Book Review – Charlie Munger: The Complete Investor, By Tren Griffin

Book Review by Jesse Koltes, Editor of TheCharlieton.com

Welcome to The Charlieton’s first book review. The aim of this review is to deeply understand the ideas of the book, and to compare them with related and competing ideas as they exist elsewhere in the world. The recitation of historical facts, narratives, and other trivialities will be minimized, except insofar as they support an interesting idea.

I will number each major idea in the book as I come across them in order to create an easily referenceable catalog of ideas. My hope is that this numerical system will be of growing use of as the number of book reviews piles up in the future.

I encourage the readers of this review to support the author of the original work by purchasing the book. Please note, I have only included my thoughts on Griffin’s first chapter. For a complete review of all 71 ideas in the book, please subscribe to our mailing list.

Overall Thoughts:

This book is a well-organized and thorough survey of both the Ben Graham value investing system, and Charlie Munger’s contributions to the investing world. Griffin expertly displays how Munger’s own ideas both emerged from, and later departed with the intellectual foundations laid by Graham.

Griffin also makes a valiant attempt at summarizing Charlie Munger’s notoriously artful and qualitative approach with rigor and detail. I believe this effort was successful, with my only quibble being that several points of explanation seemed duplicative or redundant. As a management consultant would say, the ideas within the constructed framework were not always “mutually exclusive and collectively exhaustive.” Still, this may be the price of trying to detail a system so thoroughly dependent on personal rationality, grit, and temperament. I doubt I could do better.

I hope to see more work from Tren Griffin that detail his own thoughts on contemporary value investing. His chapter on factor versus value was his best, despite it being one of the shortest. Now that the author has so successfully catalogued many of the great ideas of Charlie Munger, I hope to read future works by Griffin that are focused on more controversial subjects at the margins of modern value investing.

Note: All page numbers refer to quotes in Charlie Munger: The Complete Investor 2

Intro Summary:

The purpose of the book is to teach the reader how to think more like Charlie Munger, the legendary thinker, investor, and vice chairman of Berkshire Hathaway.

Griffin first explores the Ben Graham value investing system (the foundation and intellectual progenitor of the Berkshire system). Second, Griffin explores Munger’s complementary system using three elements: “principles, the right stuff, and variables.”

Chapter 1: The Basics of the Graham Value Investing System

Griffin explore the basic ideas of Ben Graham’s value investing system, citing it as the intellectual underpinning of Charlie Munger’s own system of thinking.

Idea #1: Simplicity

• Investing is simple but not easy. Complexity militates against an effective understanding of what is going on. Keep things as simple as possible.

Idea #2: Circle of competence

• Knowing what you don’t know is as important as what you do know

• “Confucius said that real knowledge is knowing the extent of one’s ignorance. Aristotle and Socrates said the same thing.” – Munger, p. 11

Idea #3: Inversion

• Rather than trying to be smart, it’s better to try to avoid being stupid.

• “It’s remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent. There must be some wisdom in the folk saying, “It’s the strong swimmers who drown.”” – Munger, p. 13

Idea #4: Investing is a zero sum game

• It is an undeniable arithmetic fact that the average return of all active investors will equal the average return of all passive investors, less costs.

• “The idea that everyone can have wonderful results from stocks is inherently crazy, nobody expects everyone to succeed at poker.” – Munger, p. 15