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1-Page Summary of Charlie Munger
Overview
You would think that having a lawyer’s salary would mean you have enough money to live comfortably, but Danielle Town proves otherwise. She was living paycheck-to-paycheck even though she worked long hours and had an extensive academic background.
In the beginning, she didn’t know anything about investing. Her father gave her some advice and tools to learn how to invest on her own. She started learning in January by being brave enough to start investing money that was not hers. In February, she decided what amount of money would be enough for her to quit working at a job and live off the interest from investments instead. In March, she voted with her money by putting it into companies that reflected what she believed in as well as voting against companies whose practices went against those beliefs. By April, she had learned the first principle of value investing: knowing a company inside out before you buy stock in it so you can avoid getting lost in its growth story or distracted by short-term fluctuations in price. May was all about Munger’s moat—how do you find something that will last? June is when we circled competence—what are your personal struggles with your relationship to money? What is your family’s history with money? July was all about pricing—how do you know when a company’s stock is at a good price? August was all about value—you’re looking for things people want or need even if they don’t yet realize they want or need them – but how do you recognize true value amidst all the noise out there? September inverted the story – once you’ve come up with reasons why an investment might be worth buying (more likely), play devil’s advocate: what are reasons not to buy this investment now (less likely)? October compiled an antifragile portfolio; find a company that won’t simply survive but will grow stronger because of crisis (antifragility). November meant selling stocks when certain criteria were met; like when their market cap got too big compared to their sales revenue or profit margins shrank too much after years of expansion. December meant living thankfulness – reflecting on everything gained from learning how to invest wisely over time.
January: Becoming Brave
The first month of the journey is about gathering the resolve it takes to begin. Danielle’s first month found her completely exhausted at her job as a lawyer and at her wit’s end. Her father Phil, a financial guru who authored a New York Times bestselling book on personal finance, had once offered to teach her his method for making money through investing but she didn’t want to listen. However, now she was ready because she needed help with her finances after getting laid off from work and having no income coming in.
Her mind was changed when Phil gave her a new perspective: If you have to do your job in order to make money, then you don’t really have any choice. Choice only comes from having enough money that you can choose how to spend your time. That is financial freedom. And Danielle wanted that freedom. Phil started by drilling down on “Rule #1”: Don’t lose money. There are many ways of losing money and Danielle was already doing one of them: saving her money instead of investing it because savings loses value over time due to inflation, while investments grow with inflation and therefore prevent losses.
Investing is important. It can help you grow your money and make it work for you over time. However, how do you invest well? Phil takes his lead from Warren Buffet, who suggests buying a good company when its price drops because of the economic cycle or other reasons. You should buy only if the stock will be worth more in 10 years than it is today. In the meantime, watch that stock as it grows into a valuable company that’s smart and good for society.
