“I knew a guy who had $5 million and owned his house free and clear. But he wanted to make a bit more money to support his spending, so at the peak of the internet bubble he was selling puts on internet stocks. He lost all of his money and his house and now works in a restaurant. It’s not a smart thing for the country to legalize gambling [in the stock market] and make it very accessible.”-said Charlie Munger
Tag: Munger
For a few months I had been having slight pain in my biceps near my elbows. My doctor said it was probably an injury from lifting weights. One night about four weeks ago I was sleeping soundly when I was jolted awaked by much more significant bilateral pain in both of my biceps. I immediately thought: “I am having a heart attack; I need to get to an emergency room.” I woke my wife and asked her to get dressed quickly and to get in the car. As we were driving to the hospital the painful sensations in my biceps started to go away. It was at that point that I believe I started telling myself a story about the pain in my arms not really being from a heart attack. I am sure I was subconsciously thinking: “I have a busy schedule next week. I can’t afford to have a heart attack right now. This pain is probably nothing. I probably just hurt myself in the gym. Who gets bicep pain with a heart attack and no chest pain?” I then said to my wife: “Maybe we should go home.” My wife insisted we go to the emergency room. I might have argued with her, but at that moment I reminded myself about Munger and Buffett’s approach to risk:
“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’s all about.” http://beta.fool.com/danielsparks/2012/12/14/berkshire-hathaways-downside-protection/18950/
Going to the emergency room emergency room for tests on my heart function was clearly wise since the amount of possible loss was so massive even if the probability was small (which it was not given the symptoms). After thinking about this formula I no longer argued with my wife about going to the emergency room. In this case rationality (and my wife) overcame psychological denial, over-optimism and other negative decision making heuristics. It turned out that my pain was from a small heart attack and three days later I was in the operating room for a triple bypass.-from 25IQ
Source:Ben Carlson
I don’t love Ben Graham and his ideas the way Warren does. You have to understand, to Warren — who discovered him at such a young age and then went to work for him — Ben Graham’s insights changed his whole life, and he spent much of his early years worshiping the master at close range. But I have to say, Ben Graham had a lot to learn as an investor. His ideas of how to value companies were all shaped by how the Great Crash and the Depression almost destroyed him, and he was always a little afraid of what the market can do. It left him with an aftermath of fear for the rest of his life, and all his methods were designed to keep that at bay.
I think Ben Graham wasn’t nearly as good an investor as Warren Buffett is or even as good as I am. Buying those cheap, cigar-butt stocks [companies with limited potential growth selling at a fraction of what they would be worth in a takeover or liquidation] was a snare and a delusion, and it would never work with the kinds of sums of money we have. You can’t do it with billions of dollars or even many millions of dollars. But he was a very good writer and a very good teacher and a brilliant man, one of the only intellectuals – probably the only intellectual — in the investing business at the time.- said Charlie Munger
A young shareholder asked Munger how to follow in his footsteps, and Munger brought down the house by saying, “We get these questions a lot from the enterprising young. It’s a very intelligent question: You look at some old guy who’s rich and you ask, ‘How can I become like you, except faster?’”
Munger’s reply was: “Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Step by step you get ahead, but not necessarily in
fast spurts. But you build discipline by preparing for fast spurts… Slug it out one inch at a time, day by day, at the end of the day — if you live long enough — most people get what they deserve.”