differential equations. So it’s in a wonderful path for me, but I think the correct path for everybody else is to specialize and get very good at something that society rewards and get very efficient at doing it.
But even if you do that, I think you should spend 10 or 20% of your time into trying to know all the big ideas in all the other disciplines. Otherwise — I use the same phrase over and over again — otherwise you’re like a one legged man in an ass-kicking contest. It’s just not going to work very well. You have to know the big ideas in all the disciplines to be safe if you have a life lived outside a cave.
But no, I think you don’t want to neglect your business as a dentist to think great thoughts about Proust.
Questioner: My perception is that the (oil and gas) industry itself has continuously gotten more complex and technical, and as the economy expands and you have more division of labor and specialization, it seems to me that it can be very hard for investors unless there’s more specialization. (Charlie interjects)
Munger: Of course.
Questioner: Do you think that capital allocators are going to need to become more specialized going forward?
Munger: Well, you, petroleum people, of course, have to get more specialized because the oil is harder to get and you have to learn new tricks to get it. And so you’re totally right. Generally, specialization is just the way to go for those people. It’s just I have an example of something different. It’s awkward for me because I don’t want to encourage people to do it the way I did, [and] because I don’t think it will work for most people.
I [do] think the basic ideas of being rational and disciplined and deferring gratification, those will work [for everyone]. But if you want to get rich the way I did, by learning a little bit about a hell of a lot, I don’t recommend it to others.
Now I’ve get a story there that I tell. A young man comes to see Mozart, and says, “I want to compose symphonies.” And Mozart says, “You’re too young to compose symphonies.” He’s 20 years old and the man says, “But you were composing symphonies when you were 10 years old.” And Mozart says, “Yeah, but I wasn’t running around asking other people how to do it.”
I don’t think I’m a good example to the young. I don’t want to encourage people to follow my particular path. If you’re a proctologist, I do not want a proctologist who knows Schopenhauer, or astrophysics. I want a man whose specialized. That’s the way the market is. And you should never forget that. On the other hand, I don’t think you’d have much of a life if all you did was proctology.
In Towards Greatness
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