Private Investment

Ideas from Charlie Munger
(Warren Buffet's financial partner)

Tips on the decision-making process; In 2015 T. Griffin homed in on the ideas of Charlie Munger, longtime investor and vice chairman of Berkshire Hathaway Inc.; a book by Mr. Griffin, “Charlie Munger: The Complete Investor”.

 

 

Extracts from a WSJ-Interview (The Wall Street Journal) with Tren Griffin. Mr. Griffin is a senior director of strategy at Microsoft Corp., focusing on software platforms and business models. Nights and weekends, he transforms into a voracious reader and writer about business and investing.

WSJ: What is unique about Mr. Munger’s decision-making process?
MR. GRIFFIN: He uses a two-track process. The first process is essentially an expected-value calculation; the goal is to be as rational as possible. The second process involves looking at subconscious influences which can cause an investor’s thought process to malfunction. He believes that through a process of applying a range of mental models he refers to as "worldly wisdom" and a couple of dozen principles related to "the psychology of misjudgment," a person can reduce mistakes. Included in this are factors such as confirmation bias, the tendency to only seek information or statistics that confirm a previously held view, and action bias, the tendency or need to do something as opposed to being patient.

 

WSJ: Mr. Munger has unique views on investing, particularly about the choice between index investing and what he calls "focus investing." Do you agree with his approach?
MR. GRIFFIN: Munger says the best option for what he calls the “know-nothing investor” with a long-term time horizon is a diversified portfolio of low-cost index funds or ETFs. He also points out that despite the fact that more than 90% of investors are "know-nothing investors," way more than 10% will conclude ''I´m in the 10%.'"

 

WSJ: What are some of the techniques that can be used to make better investing decisions?
MR. GRIFFIN: The ability to learn, especially from mistakes, is a critical skill. The other key skill is to focus more on not being stupid, rather than trying to be smart. Taking the time to understand sources of psychological and emotional bias in making decisions is central to his way of thinking.

 

Charlie Munger/The complete Investor - in a nutshell:
Munger’s system has steered his investments for forty years and has guided generations of successful investors. The book presents the essential steps of Munger’s investing strategy, condensed here for the first time from interviews, speeches, writings, and shareholder letters, and paired with commentary from fund managers, value investors, and business-case historians. Derived from Ben Graham’s value-investing system, Munger’s approach is straightforward enough that ordinary investors can apply it to their portfolios. The book is not simply about investing. It is about cultivating mental models for your whole life, but especially for your investments.

 

T. Griffin-Blog: https://25iq.com 

Original Interview/link: http://www.wsj.com

 

The book was published by 'Columbia Business School Publishing'