RWH037: Celebrating Charlie Munger w/ Mohnish Pabrai, Tom Gayner, Joel Greenblatt, & Chris Davis
We Study Billionaires - The Investor’s Podcast Network
The Dangers of Delusion and Wrong Incentives in the Financial Industry
In this engaging summary, Charlie Munger emphasizes the importance of recognizing when our approach may not be working, despite the discomfort it may bring. He highlights the traps of the financial industry and finance professors who stick to outdated methods. Munger compares this behavior to back surgeons who only perform one type of operation because it's all they know. He quotes Upton Sinclair who said, 'It's difficult to get a man to understand something when his salary depends on his not understanding it.' Munger discusses his alternate investment approach, likening it to a patient spearfisherman waiting for the right opportunity. He critiques the hyperactivity and over-diversification of Wall Street. Moreover, he emphasizes the difficulties of outperforming index funds and the danger of becoming too committed to a single position. Munger highlights the importance of incentives and aligning them properly. He warns against self-delusion and rationalization. Munger's approach is to be brutally rational and confront painful truths.
