Charlie Munger once gave a graduation speech in 1986 on how to guarantee a life of misery. He borrowed the idea from a speech Johnny Carson gave several years earlier. Instead of speaking about what leads to a life of happiness, Carson did the opposite.
So Carson rattled off three sure things he knew would lead to misery: ingesting chemicals in an effort to alter mood or perception, envy, and resentment. If you focused on only those three things you can have the most miserable life you’ve always wanted.
Munger liked Carson’s speech so much, he expanded on it, adding four more ingredients that would guarantee misery:
First, be unreliable. Do not faithfully do what you have engaged to do. If you will only master this one habit you will more than counterbalance the combined effect of all your virtues, howsoever great. If you like being distrusted and excluded from the best human contribution and company, this prescription is for you. Master this one habit and you can always play the role of the hare in the fable, except that instead of being outrun by one fine turtle you will be outrun by hordes and hordes of mediocre turtles and even by some mediocre turtles on crutches.
My second prescription for misery is to learn everything you possibly can from your own personal experience, minimizing what you learn vicariously from the good and bad experience of others, living and dead. This prescription is a sure-shot producer of misery and second-rate achievement.
You can see the results of not learning from others’ mistakes by simply looking about you… I recommend as a memory clue to finding the way to real trouble from heedless, unoriginal error the modern saying: “If at first you don’t succeed, well, so much for hang gliding.” The other aspect of avoiding vicarious wisdom is the rule for not learning from the best work done before yours. The prescription is to become as non-educated as you reasonable can.
My third prescription for misery is to go down and stay down when you get your first, second, third severe reverse in the battle of life. Because there is so much adversity out there, even for the lucky and wise, this will guarantee that, in due course, you will be permanently mired in misery.
My final prescription to you for a life of fuzzy thinking and infelicity is to ignore a story they told me when I was very young about a rustic who said: “I wish I knew where I was going to die, and then I’d never go there.” Most people smile at the rustic’s ignorance and ignore his basic wisdom. If my experience is any guide, the rustic’s approach is to be avoided at all cost by someone bent on misery. To help fail you should discount as mere quirk, with no useful message, the method of the rustic, which is the same one used in Carson’s speech.
That message was to “Invest, always invert.” It’s the exact thing you should never do when seeking a life of misery.
But for those of you not sold on a life of misery, what Carson and Munger did was flip the question – how to be happy – on its head. Carson wasn’t sure what lead to a happy life, but his own experiences taught him what didn’t. He reasoned that if you avoided the non-happy things, you’d live a happy life.
And Munger follows the same line of thinking.
The life of Darwin demonstrates how a turtle may outrun the hares, aided by extreme objectivity, which helps the objective person end up like the only player without blindfold in a game of pin-the-donkey. If you minimize objectivity, you ignore not only a lesson from Darwin but also one from Einstein. Einstein said that his successful theories came from: “Curiosity, concentration, perseverance and self-criticism.” And by self-criticism he meant the testing and destruction of his own well-loved ideas.
So to give this an investing twist, I borrowed the idea and pulled a few things off the top of my head for anyone who wants to guarantee investing misery:
- Always try to get rich quick, chase the latest fad, and do it in the shortest time possible.
- Let debt be your friend. Mortgage everything you own, including future income, and bet it all in the market.
- Cherry pick historical returns so your expected future returns are always high.
- Expect a really high return so you can spend more money now (save less) and still reach your goals on paper.
- Believe that no matter how much you trade, you’re investing prowess will easily exceed your return needs while covering costs and taxes.
- Or just equate higher costs with better performance.
- Invest like the worst is so unlikely you never have to worry about it.
- Or just assume the best and prepare for even better.
- Rely on stock volatility to assess the risks of the business.
- Seek out the facts that fit your strategy, positions, and predictions and ignore everything else.
- Know you’re always right. And when it doesn’t work out, it’s someone else’s fault.
- Stay emotional. Stay irrational.
And whatever you do, repeat all of the above to guarantee the most miserable investing experience ever.
Charlie Munger’s Speech to the Harvard School