Dubrovina - The Art of Being Rational: Charlie Munger

The Art of Being Rational

The Art of Being Rational

CHARLIE MUNGER

Oxana Dubrovina

Copyright 2019 Oxana Dubrovina

All rights reserved. This book or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of the publisher except for the use of brief quotations in a book review.

ISBN: 978-1-64633-759-0

I am trying to emulate my great grandfather. When he died, they said about him, nobody envied the success so fairly won and wisely used. It is a simple philosophy. Wouldnt Wall Street have worked better if more people had tried to imitate my grandfather?

Charlie Munger, CNBC interview, Sunday, May 6, 2012

My story. First, let me tell you something about myself. I am Russian, but I was born in Samarkand, Uzbekistan, in the former Soviet Union. After the collapse of the Soviet Union, my family moved to Moscow, Russia. I graduated with a law degree from the Academy of Labor and Social Relation in Moscow. In 2005, I moved to Vienna, Austria, to pursue a law degree at the University of Vienna. Through the years, I worked for different big and local international law firms in Vienna.

Now I live and work in Vienna. The first question you may ask me is what does this have to do with Charlie Munger and Warren Buffett? Let me answer this question systematically. I would like to give you an example from psychology, as illustrated in a book by Robert Cialdini, Influence: The Psychology of Persuasion.

Cialdini starts by discussing the mothering instinct of turkeys. Mother turkeys are very protective, good mothers, but their mothering instinct has been found to be triggered by one thing and one thing only: the cheep-cheep sound of their chicks. The polecat is the natural enemy of the turkey, and when a mother turkey sees one, she will instantly go into attack mode; she will do so even at the sight of a stuffed version of a polecat. But when the same stuffed polecat is made to make the same cheep-cheep sound that her chicks make, something strange happens: the mother turkey becomes a devoted protector of it!

You may think: How dumb are animals? Press a button, and they act a certain way, even if those actions are ridiculous. But Cialdini tells us about turkey behavior only to prepare us for the uncomfortable truth about human automatic reaction. We also have our preprogrammed tapes, which usually work for us in positive waysfor instance, to ensure our survival without having to think too muchbut they can also be played to our detriment when we are unaware of the triggers.

The principle of the cheep-cheep sound illustrates the connection I have with my relatives or somebody whom I know very well. We are usually interested in a person who looks the same, who behaves the same, and everything we do goes together with psychology, which influences our decisions and thoughts in everyday matters. In my case, it is about my grandfather who reminds me of Charlie Munger. My grandfather died many years ago. I miss the old-school values of moral and ethics that my grandfather represented. Charlie represents a high intellect with the continuation of these high standards of morals and ethics. I believe that Charlie Munger is a most rational person, while Warren Buffett is a genius in his own way. They have a lot in common, despite being different characters, but represent the same values and principles.

In one CNBC interview, after they discussed how Warren Buffett wants to be remembered as a teacher, Charlie said: Well I have a little different twist. I have less ambition than Warren of being a great teacher. I am trying to emulate my great grandfather. When he died they said about him, nobody envied the success so fairly won and wisely used. It is a simple philosophy. Wouldnt Wall Street have worked better if more people had tried to imitate my grandfather?

This book is not a typical Value Investing Book; it is not the aim to teach you how to get rich easy or recommend stocks you should buy. This book is a collection of thoughts put together on morals and ethics and the life of Charlie Munger as a novel. I tried to put his quotes and his thoughts on different matters together in Part 1 as a story. I combined small puzzles to make it much more fun for the reader, to help you understand it better. I believe when you have his quotes presented in a story, it will help make it easier to understand; his writing and speeches are in their pure form.

You may ask, if my interest is Charlie Munger, why I am writing on both Charlie Munger and Warren Buffett. Well, first I started to focus on Charlie exclusively but later understood it is impossible to separate them. Both men are very connected; they have influenced each others decisions throughout the years. Exactly this cooperation of two minds made Berkshire Hathaway one of the best financial conglomerates ever created based on two great intellects, Charlie Munger and Warren Buffett. As I started to be interested in Charlie Munger in 2014, I made a fan group on Facebook, Charlie Munger Almanack. After a while, I concluded that if I did not put his beautiful ideas and facts in a book, they would be wasted and lost with time. You should approach this book with an open mind and adopt the best ideas and lessons as you see fit, or maybe you will even change your mind on certain subjects after reading this book. I hope this book will influence many peoples minds, especially young people, helping them to be more rational and objective.

Nobody is that clever to sit and dream it himself, Charlie Munger said.

As Darwin said: When I have found out that I have blundered or that my work has been imperfect, and when I have been overpraised, so that I have felt mortified, it has been my greatest comfort to say hundreds of times to myself I have worked as hard as well I could, and no man can do more than this. I remember when in Good Success Bay in Tierre del Fuego thinking (and, believe, that I wrote home to the effect) that I could not employ my life better than in adding a little to national science. This I have done to the best of my abilities, and critics may say what they like but they cannot destroy this conviction.

This point of view of Darwin reflects exactly what I want to tell you. I have worked on this book to make it interesting and amusing so every reader will find the content useful.

Why do I concentrate your attention on morals and ethics, faults and mistakes? Well, it comes back to my personal story. I was raised in a family with two fathers, my own father and my grandfather. Each of them had a strong influence on me. I spent a lot of time with my grandfather in my childhood. He was very kind, a very special person. Of course, you may have great ethics and moral principles in your family but never take it to your business. But why dont we put the right principles and values in our everyday business life as well?

As Charlie articulated: Nothing is more important than behaving well in life.

We do lack great people in a leadership in business right now. The last generations of struggle in Russia made a business society that is moved and ruled by the principles of an ecosystem, so the strongest are going to survive without any attention to humanity and ethics; if you speak about using honestly and moral in business, they think it is maybe a joke or you are a very naive and weak person. After the collapse of the Soviet Union, the former USSR republics were economically poor due to the lack of an intelligent, effective systematic approach in business, of well-educated people, of wisdom, of respectable people in both business and social life. Of course, the international characteristics of modern businesses are far from excellent. It is difficult to find a good model of behavior to learn from in the modern world, to copy their ideas. Maybe they are all already gone, so you could learn it from the past. Therefore, I focused my attention on Charlie Munger and Warren Buffettexceptional people offering an intelligent, honest, and moral approach to business and life.