Charlie Munger was speaking to a business school class at the University of Southern California in the early 1990s. The topic of the speech was the art of stock picking. But in typical Munger fashion he had some other things to say. He started the speech talking about what he coined ‘elemental worldly wisdom.’

Why start a discussion about picking shares with worldly wisdom? Munger wanted to make a point about what it takes to be successful at investing or anything else in life. He said, “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.”

His worldly wisdom is not just about investing. He takes a multi-disciplinary approach and borrows from psychology, physics, biology and mathematics. He takes all the elements that make up life and applies them to his philosophy of building wealth.

This makes sense. Philosophy is a systematic study of general and fundamental questions to find guiding principles for behaviour. And with so many different investment approaches, so many shares, funds and ETFs to choose from, and so much noise some guiding principles for behaviour are needed.

In the spirit of looking outside the investing world for guidance on how to navigate it here are some of my favourite quotes that inform my approach to money and life.  

The quotes I turn to when thinking about my finances

“One of the points I’m making in the book is that whoever you’ve been and wherever you’ve been, it never leaves you. I always picture it as a car. All yourselves are in it. And a new self can get in, but the old selves can’t ever get out. The important thing is, who’s got their hands on the wheel at any given moment?”

- Bruce Springsteen

Springsteen was asked why he was able to write so many songs that intimately portrayed lives that he never lived.

His songs captured working class anxiety as American manufacturing disappeared. Yet he never had a job other than being a musician.

He romanticised the car and the freedom of the road. But he didn’t have a driver’s license until after his mega-hit album Born to Run was recorded.

Yet the feelings expressed in his songs were genuine. He grew up in a working-class community buffeted by economic upheaval and his father worked in a factory. He saw first-hand the car obsessed culture in the US in the 60s and 70s and the yearning for freedom after the conformist ‘50s.

He absorbed a point of view from his surroundings. Even after he became a famous and wealthy rock star those past selves were still inside him ready to tap. All he had to do is let them take the wheel in his metaphorical car.

To me this quote sums up the study of behavioural economics far better than any textbook. We are not rational. Our decision making is influenced by more than we realise. I try and remain conscious of what I’ve absorbed from my experiences and how they may distort and influence the approach I take with my finances. Our decision-making is impacted by biases we don’t even know we have.

I also think about this quote when receiving advice from others. I take it all with a grain of salt. Any advice is the product of the experiences of the person giving it. That doesn’t mean it isn’t helpful. But it also doesn’t mean it is right for me and the goals I want to accomplish. The best thing that any of us can do is understand what makes our goals unique and the proper approach to achieve them. That is the framework we should use to assess the applicability of any financial advice we receive.

Robert Frost’s famous poem about the two paths diverging in the woods isn’t only about the two paths. It also describes how older people go back in memory and impose narrative order on choices that didn’t seem so clear at the time:

- David Brooks

Narratives can be dangerous. Life is like the zigging and zagging of a stock chart. It is more random than we think. Luck plays a bigger role than we think. In both cases this is truer in the short-term than the long-term. Consistency, patience and structure will have little impact on my life and investment outcomes in the next year. They will have an immense influence over where I am in 20 years.

We create narratives to impose order on chaos and randomness. They tend to credit us with skills and foresight when things go well. They tend to blame external factors out of our control when things don’t. Narratives and short-term conclusions are dangerous because they encourage us to act.

When a commentator with a level of confidence befitting an oracle tells me that an event will have certain investment implications, I can’t help but be sceptical. They don’t know. And they know they don’t know.

We hear this noise all the time. We are now hearing about what Trump will do and what investments will perform well in his administration. To me it doesn’t seem like Trump even knows what he will do two hours from now.

We’re still being told what is going to happen with interest rates and inflation. After being so wrong for the last four years I don’t know how an economist has the nerve to make another prediction. Yet the predictions keep coming. A stopped clock is right twice daily. That doesn’t seem like a good reason for changing my approach based on any preduction.  

Investing is a probabilistic exercise. It is about the greys far more than the blacks and whites. I invest in low business risk companies with moats that pay dividends. They are probably going to be making money and paying dividends 10 years from now. A small-cap conglomerate focusing on AI, Bitcoin minning and rare earths that is perfectly positioned to benefit from Trump in the White House and moderate reductions in interest rates will probably be an investing meme on what not to do in 10 years. I’m fine with embracing boring. When it comes to investing you should be too.

“Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally”

- John Maynard Keynes

This quote from Keynes can be taken in all sorts of ways. For me it is the basis for my view that one of the biggest advantages I have as an investor over professionals is structural edge. Structural edge refers to the impediments on investment professionals that shape the approach they take. Those impediments can be regulatory, they can be risk mitigation frameworks imposed by their employers to protect reputational risk and business risk or they can be the understandable desire to maintain a well-compensated career.

I have none of these impediments to my own approach with my portfolio. How I manage my personal investments are not regulated in most cases. I am not going to ruin the reputation of my firm by what I buy and sell in my own portfolio. My career is not based on how my investment actions can be perceived by my peers or my boss. I am free to do what I want. That is a huge responsibility but also a huge advantage. It is all up to me. My choices, my behaviour and my outcomes are in perfect alignment.

"The fact is, we are all terrible at imagining how we will feel in the future. We exaggerate how much the future will be like the present. We underestimate the power of temperament to gradually pull us up from the lowest lows. And if our capacities for imagining the future are bad in normal times, they are horrible in moments of stress and suffering.

Given these weaknesses, it seems wrong to make a decision that will foreclose future thinking. It seems wrong to imagine that you have mastery over everything you will feel and believe. It’s better to respect the future, to remain humbly open to your own unfolding."

- David Brooks

This is my second David Brooks quote, I like him so I think this allowed. I remember walking home from work in Boston during the global financial crisis. Every single day the news seemingly got worse, and my portfolio went down further.

To get back to my apartment I crossed the Public Garden which is adjacent to Boston Common. It is beautiful. But I never noticed the beauty during those days. I was too busy concentrating on the fact I was going to lose my job and trying to resist the urge to sell every share I owned.

It is 16 years later and I’m writing this in a pub looking out over Sydney Harbour. I never thought I would live here. I never thought that my decision not to sell would work out so well. I still own many of the same shares. I’m glad I do.

My decision-making ability was imperiled by my stress and my perception of suffering. But the suffering was only in my head. I was missing out on a beautiful garden each day because I was focused on what was going to happen with my portfolio the next day. I had lost sight of what was important and that was where my portfolio would be decades from now and the type of life it could enable.

I had no way to imagine my future would involve living in Sydney. I didn’t know that I would be an Australian citizen, and this would now be home. Being mindful of my finances allowed me to pack up and start my life over in my mid-30s.

I’m going to add a bonus quote that emphasises David Brooks’ thought on how hard it is to imagine the future. A Texan song writer named Hayes Carll left us with this beauty: 

I can hear the laughter as I make another plan
Set out like a fool towards the sea
Every wave that crashes, rearranges all the sand
And puts another path in front of me
I can hear the laughter as I make another plan

'Cause what it was is gone forever
What it could be, God only knows
And what it is is right here in front of me
And I'm not letting go 

This is life. And there is another thing I know now that I didn’t fully understand then. Financial security and building wealth is about providing options in the future. It is about enabling things you don’t even know you want right now. Aging closes off options. Investing opens them up. Always keep the focus on the long-term. 

I can truthfully say that since I reached the age of discretion I have consistently drunk more than most people would say was good for me. Nor do I regret it.

Wine has been to me a firm friend and a wise counselor. Often wine has shown me matters in their true perspective, and has, as though by the touch of a magic wand, reduced disasters to small inconveniences.

Wine has lit up for me the pages of literature, and revealed in life romance lurking in the commonplace. Wine has made me bold but not foolish; has induced me to say silly things but not to do them. Under its influence words have often come too easily which had better not have been spoken, and letters have been written which had better not have been sent.

But if such small indiscretions standing in the debit column of wine’s account were added up, they would amount to nothing in comparison with the vast accumulation on the credit side.

- Duff Cooper

This is a bonus quote because I love it. I have it hanging on my wall at home. I like wine. I would suggest you make most of your investment decisions before consuming too much of it. But make sure you think of the vision of your future that is unveiled after having a couple glasses when you think about the approach you take with your finances. It is all about the life you want. Your finances are just a means to an end 

Final thoughts 

This is wisdom from an eclectic mix of people. We have a world-famous economist and an obscure Texan songwriter. A New York Times columnist and a mostly forgotten British Politian. And don’t forget The Boss.

We all need to create our own framework for success. Having an investment philosophy is the framework that we hang our day-to-day decisions upon. Coming up with your own may just be the secret for success.  

I would love to hear what underpins your money philosophy. Email me at [email protected] 

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