Who’s the Real Genius at Berkshire Hathaway?

After reading “The Intelligent Investor,” “Common Stocks and Uncommon Profits,” “Rich Dad Poor Dad” and many other books, I have realized that the best investing book I ever read is “Poor Charlie’s Almanack” by Charlie Munger (Trades, Portfolio).

The life lessons inside this book are phenomenal. Munger taught me a simple, much more in-depth way of thinking at a rational level. I am grateful that Munger took the time to write this book because it opened up an entirely new perspective for me. He talks about Benjamin Franklin being his hero, and that is where I really learned to be virtuous and frugal in all aspects of life.

Most people believe Warren Buffett is the smartest investor in the world, but if you read “Poor Charlie’s Almanack,” Munger says one of Berkshire Hathaway‘s (NYSE:BRK.A)(NYSE:BRK.B) biggest mistakes was buying USAir stock where it lost a ton of money and opportunity cost in other companies. In this interview Buffett says the mistake was his own, and Munger told him to go ahead and drink at the bar instead of investing without him being there. The YouTube video is right here starting at 46:30.

One of the greatest pieces of advice that Munger offers is to read the book “Influence: The Psychology of Persuasion” by Robert Cialdini. He explains the laws of human misjudgment in this book and explains why it is a mandatory read.

Munger is not very outspoken and most of the time you only see Buffett speaking in public. Buffett makes investing seem very simple with only four rules to follow:

  1. A stock must be stable and understandable.
  2. Stock must have a long-term prospect.
  3. A stock must be managed by a vigilant leader.
  4. The stock must be undervalued.

These are four very basic simple rules. After reading “Poor Charlie’s Almanack,” I feel more should be added. These are Charlie’s rules:

  1. Allocate yourself when you find great opportunity.
  2. You don’t need to own more than three companies.
  3. Be extremely frugal and industrious.
  4. Constantly work on your mental models for ongoing improvement.

I learned more from reading what Munger has to say than what Buffett says, but this is just my opinion.

Cheers to your investment success.


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