Customer Reviews

Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger, Expanded Third Edition

5 star:		(11)
4 star:		(3)
3 star:		(2)
2 star:		(0)
1 star:		(0)

 

 

First of all, this is my first and last book review. I don't write these ever, and I will never write one again. However, seeing this gem had only 6 reviews and I felt this needed to be said.

You can't afford to not read this. Think of it as a gift to humanity from a higher more intelligent species - Its something you don't want to go through life having missed.

I spend about 16 hours a day researching financial markets/value investing.

I have read over 50 books on related subjects - No book has influenced my thought process more that this one. It is simply amazing.

You will not get the value from this book when you close the last page, but when you see the world relate in the ways Munger lays out for you. This is one of the greatest minds and business and he tells you his secrets. The last chapter on the psychology of human misjudgment will live on past Munger's days. It is his greatest work and is invaluable information. The way your brain fires and works will literally physically change over time from the things this book teaches you. Its a mind trainer - it teaches you how to look at problems. It is worth its weight in platinum.

I don't care who you are. You need to buy this and pound his ideas in your head. You won't even think its that great as you read it and might even wonder why it is praised so much. Over time, you'll see things how Munger does and start to think like Munger does. Whatever field you are in, this book will help you to look and analyze problems and the world as a whole in a different more intelligent manner. Again, I cannot praise or recommend this book enough. When your done with it and look back years later, this odd review I just wrote will make crystal clear sense to you. Your welcome.

Poor Charlie's Almanack is one of the most powerful, insightful works I have ever read. With 532 pages packed with wisdom and contrarian thought it is very difficult to do this book justice even in a moderately lengthy review.

I bought it because of Munger's reputation as a creative and original problem solver. As readers of my reviews know my primary interest in recent years has been to understand why civilizations fail. Given the perilous state of the world's economy my concerns about our own civilization appear to be increasingly justified. (Interestingly, Jared Diamond's "Collapse: How Societies Choose to Fail or Succeed" is mentioned on page 317 of the Almanack as an example of rare but much needed multidisciplinary analysis).

Charlie Munger is a magna cum laude graduate of the Harvard Law School and currently vice chairman of Berkshire Hathaway, Warren Buffet's $100+ billion empire. What can a highly successful businessman teach us about how we got into this mess and what lessons should we learn from it?

To my surprise Munger as early as 2000 correctly predicted the current financial crisis and identified its causes. Speaking to the Philanthropy Roundtable in November of that year he said, "I suggest that when the financial scene starts reminding you of Sodom and Gomorrah you should fear practical consequences even if you like to participate in what is going on." (p. 352)

One of the key causes is the functional equivalent of embezzlement or `febezzlement' as Munger calls it. Febezzling can take several forms but one of the most destructive happens when accounting rules are written so that fund managers and consultants can take huge fees based on `soaring' stock prices made possible by very low interest rates and loose lending practices.

In a postscript to the above observation Munger adds this ominous note:

"...some economists would regard the result as good because it came about in a market. But to me it would resemble a weird and disturbing combination of (1) a gambling casino imposing an unreasonably greedy take for the house, plus (2) a form of Ponzi-like scheme...plus (3) a bubble of speculation that would eventually burst...(which) would, I think, reduce the reputation of our
country, and deservedly so." (p. 355)

Today, eight years later, trillions of dollars are being magically created by the Fed and Treasury and poured into our financial system to fend off economic collapse. As this review is being written in late November 2008 respected analysts speaking on national television are saying that such folly will soon result in the collapse of the dollar as the world's reserve currency and the fading of the USA as a global economic power.

Our current crisis is a classic example of the lollapalooza effect, a term Munger uses to describe when powerful forces all interact in the same direction to produce an unexpected and often disastrous outcome. He compares it to certain effects in physics where forces don't just add together but instead produce a nuclear explosion when critical mass is reached.

Projected Medicare costs for example were vastly underestimated by economists when the system was initially envisioned because they failed to take into account second and third order effects such as gaming the system by both health care providers and users. Doctors, lawyers, insurance companies, hospitals billing five dollars for one aspirin tablet, and ordinary citizens pushing bogus `disability' claims all chimed in to make our health care system the fiasco it is today.

The same applies to economists simplistically following Ricardo's comparative advantage law with regard to trade with China. Yes, you will get cheap goods from China but at the expense of ultimately destroying American economic power in the world. Munger once pointed this out to George Shultz, an economics PhD and treasury secretary in the Nixon administration and secretary of state under Reagan. "Charlie, I do not want to think about this," was Shultz's reply. (p.407)

This is a perfect example of failing to heed Munger's axiom that "one should recognize reality even when one doesn't like it, indeed, especially when one doesn't like it." (p. 348)

The point Munger repeatedly makes is that much if not most of what happens in life is quite predictable if you take into account psychology as well as economics. He argues in fact that usually the former is more important than the latter. A political system that allows rules to be created that lead to bogus accounting standards and complex, opaque shams like derivatives deserves what it gets.

And here Munger is perfectly willing to make a lot of people angry. He shares the ancient Roman statesman Cicero's views on limited-franchise democracy and a distaste for pure mob rule and demagogues.(p. 28) Indeed, Poor Charlie's Almanack editor Peter Kaufman writes "Arguably the most important theme of this book is the need for *trust*: deserved reliance upon the character, values, and integrity of those you live and work with." (p. 417)

(Whether or not a form of limited democracy coupled with true meritocracy is possible is open to debate but sadly the national media, with which this reviewer has had considerable `insider' experience, has displayed virtually no interest in furthering a serious discussion on subjects so fundamental to successful governance).

To be successful in life, Munger argues that in addition to integrity and hard work you must use an array of models drawn from many disciplines. Physics is an excellent place to start because its concepts and formulas so wonderfully demonstrate the power of a sound theory.

Munger's principles really do work. I know because I have been using many of them over the years without reading Charlie's book. By a curious coincidence, like Charlie I also studied some physics at the University of Michigan and I agree completely that learning physics makes you to think deeply and systematically. And I read Cicero in undergraduate school - in Latin. In the modern world studying both physics and Latin is a rather unusual combination. Beyond that, and our shared interest in problem solving, our paths went in very different directions.

In this reviewer's opinion it is not at all clear that our current civilization can survive this economic crisis. There is simply no way to undo the Gordian knot of hundreds of trillions of dollars in credit default swaps without a total systemic collapse. How ironic that it will be caused by a deadly and incurable plague-like virus, not biologic in nature but economic.

There will be survivors though. Poor Charlie's Almanack and the wisdom it contains should serve as a guide for those who will build a more enlightened world. Lollapalooza effects can be positive as well as negative. The challenge is to devise a lollapalooza strategy to put humanity on a new and wiser track. Any takers?

November 2009 Postscript

Given the dramatic rise in the stock market in recent months it might appear that my concern about the future of the economy and specifically the impact of credit default swaps is unfounded. Unfortunately rising stock prices have masked the CDS problem and it will likely reappear dramatically when the market suffers a sharp reversal in the coming months. My appraisal of Poor Charlie's Almanack stands as written. For the wellbeing of our country however this is one case where I hope very much that my analysis will be proven wrong.

November 27, 2009 - News of Dubai's possible default on $60bn in debt caused the price of credit default swaps on that debt to skyrocket by 320 basis points to 535 in just two days, exactly what I am warning of in the above review. Today's events are only a preview of what is to come, a fire bell ringing loudly in the night. We can only hope that international leaders can devise some way to put out the fire before it is too late. I regret that I have no words of advice to offer.

Postscript, February 12, 2011:

Rising stock prices continue to mask the CDS overhang. If central banks around the world continue to pump trillions of dollars, Euros, pounds, etc. into the global economy we should not be surprised by the resulting 'fool's rally'.

All that paper money has to go somewhere. When in the coming months skyrocketing food prices caused in part by crop failures and in part by market speculation, result in global political instability, especially in China, Pakistan, and the Middle East, we will see a repeat of 2008 only worse.

The key global stability indicator to follow is not the price of gold but the price of rice futures. Already it has gone from $11 and change to over $16. When it breaks $17 expect to see a most unpleasant example of Munger's lollapalooza effect. (Check rice futures on CNBC or the internet.)

These are complex issues and I will be glad to interact via email with those wishing to comment/debate them further. However may I ask that you be familiar with complexity theory as applied to societies (cf "The Collapse of Complex Societies" by Joseph Tainter) and the 'Singularity' in AI (cf for example Kurzweil's "The Singularity is Near"). My email address is included in my Amazon profile. Note: I do not provide financial or any other kind of advice. My interest is in political/economic trend analysis.

First, the text content makes this a good book, as others have pointed out far more extensively than I can here. But I have to agree, the illustrations are absolutely useless and the editor should be blamed for dumbing down the book in this manner. They could have made a much more compact book on lightweight pages, good for handheld reading, instead of a table book printed on glossy paper that will probably break the table it's placed on.

My biggest tip -- don't pay more than $50 from crazy people selling here -- just buy it from the book's website at [...].

Charlie Munger is a talented and smart man. He has been a successful lawyer and investor. He is also one of the wealthiest man in the US and is a famous partner of Warren Buffet.

The book combines much of his wisdom and insights and summarizes them in a highly readable format.

I have two issues with this book which prevents it from becoming a must read.

1)The book is made up of expensive glossy paper with lot of pictures and drawings with large typeface. The result is a book that is needlessly large, very heavy, and expensive and meager in content releative to a more normal autobiography. The book was not designed and priced to sell, and it seems to have sold poorly.

2)Charlie Munger praises himself (or have others praise him) way too much in this book. About 15-30% of this book is dedicated to the "Great Charlie". He calls himself "genius" at least couple of times. He also has many endorsement of his greatness and genius by other talented people such as Bill Gates. That's too bad, because Charlie is not only a great intellectual with awesome insights into practically everything, but he is also seemingly a man of great integrity and charity.

I am a great fan of Charlie Munger and I am glad to have read this book and absorb much of Charlie's wisdom. I just think the two major flaws of this book made it less than great.

This book is a must read for everyone, just like my title says. Charles (Charlie) T. Munger does not speak out as much as Warren Buffett does and this book grasps several of his talks and puts them into print for everyone. This book not only teaches you about business, but it also teaches you about life. His teachings go into areas outside of business as well. He says that in order to be good in business you have to know many different formulas from many different subject areas and then goes on to list 20 that he uses.

Not only does he talk about business but the book starts off by going a little bit into his life. Not so much a biography of sorts but the beginning is a bit about him and it also has some friend's comments in regards to him. This book is a little long, but other than that it is a great read. I have picked up several books to read outside of this book just from reading here and this is now one of my most prized books in my collection.

First, let me admit my bias: Charlie Munger is my hero and role model (along with Mr. Buffett and Mr. Franklin -- I'll let you decide which ones!). However, he came to be my hero because of everything that is written in this book. Charlie often uses the quote "To the man with only a hammer, every problem tends to look pretty much like a nail." You'll gain plenty of tools reading this book; about life, business and investing -- and you'll have a heck of a fun time doing it in my opinion. I truly believe that this is one of the great all-time books on any topic (but especially useful for one wanting to simplify the world of business and investing), and he gives plenty of other reading recommendations throughout to help one develop his or her Latticework of Mental Models. In Charlie's own words (from one of his speeches -- which comprise the last part of the book):

"What is elementary, worldly wisdom? Well, the first rule is that you can't really know anything if you just remember isolated facts and try and bang 'em back. If the facts don't hang together on a latticework of theory, you don't have them in a usable form.

You've got to have models in your head. And you've got to array your experience - both vicarious and direct - on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You've got to hang experience on a latticework of models in your head.

What are the models? Well, the first rule is that you've got to have multiple models - because if you just have one or two that you're using, the nature of human psychology is such that you'll torture reality so that it fits your models, or at least you'll think it does. You become the equivalent of a chiropractor who, of course, is the great boob in medicine.

It's like the old saying, "To the man with only a hammer, every problem looks like a nail." And of course, that's the way the chiropractor goes about practicing medicine. But that's a perfectly disastrous way to think and a perfectly disastrous way to operate in the world. So you've got to have multiple models.

And the models have to come from multiple disciplines - because all the wisdom of the world is not to be found in one little academic department. That's why poetry professors, by and large, are so unwise in a worldly sense. They don't have enough models in their heads. So you've got to have models across a fair array of disciplines.

You may say, "My God, this is already getting way too tough." But, fortunately, it isn't that tough - because 80 or 90 important models will carry about 90% of the freight in making you a worldly - wise person. And, of those, only a mere handful really carry very heavy freight.
.....
Checklist routines avoid a lot of errors. You should have all this elementary [worldly] wisdom and then you should go through a mental checklist in order to use it. There is no other procedure in the world that will work as well."

I am a HUGE fan of Charlie Munger. Sometimes equal to and even more than Warren Buffett who I also greatly admire for both his general wisdom and his investment track record. I might mention that Charlie FANS should be sure to take a look at his YouTube clips of speeches at the University of Michigan and at USC.

That said, I wanted to buy this book. But saw only USED copies for sale. I was disappointed, but then in reading Wikipedia I discovered that the book is available NEW on the Internet directly from a site that apparently gives the proceeds to a Charlie charity at the Hunington Museum.

The site is PCA Publishing or Intermountain Books Inc. They have a toll free number. The books costs $49 NEW plus shipping.

This message is NOT spam. I have no financial interest in this information or this site. I just wanted Amazon customers to know they can get the books for less that I see the USED prices on Amazon today.

Also the related book "Seeking Wisdom" is also available NEW and for $28 which is also lower than the prices for used copies on amazon.

I hope this information is helpful to FANS of Charlie Munger. Charlie would not admire people who pay more for USED items than they do for the same item new. At least I don't think he would

This is a collection of transcripts from talks Charlie Munger has given at universities and charity foundations, etc. over the years. At YouTube you can find video recordings of some of Charlie's talks transcribed in this book.

A recurrent theme of Charlie's is the need for multi-disciplinary thinking when trying to understand complex problems. Charlie recommends you know the fundamental ideas of both the hard and soft sciences (e.g. physics, chemistry, engineering, mathematics, as well as psychology, sociology, etc.), so when you are faced with an unusual or difficult problem in business or elsewhere you will be better equipped at breaking the problem down into sub-components that are easier to understand and respond to.

Another theme of Charlie's is to avoid bad things. This is particularly useful advice in investing because the pursuit of investment success is a very difficult task, but the avoidance of failure is rather easy and with that, success often comes as a byproduct.

This is an interesting and useful book albeit also quite mysterious because Charlie insists that his pupils / audience must 'reach' for the wisdom themselves so it will sit better with them. However, I think Charlie should have given more detailed examples of his thoughts because they often come out as rants and the audience must also reach too high for the wisdom which therefore eludes many people. In comparison, Warren Buffett's teachings are very simple and crystal clear. Another slight complaint I have about this book is the design. The main text is continually being interrupted with fancy magazine'ish quotes which makes it confusing to read. For these reasons I have deducted a star.

If you are looking for a how-to-invest guide I would suggest you first read Phil Fisher's book 'Common Stocks and Uncommon Profits', which gives more hands-on advice on how to assess the quality of a company.

PS: This review is for the expanded third edition.

If you have not read this book or gone to a Wesco or Berkshire annual meeting to hear him speak, do yourself a favor and buy this book. Charlie Munger is one of the smartest people alive and has a wide ranging set of interests and vast knowledge. He has a unique way of thinking about and organizing the world and he is often more informative to read than Buffett as he speaks his mind and is not political. This book was well done and this is an endorsement to read all things Charlie-you will not be disappointed. And, no, I am not getting a kick back on this book :)

I consider myself an avid reader with a particular interest in the bio/non-fiction genre; this book is without question the best I have read with a bent on personal philosophy both in business but also in life. The appearance of the book suggests it belongs on a coffee table but do not let appearances fool you; the collection of speeches and papers by Charlie are an outline to a modern 'sage'. Charlie's mental models and philosophy of combining the best of science, philosophy, and human physiology give the reader the blueprint to achieve the goals they hope to attain.

Must read, my favorite book on my bookshelf; I attempt to re-read annually.