Charlie Munger on what it takes to get very far ahead in life, and what’s attainable by “non-naturals”

Here are few excerpts illustrating Charlie Munger’s views on “getting far ahead” in life.

First, here’s what the sage (a 96-year-old at the time) said during a Caltech event in December 2020. On how competitive professional life is if you are looking to get far ahead, and the need for self-awareness to realize and act given your limitations:

Munger: When I was at Caltech I took this course of Thermodynamics from Homer Joe Stewart (a) — 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.

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 how hard it is to teach a random person how to get far ahead in poker or chess or investing. The very best (the ones who will get far ahead) seem to “embody” their special advantages as if they were made for a given activity. Things seem to simply “click” for them 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 [at Caltech] 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.

During the 2021 Daily Journal Annual Meeting, Munger was asked a follow-up question about greatness in chess and investing. To him, 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.

I don’t think it’s easy for ordinary people to become great investors.

If I were forced to summarize his viewpoint into a few bullet points, it’d be something like:

• First and foremost, you ought to know that most careers involve tough competition
• If you seek to win big (meaning, world-class achievements), you must get to know what your special advantages are; otherwise the competition will beat you easily
• How to find out if you have special advantages?
  • Follow your deep interests: if you are not fanatical about something, you can’t be one of the very best
  • Try lots of activities: actual, practical, hands-on experience (“you learn if you are good at poker by playing poker”)
• How do you know if you get a special advantage? Your results vs worthy competition should tell (sidenote: Note: there are activities where feedback is faster and easier to get than others.
  
  Munger himself needed some 13 years to figure out that investing was the thing that he liked and was particularly good at. To be fair, there have been hardships in Munger’s personal life that have certainly delayed him.
  
  In any case, it is clear to me that the feedback loop for investing is much delayed than, say, math, chess or tennis.)
• Starting as early as possible helps compounding your advantage

Being the “best in the world” is the kind of game being played by Homer Joe Stewart, Henry Singleton, and Warren Buffett. Almost by definition, most people won’t be able to play at such high level. That is a game for outliers.

What about the not-dumb-nor-genius? What advice does Munger have for us?

I could find three good ones:

1. Recognize that your playing field won’t be top-of-the-world tournaments, yet we can and should improve through diligent practice
2. Find what you have enough obsession, you’re very likely to be better at it vs things you’re not very interested in
3. Regardless of your abilities and ambitions, keep an eye on the tailwinds, because the wind helps everyone when it blows hard

In his famous 1994 speech at the University of Southern California, The Art of Stock Picking (PDF), Charlie Munger has said:

If you want to be the best tennis player in the world, you may start out trying and soon find out that it’s hopeless — that other people blow right by you.

However, if you want to become the best plumbing contractor in Bemidji (sidenote: Bemidji is a small city in Minnesota with a population of 15k people.) , that is probably doable by two-thirds of you. It takes a will. It takes the intelligence. But after a while, you’d gradually know all about the plumbing business in Bemidji and master the art.

That is an attainable objective, given enough discipline. And people who could never win a chess tournament or stand in center court in a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence — which results partly from what they were born with and partly from what they slowly develop through work.

So some edges can be acquired. And the game of life to some extent for most of us is trying to be something like a good plumbing contractor in Bemidji. Very few of us are chosen to win the world’s chess tournaments.

From the 2020 Caltech event, on deep interest on something as a necessary condition for doing well at that something:

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.

Finally, also from the Caltech event — on how tailwinds help everyone, even someone who’s “ordinary”, with no special advantage and not 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.