Quotes

Conviction

Obtaining Conviction

Charlie Munger once described the secret of success as “take a simple idea and take it seriously.”

“Our ideas are so simple that people keep asking us for mysteries when all we have are the most elementary ideas”—Charlie Munger

“That’s how we succeeded. Because we have open minds (and) common sense. A lot of analysis, careful weighing of the odds, make a firm decision, monitor it, implement it, modify as it goes wrong, abandon if it is no good.” – Lee Kuan Yew

“If you give me the right man in any field, I can talk to him. I know what the condition is. That he did whatever he did as far as he can go. That he studied every aspect of it. That he has stretched himself to the end. He’s not a dilettante in any way. Therefore he’s up against mysteries all the way around the edge. And we can talk about mystery and awe, and that’s what we have in common.” – Richard Feynman

“It is remarkable how much long-term advantage people like [Warren Buffett and myself] have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” – Charlie Munger

“In some corner of the world they are probably still holding regular meetings of the Flat Earth Society. We derive no comfort because important people, vocal people, or great numbers of people agree with us. Nor do we derive comfort if they don’t.” – Warren Buffett

“…we derive no comfort because important people, vocal people, or great numbers of people agree with us. Nor do we derive comfort if they don’t. A public opinion poll is no substitute for thought. When we really sit with a smile on our face is when we run into a situation we can understand, where the facts are ascertainable and clear, and the course of action obvious. In that case – whether conventional or unconventional – whether others agree or disagree – we feel we are progressing in a conservative manner…” – Warren Buffett

“We try to profit from always remembering the obvious than from grasping the esoteric.” – Charlie Munger

“Understanding both the power of compound interest and the difficulty of getting it is the heart and soul of understanding a lot of things” – Charlie Munger

“Having sound principles takes you through everything. And the bedrock principles that really I learned from Graham and Dodd, I haven’t had anything to do with them. They take me through good periods, they take me through bad periods. In the end, I don’t worry about them because I know they work.” – Warren Buffett

“It was like Paul on the road to Damascus. I read the first edition of the book early in 1950, when I was nineteen. I thought then that it was by far the best book about investing ever written. I still think it is.” – Warren Buffett

“The game of investing is one of making better predictions about the future than other people. How are you going to do that? One way is to limit your tries to areas of competence. If you try to predict the future of everything, you attempt too much. You’re going to fail through lack of specialization.” – Charlie Munger

“I think that every single important thing we’ve done, the most important things have always seemed dumb to industry experts at the beginning. To get really good results, you have to defy conventional wisdom. And the problem of course is that conventional wisdom is usually correct. A simple test of, ‘let’s go talk to experts’, and ask them if we should do Amazon Web Services, that would be a huge failure. They would all tell you, this is stupid, stick to the knitting. You’ve got a great retail business, whatever you do, don’t do this AWS things, it can’t possibly work. And of course that would have been wrong. So you can’t listen to people at the beginning when they say it won’t work. But you do have to say, ‘what are we doing differently?'” – Jeff Bezos

“I think it’s important to reason from first principles rather than by analogy. The normal way we conduct our lives is we reason by analogy. [With analogy] we are doing this because it’s like something else that was done, or it is like what other people are doing. [With first principles] you boil things down to the most fundamental truths…and then reason up from there.” – Elon Musk

“Boil things down to their most fundamental truths. What are we sure is true? Or possible to be true? And then reason up from there.” – Elon Musk

“It’s important to review your past stupidities so you are less likely to repeat them, but I’m not gnashing my teeth over it or suffering or enduring it. I regard it as perfectly normal to fail and make bad decisions. I think the tragedy in life is to be so timid that you don’t play hard enough so you have some reverses.” – Charlie Munger

“Perhaps the strongest feature in George Washington’s character was prudence, never acting until every circumstance, every consideration was maturely weight, refraining if he saw a doubt, but, when once decided, going through with his purpose, whatever obstacle opposed.” – Thomas Jefferson on George Washington

“Don’t tolerate blind faith, figure things for yourself” and “Read every line item until you get it” – Michael Burry

“I don’t have a problem if someone says ‘you’re wrong’, I go back and look at the facts. I think that really is much more important, frankly, than having a few points of IQ or an extra course or two in school or anything of the sort. You need emotional stability” – Warren Buffett

“When everyone is going right, look left.” “I‘ve spent my whole life listening to people explain to me that I just don‘t understand, but it didn‘t change my view. Many times, however, having a totally independent view of conventional wisdom is a very lonely game.” – Sam Zell

“If we have a strength, it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter.” – Warren Buffett

“I’m trying to find out how nature is, not how it could be.” – Richard Feynman

Acting on Conviction

“People will always try to stop you doing the right thing if it is unconventional.” – Warren Buffett

“In the midst of chaos, there is also opportunity” – Sun Tzu

“Approval, though, is not the goal of investing. In fact, approval is often counter-productive because it sedates the brain and makes it less receptive to new facts or a re-examination of conclusions formed earlier. Beware the investment activity that produces applause; the great moves are usually treated by yawns.” – Warren Buffett

“Cash combined with courage in a crisis is priceless.” – Warren Buffett

“I will not abandon a previous approach whose logic I understand even though it may mean forgoing large, and apparently easy, profits to embrace an approach which I don’t fully understand, have not practiced successfully and which, possibly, could lead to substantial permanent loss of capital.” – Warren Buffett

“It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.” – Charlie Munger

“Investing requires the crazy combination of gumption and patience, and then being ready to pounce when the opportunity presents itself.” – Charlie Munger

“What you have to learn is to fold early when the odds are against you or if you have a big edge, back it heavily because you don’t get a big edge often. Opportunity comes, but it doesn’t come often, so seize it when it does come.” – Charlie Munger

“You have to have a certain set courage of your own convictions, because you can be wrong for weeks or months. It’s not that you really were wrong, but you appear to be wrong. So you do have to have the courage of your convictions, I think to be good. You really have to be grounded. I think discipline is really critical, too. You do have to show up every day, no matter the days you hate it. You can’t bear to lose any more money. I take it very personally always, but if you don’t show up, you don’t get to play the game and eventually you are just out of the game.” – Candace King Weir, founder, Paradigm Capital Management

“A hugely profitable investment that doesn’t begin with discomfort is usually an oxymoron.” – Howard Marks

“If you’ve done the numbers and are satisfied with them and the principle is right, you just have to grit your teeth and be patient.” – Peter Cundill

“Being out on a limb, alone and appearing to be wrong is just part of the territory of value investing.” – Peter Cundill

“If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification…If you try to be just a little smart, spending an hour a week investing, you’re liable to be really dumb.” – Warren Buffett

Lack of Conviction

“The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.” – Benjamin Graham

“With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles, but we cling tenaciously and unquestioningly to our prejudices. ” – Benjamin Graham

“Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on,” – Warren Buffett

Madness of Crowds

“Nothing sedates rationality like large doses of effortless money.” – Warren Buffett

“Stepan Arkadyevitch took in and read a liberal paper, not an extreme one, but one advocating the views held by the majority. And in spite of the fact that science, art, and politics had no special interest for him, he firmly held those views on all these subjects which were held by the majority and by his paper, and he only changed them when the majority changed them—or, more strictly speaking, he did not change them, but they imperceptibly changed of themselves within him. Stepan Arkadyevitch had not chosen his political opinions or his views; these political opinions and views had come to him of themselves, just as he did not choose the shapes of his hat and coat, but simply took those that were being worn.” – from “Anna Karenina”

“You’re beginning to believe the illusions we’re spinning here. You’re beginning to think that the tube is reality and that your own lives are unreal. You do whatever the tube tells you. You dress like the tube. You eat like the tube. You raise your children like the tube. You even think like the tube. This is mass madness you maniacs! In God’s name you people are the real thing, WE are the illusion!” – Network

[On going to the Stockholm stock market.] They said the Stockholm stock market is never going to go up again…I asked are the stocks cheap? And they said ‘Of course they are they’re trading at three times earnings…” – Peter Cundill

“What the wise men do in the beginning, fools do in the end.” – Warren Buffett

“But a pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons: First, many in Wall Street – a community in which quality control is not prized – will sell investors anything they will buy. Second, speculation is most dangerous when it looks easiest.“ – Warren Buffett

Temperament

The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.” – Warren Buffett

“You’re dealing with a lot of silly people in the marketplace; it’s like a great big casino and everyone else is boozing. If you can stick with Pepsi, you should be O.K.” – Warren Buffett

Margin of Safety

“The scientist has a lot of experience with ignorance and doubt and uncertainty, and this experience is of very great importance, I think. When a scientist doesn’t know the answer to a problem, he is ignorant. When he has a hunch as to what the result is, he is uncertain. And when he is pretty darn sure of what the result is going to be, he is in some doubt. We have found it of paramount importance that in order to progress we must recognize the ignorance and leave room for doubt. Scientific knowledge is a body of statements of varying degrees of certainty– some most unsure, some nearly sure, none absolutely certain.” – Richard Feynman

“There is no investment rule that remains immutable except the margin of safety.” – Peter Cundill

Forecasting

“Forecasting can be affected by more vagaries from year to year. You have to understand the nature of a company’s revenue and earnings in order to know the predictability of historical data.” – Charlie Munger

“Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it’s lack of change that appeals to me. I don’t think it is going to be hurt by the Internet. That’s the kind of business I like.” – Warren Buffett

“You’re the speculator. See, you and I think differently. I think of the possibilities but am afraid to put things in. When I see all the possibilities…I always figure the dark is too big for me to guess at. It’s not much use in guessing particular things. But you’re different…I’m really afraid to make specific guesses because the moment I’m make that guess, I can see seven other alternatives. And so since I see all these other alternatives, I don’t know which one to piddle with.” – Richard Feynman

“You must stock this short term anticipation stuff.” – Peter Cundill

“Forecasting should be used as a device to put both problems and opportunities into perspective… but it can never be a substitute for strategy, nor should it ever be used as the primary basis for portfolio investment decisions.” – Peter Cundill

Problem Solving

“I insist on a lot of time being spent, almost every day, to just sit and think.” – Warren Buffett

“If I had 20 days to solve a problem, I would spend 19 days to define it.” – Albert Einstein

“Where all think alike, no one thinks very much.” – Walter Lippmann

“If you skillfully follow the multidisciplinary path, you will never wish to come back. It would be like cutting off your hands” – Charlie Munger

To Gain an Edge

“The way to win is to work, work, work, work and hope to have a few insights.” – Charlie Munger

“So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction that you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence. – Charlie Munger

“You don’t have to be the smartest analyst, you just have to be the most dogged.” – Michael Burry

“Read every line item until you get it.” – Michael Burry

“I began to get into the practice of going to the worst stock exchanges in the world…” – Peter Cundill

Adversity & Setbacks

“When you find bad news, I say: Get it right, get it fast, get it out, get it over” – Warren Buffett

“Assume life will be really tough, and then ask if you can handle it. If the answer is yes, you’ve won.” – Charlie Munger

“I think I developed courage when I learned I could deal with hardship. You need to get your feet wet and get some failure under your belt.” – Charlie Munger

“Whenever you think that some situation or some person is ruining your life, it’s actually you who are ruining your life. It’s such a simple idea. Feeling like a victim is a perfectly disastrous way to make go through life. If you just take the attitude that however bad it is in anyway, it’s always your fault and you just fix it as best you can – the so-called “iron prescription” – I think that really works.” – Charlie Munger

Life Advice

“Never give up searching for that job that you are passionate about.” – Warren Buffett

“The successful warrior is the average man, with laser-like focus.” – Bruce Lee

“You can enhance your mind over time. A person’s main asset is themselves, so preserve and enhance yourself.” – Warren Buffett

“Try not to become a person of success, but rather try to become a person of value.” – Albert Einstein

“You gotta keep control of your time, and you can’t unless you say no. You can’t let people set your agenda in life.” – Warren Buffett

“Whoever watches the wind will not plant; whoever looks at the clouds will not reap.” – Ecclesiastes 11:4

Bridge

“Investing in a market where people believe in efficiency is like playing bridge with someone who has been told it doesn’t do any good to look at the cards.” – Warren Buffett

“The approach and strategies [of bridge and stock investing] are very similar. In the stock market you do not base your decisions on what the market is doing, but on what you think is rational. With bridge, you need to adhere to a disciplined bidding system. While there is no one best system, there is one that works best for you. Once you choose a system, you need to stick with it.” – Warren Buffett

“You know, if I’m playing bridge and a naked woman walks by, I don’t ever see her — don’t test me on that! … You know, I wouldn’t mind going to jail if I had the right three cell mates, so we could play bridge all the time. … It takes some investment to play it … I mean, you can not sit down and learn how to play it like most games. … There’s a lotta lessons in it … you have to look at all the facts. You have to draw inferences from what you’ve seen, what you’ve heard. You have to discard improper theories about what the hand had as more evidence comes in sometimes. You have to be open to a possible change of course if you get new information. You have to work with a partner, particularly on defense.” – Warren Buffett

“The approach and strategies are very similar in that you gather all the information you can and then keep adding to that base of information as things develop. You do whatever the probabilities indicated based on the knowledge that you have at that time, but you are always willing to modify your behavior or your approach as you get new information. In bridge, you behave in a way that gets the best from your partner. And in business, you behave in the way that gets the best from your managers and your employees.” – Warren Buffett

“It’s a game of a million inferences. There are a lot of things to draw inferences from — cards played and not played. These inferences tell you something about the probabilities. It’s got to be the best intellectual exercise out there. You’re seeing through new situations every ten minutes. Bridge is about weighing gain/loss ratios. You’re doing calculations all the time.” – Warren Buffett

“I never look back. I don’t worry about anything… You play the hand you get, you play it as well as you can… and you’re thankful.” – Warren Buffett

Finding Ideas: Curiosity

Great story demonstrating Warren Buffett’s mind and relentless curiosity.

“When a thing is funny, search it carefully for a hidden truth.” – George Bernard Shaw

“In any field, find the strangest thing and then explore it.” – John Archibald Wheeler

Ben Graham Core Tenants

“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” – Ben Graham

“The chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.” – Ben Graham

Discipline, Knowledge, and Self-Control

“I met the towering intellectuals in books, not in the classroom, which is natural. I can’t remember when I first read Ben Franklin. I had Thomas Jefferson over my bed at seven or eight. My family was into all that stuff, getting ahead through discipline, knowledge, and self-control.” – Charlie Munger

“From the circumstances of my position, I was often thrown into the society of horseracers, cardplayers, foxhunters, [as well as] scientific and professional men … and many a time have I asked myself … ‘Well, which of these kinds of reputation should I prefer–that of a horsejockey, a foxhunter, … or the honest advocate of my country’s rights?'” – Thomas Jefferson

“[you should] lose no occasion of exercising your dispositions to be grateful, to be generous, to be charitable, to be humane, to be true, just, firm, orderly, courageous &c. Consider every act of this kind as an exercise which will strengthen your moral faculties, & increase your worth.” – Thomas Jefferson

“A mind always employed is always happy. This is the true secret, the grand recipe for felicity” – Thomas Jefferson

Probability

“Whether or not they recognize it, virtually all decisions that investors make are exercises in probability. For them to succeed, it is critical that their probability statement combines the historical record with the most recent data available. And that is Bayesian analysis in action.” – Robert G Hagstrom: The Warren Buffett Portfolio

“The best investing is done by people who make the best subjective judgments.” – Howard Marks

“We can see quite clearly that Buffett’s risk arbitrage estimates are subjective probabilities. There is no frequency distribution in risk arbitrage. Every deal is different. Every circumstance requires different estimations. Even so, there is value to approaching the risk arbitrage deal with some rational mathematical calculation.” – Warren Buffett – Robert G Hagstrom: The Warren Buffett Portfolio

“Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain. That is what we’re trying to do. It’s imperfect, but that’s what it is all about.” – Warren Buffett

Simplicity

“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.” – Warren Buffett

“Simplicity has a way of improving performance through enabling us to better understand what we are doing.” – Charlie Munger

“Focus on simplicity…once you get there, you can move mountains.” – Steve Jobs

“There seems to be some perverse human characteristic that likes to make easy things difficult.” – Warren Buffett

“False precision leads to Long-Term Capital Management [a hedge fund associated with two Nobel Prize winners in economics that almost brought down the global financial system in 1998]. It only happens to people with high IQs. Those of you with an IQ of 120 are safe.” – Warren Buffett

“Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper.” – Warren Buffett

“Some of the worst business decisions I’ve ever seen are the consequence of complex calculations and projections. They do that in business schools because, well, they have to do something.” – Charlie Munger

“There is now an overwhelming amount of data to suggest that in many environments, simple [numeric] models significantly outperform human (expert) judgement. – James Montier

“Every two years, I write them [the CEOs] a very simple letter, a page and a half. I don’t believe in a 200-page manual, because if you put out a 200-page manual, everyone is looking for loopholes” – Warren Buffett

“You don’t have to know how to value all businesses.You have to stay within your circle of competence, and pick companies that sell for less than what they’re worth. Some don’t lend themselves to valuations, so you should ignore them…If you are in the investment business and have an IQ of 150, sell 30 points to someone else. You do have to have an emotional stability and an inner peace about your decisions. It is a game where you are bombarded by minute-by-minute opinions. It’s not a complicated game. It’s simple, but it’s not easy. You have to have an emotional stability.” – Warren Buffett

“You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick ‘no’.” -Warren Buffett

“Here’s what we’re looking for…(5) simple businesses (if there’s lots of technology, we won’t understand it),” – Warren Buffett

“The essential principle is what Charlie calls the ‘too hard’ pile, where we put things we don’t know how to evaluate. We get to that pile with about 99% of the ideas that come our way.” – Warren Buffett

Checklists

“I’m a great believer in solving hard problems by using a checklist. You need to get all the likely and unlikely answers before you; otherwise it’s easy to miss something important.” – Charlie Munger

“Good checklists, are precise. They are efficient, to the point, and easy to use even in the most difficult situations. They do not try to spell out everything.” – Atul Gwande

“You need a different checklist and different mental models for different companies. I can never make it easy by saying, ‘Here are three things.’ You have to derive it yourself to ingrain it in your head for the rest of your life.” – Charlie Munger

List of Investing Mistakes & Lessons

Mistakes of the First Twenty-five Years (A Condensed Version) – Berkshire Hathaway 1989 Shareholder Letter

Berkshire’s Blemishes: Lessons for Buffett’s Successors, Peers, and Policy – Lawrence Cunningham

“I like people admitting they were complete stupid horses’ asses. I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.” – Charlie Munger

“Those things that hurt, instruct.” – Benjamin Franklin

“Understand your errors, and then you’ll make better decisions.” – Richard Zeckhauser

Munger’s Rules:

“Large amounts of easy money cause regrettable human behavior. That’s Munger’s rule.” – Charlie Munger
“When any person offers you a chance to earn lots of money without risk, don’t listen to the rest of their sentence. Follow this and you’ll save yourself a lot of misery.” – Charlie Munger
“In fact, any time anybody offers you anything with a big commission and a 200-page prospectus, don’t buy it. Occasionally, you’ll be wrong if you adopt ‘Munger’s Rule‘. However, over a lifetime, you’ll be a long way ahead—and you will miss a lot of unhappy experiences that might otherwise reduce your love for your fellow man.” – Charlie Munger
“…you really get extreme dysfunction as a corrective decision-making body in the typical American board of directors. They only act, again the power of incentives, they only act when it gets so bad it starts making them look foolish, or threatening legal liability to them. That’s Munger’s rule. I mean there are occasional things that don’t follow Munger’s rule, but by and large the board of directors is a very ineffective corrector if the top guy is a little nuts, which, of course, frequently happens.” – Charlie Munger
“People are trying to be smart—all I am trying to do is not to be idiotic, but it’s harder than most people think.” – Charlie Munger
“Never, ever, think about something else when you should be thinking about the power of incentives.” – Charlie Munger

Caution:

“Most value investors tend to buy things too early and sell things too early.” – Peter Cundill
“What I’m against is being very confident and feeling that you know, for sure, that your particular intervention will do more good than harm, given that you’re dealing with highly complex systems wherein everything is interacting with everything else.” – Charlie Munger

Other Quote Resources

Random

“Great minds discuss ideas; average minds discuss events; small minds discuss people.” – Thomas Henry Buckle
“To be yourself in a world that is constantly trying to make you something else is the greatest accomplishment.” – Ralph Waldo Emerson
“Life is either a great adventure or nothing.” – Helen Keller
“Great things are done by a series of small things brought together.” – Vincent Van Gogh