Charlie Munger: Turning $2M Into $2T | Hacker News Reader

Charlie Munger: Turning $2M Into $2T

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92 pointsvikrum112 comments

This is a long read, and I skimmed it, but I can hazard a guess that a lot of comments are not about the article, but simply about the headline and early premise. Surprisingly (perhaps), the intention of the overall article is more about the state of academic education and behavioral psychology.

> In short, academic psychology departments are immensely more important and useful than other academic departments think. And, at the same time, the psychology departments are immensely worse than more of their inhabitants think.

In effect, much of the story is merely to illustrate that we're bad at learning from history, because we aren't very good at understanding how we think about things.

I have little want to listen to what Charlie Munger has to say about academia, or anything really. Having done a decent dive into him when I found about how he pushes his amateur architect designs for dorm rooms (basically prisons) on universities, I found that Munger is so up his own ego, it's hard to think of him as a thinker who considers appropriate viewpoints.

Ultimately, he's an uber rich guy who got lucky getting rich. Why should we listen to him about anything?

I read bits of the posted article. It's about what I would expect from Munger, and most of it isn't worth quoting and arguing against.

How do you know he got lucky?

Were Buffet and Munger were the only people trying to make money from the stock market in the last hundred years and nobody else was trying? Or were they the smartest and they didn't luck into being born smart, but self-generated their smarts too?

Smart is neither necessary nor sufficient to do well in trading, as well as luck. It mostly requires being rigorous, disciplined, rational, and obsessively focused on the pursuit. “Smart” and “luck” are lazy thinking ways of explaining why they do well and others didn’t. In my 30 years or so in the industry working in quant and traditional trading spaces as well as high tech startups that did very well, I’ve not seen smart beat discipline, or luck replace rational obsession. The fact is they’ve all faced enormous bad luck at some point or another, but kept plugging away. I’ve seen that almost anyone if they have a strong self discipline and a clear rational mind can do very well in trading, but it also requires obsessive focus - to the extent that most people can’t match it. I’d note this isn’t unique to trading though. I’ve seen in tech the smartest people languish around ivory towers, but the most mediocre of intellects develop the most useful systems and software that’s widely used. Again, discipline, rigor, rationality, and obsessive focus are the key factors.

>> Smart is neither necessary nor sufficient to do well in trading, as well as luck.

These guy are in the business of investing, not trading. A lot of people don't understand the difference and that is part of their advantage.

Investing is trading with a long horizon.

As the saying goes, a long-term investment is a short-term one that went wrong.

When people asked how Buffett made money in investing, his usual response is "start with the A's" (referring to the Value Line manual). I have found that an unsatisfactory answer, though, because unless you have some idea of what you're looking for, "starting with the A's doesn't mean much."

A better example of Buffett's obsessiveness is that he used to pick up discarded race track tickets. The overwhelming majority were no good, of course, but you might find one in a thousand where a winning ticket had been absent-mindedly discarded and you could cash in on the bet.

But, well, the fund management industry do work hard, yet have little to show for it. An old investment classic (can't remember which) put it this way: a guy new an analyst that could tell you everything you wanted to know about every railway company, except which ones to invest in.

I think many good investments rely on just a few simple arguments. For example, back in 2021 I learned that the price of Shell shares were at their lowest point for a decade or so, oil was at a low, and the US strategic oil reserves were at their lowest level since the 80's. I figured, Jeez, how much lower can then stuff go? So I bought shares. They've nearly doubled. There's no guarantees with this stuff, of course, I've made plenty of mistakes. It also requires the availability of opportunities, naturally. Sometimes my primitive monkey brain can spot them. No guarantees, there never are, but sometimes you can spot opportunities where the odds are stacked in your favour, and those are the ones you want to dabble in.

This same situation happened in 2020-2022 as well. XOM quadrupled.

How did he not? His wealth is a direct consequence of something he possesses and was able to deterministic enact in the world? Or is it more likely that he's old, he started off well off with a wealthy-enough and connected father, and has done nothing but invest since he was a teenager in one of the east time periods in the history of mankind to make money from money?

I'm not saying luck wasn't a factor (e.g. he wasn't hit by a bus, so, lucky?) I'm saying luck can't have been the only factor, or even a primary factor. Plenty of people try and do what he did, and fail.

It’s nice to read someone else who feels similar; I purchased the best known ‘book’ of his. It’s a coffee table treatise that is repetitive, dull, and self congratulatory.

I used to think the same as you, but I would suggest giving this a read before you pass off his success as luck as it's a direct rebuttal to the normal argument. Unless by luck you mean him meeting Warren Buffett.

https://www8.gsb.columbia.edu/sites/valueinvesting/files/fil...

Warren Buffett may have been lucky to meet Munger. He credits Munger with getting him off buying “cigar butts” and instead focusing on excellent businesses (pricing power, barriers to entry, etc) at fair prices which is largely where Buffett’s wealth expanded the most.

They're both lucky, and I'm not a fan of Warren Buffett either. He constantly throws out his "money has no utility to me" as part of his "aww shucks, I'm from Nebraska" schtick, which is a slap in the face of the other n-billion people poorer than him, less lucky than him, and to whom money does have utility, as in life or death utility.

Jim Simons has mentioned explicitly about how most people underestimate the role of luck in success, and he attributes quite a bit of his success to luck.

[PDF warning ^]

> amateur architect designs for dorm rooms (basically prisons) on universities

I hope UCSB backed out of building one of these monstrosities.

"Public policy graduate student Luiza Macedo didn’t see the sun for a full week when she had to isolate in her room at Munger Residence due to a Covid-19 scare."

https://www.cnn.com/2021/11/02/business/munger-residences-mi...

Yea, it's pretty sickening. It's pretty sad that in the U.S., someone else's money can buy the government, your education, and how you literally live, all in the way that that someone else thinks it should be done but wouldn't do themself.

I think the phrase you are looking for is "beggars can't be choosers".

Because students and non-billionaires are beggars?

Students pay several tens of thousands of dollars to go to universities these days. That's not remotely begging.

The begger here is UCSB. They had to take Munger's money and his design to build more housing.

Wow, this sounds horrible. I have a through contempt for inhumane or ugly architecture.

Interestingly based on this you would have $500B simply by investing the money in the S&P500 and holding it for 140 years. If we move the date back to 1874 then after 150 years you'd have $1T:

https://www.officialdata.org/us/stocks/s-p-500/1884?amount=2...

In other words the whole game of corporate planning is fairly pointless imho and merely a shell game around market growth.

Would the market grow if underlying corporations didn't plan how to make money? (at least, that's what I think u r talking about)

The market only grows because of corporate planning in some way or another.

The market grows because people are want to participate in it. See crypto currency. Thats a market that grew with no corporate planning, simply from people increasingly participating. Many people think they should have exposure to markets they don’t fully understand and automatically have a portion of their pay go to such investments made on their behalf, be it crypto or a more ‘grown up’ seeming fund.

Well, lots of crypto grows on the same way that any pyramid scheme grows: they hope there will be many greater fools who will buy in so they can cash out. I don't think that's equivalent to the S&P500's growth over the last 100 years.

"If you can know the future while pretending to not know the future, you will be reach"

There's so much in the article that fundamentally knows what the future is. The most egregious point for me was disussing Pavlov in an 1884 context. (His discovery of classical conditionings dates to 1890 and later)

Assuming a four cent profit requires assuming large inflation over the intervening time span. (It's been ~3000%). Inflation in 1884 was barely understood, and mostly treated as a devaluation of currency, not an increase in price.

Population growth to 8 billion people required modern medicine and modern agriculture at the least. (World population less than doubled over the 19th century - assuming it'd quadruple again, especially given that the Malthusian trap was a prevailing thought concept, would be an extremely bold assumption)

And so the entire pretext that you could've predicted this path kind of falls apart. We can retcon an explanation, but we can retcon an explanation for any success easily. So easily, we have a picture of a bullet-riddled plane to handily explain it.

rich. Rich, damn it. You will be rich. I hate my brain :)

For passive investments, it’s partly the Law of Large Numbers at work.

The key to exploiting LLN is to avoid “game over” scenarios. You have to survive and stay in the game in order for LLN to converge.

If let’s say your expectation of winning in the long run is 0.7, you’ll only achieve this if you don’t get wiped out anywhere in the process (if you do your expectation drops to 0 immediately).

Yep, which is why investing (life?) is really about risk management.

That was how I learned to trade options. I didn't put a penny in until I learned the fundamentals of risk management. Then I played around, won some, lost some, learned a ton, and came out a bit ahead. And never once was I at any risk of a catastrophic outcome, because that's the whole point of risk management.

Are you saying that risk management is (mostly) buying suitable options to balance your trade ?

I have often wondered why the price of the option does not naturally find a level that exactly cancels out the trade?

Edit: Sounds too challenging - I am interested in your take on risk management, please expand. Esp with red to why options are priced at a level where they make a profit? (my perhaps limited understanding of options is I am betting A will go up 10% but if A goes down 5% I can buy an option to purchase A at the lower price. My instinct is at some point there is always a losing side. Why enter?

> Are you saying that risk management is (mostly) buying suitable options to balance your trade ?

Kind of. Fundamentally risk management comes down to bankroll management. And one workable general approach is the Kelly criterion[1] or something like it. However, unlike casino games, with options we don't know the true odds and have to estimate them in most cases. And there are other risks like theta, which is how all else being equal an option loses premium value as expiration approaches. Therefore we can't just use Kelly directly. A trivially simple strategy that is suboptimal, but is good enough for learning is to never risk more than 1% of your trading bankroll[2]. The end result is that as you make winning bets your bet size increases and as you make losing bets your bet size decreases. Remember your goal at this level of knowledge is hands on learning with some skin in the game to sharpen your attention.

In the prior paragraph the trivial basic risk management strategy is "never risk" more than 1%. The reason I say never risk rather than never bet is because when trading options you can lose more than you bet! In fact you can potentially go to zero. A simple example is selling an uncovered call, that is to say selling someone the right to buy some multiple of 100 shares of a stock at a fixed price while not actually owning the stock to sell to them if they exercise the contract. Therefore, if the contract is exercised you have to go and buy however many shares are needed to cover the call. Since there is no limit to how much higher the market price can be than the call's strike price, you can lose an unbounded amount of money from a bet that actually increased your cash on hand when you entered it. Most (all?) trading platforms have some notion of options levels. I highly advise not requesting the level that lets you make such bets. I personally don't see any good point to them[3] and for a slightly increase in premium you can make very similar bets without the unlimited downside by using spreads.

If you are unspeakably unfortunate or otherwise consistently make losing bets, then even solid risk management can result in your ruin. However, it will be a slow process and hopefully somewhere before disaster you will conclude that trading derivatives isn't where your gifts lie and preserve what remains of your capital.

> I have often wondered why the price of the option does not naturally find a level that exactly cancels out the trade?

Options markets aren't perfectly efficient. Furthermore, the typical leverage is 100:1, which magnifies even small pricing inefficiencies. In fact, there isn't even agreement on how to price options at all. The Black-Scholes model[4] is just one popular model and many traders think it has problems.

> My instinct is at some point there is always a losing side. Why enter?

Yes, derivatives trading isn't investment, and there is always (usually?) a winner and a loser for every trade. However, there are market participants that make trades that set out to make a loss. For example, A trader may need to execute a hedging strategy and one leg of it will lose money if his primary trade goes as he hopes. Nevertheless, the opportunity remains to potentially be the counterparty on hedging leg. This is a pretty complicated area and I don't pretend to have a deep understanding of it, but if you dig in you'll find plenty of discussion.

There are also market participants who are just making bad trades. When you start you'll probably be one of them, which is why I emphasize risk management. Their counterparties also have a good opportunity to profit.

[1] https://en.wikipedia.org/wiki/Kelly_criterion

[2] And that bankroll itself should be less than your total financial net worth (IE paper assets like cash and stocks and so on, not real estate). Don't bet your emergency fund and so on. How much less depend on your own circumstances and is more a general matter of savings allocation than anything derivatives trading specific.

[3] But as I said I'm not an expert, just a dabbler who did OK. Perhaps some sufficiently advanced trader can come up with a good reason to make such a bet that isn't just based on hubris and wishful thinking.

[4] https://www.investopedia.com/terms/b/blackscholes.asp

As they say, return of capital is more important than return on capital.

> the Law of Large Numbers at work.

Also known as "it's easy to become a rich man, if you start out as a rich man".

Realizing a positive real return is not very hard - just buy the index or some real estate. If you start with a large amount of capital, you can simply watch it multiply, and, for the adventurous, maybe risk some of it into more speculative deals.

If you start out with just the human capital of your hands and brain, any reasonable rate of return will be squashed by living expenses and basic quality of life, dependents etc. You will need many decades to build enough wealth using the same methods a rich man uses, and by that time your own human capital starts to depreciate and you are forced to move to a capital conservation strategy.

So, to make it big as a poor person, you always have to take on crazy risks that the rich never would and/or be exceptionally lucky, or be extraordinarily talented and hardworking - to an statistically implausible degree - so as to make your starting human capital much more valuable.

You will always find the rags to riches story presented as a tale of hard work and determination, but rarely will any "self made billionaire" acknowledge their immense luck. The entire VC space is basically an attempt from capital owners to cash in on this statistically rare phenomenon, by hedging their bets on the destinies of many many people attempting to make it big.

> 'or be extraordinarily talented and hardworking'

Maybe you meant "and possibly", since otherwise the 'or' there detracts from the point I think you're trying to make (that ludicrous amounts of wealth requires luck regardless of what talent, skill, or determination you bring).

Maybe the years and amounts were chosen this way but at 7% you double your money every 10 years (for those who don't know too, percentages are reversible so at 10% you double your money every 7 years...)

You have 15 doubles between 1884 and 2034.

So you get 2^10 * 2,000,000 or 2,048,000,000 - just over 2 trillion dollars.

I read through parts of the article - I have no idea what point is attempting to be made. It all rambles quite a bit.

> "I read through parts of the article - I have no idea what point is attempting to be made. It all rambles quite a bit."

"""This brings me, at last, to the main purpose of my talk. Large educational implications exist, if my answer to Glotz’s problem is roughly right and you make one more assumption I believe true – that most Ph.D. educators, even psychology professors and business school deans, would not have given the same simple answer I did. And, if I am right in these two ways, this would indicate that our civilization now keeps in place a great many educators who can’t satisfactorily explain Coca-Cola, even in retrospect, and even after watching it closely all their lives. This is not a satisfactory state of affairs.

Moreover – and this result is even more extreme – the brilliant and effect executives who, surrounded by business school and law school graduates, have run the Coca-Cola company with glorious success in recent years, also did not understand elementary psychology well enough to predict and avoid the “New Coke” fiasco, which dangerously threatened their company. That people so talented, surrounded by professional advisers from the best universities, should thus demonstrate a huge gap in their education is also not a satisfactory state of affairs."""

7% is adjusted for inflation, BTW. So you should look at what $2M is worth in today's dollars.

> (for those who don't know too, percentages are reversible so at 10% you double your money every 7 years...)

That is not true at all. "Percentages are reversible" means that 30% of 50 is the same as 50% of 30, so 15. It does not mean that anywhere you see a percent related to another number, you can just switch them around.

Easy counterexamples:

At 100% annual interest, you double your money every 1 year. At 1% annual interest, you double your money every 70 years.

At 41% annual interest, you double your money every 2 years. At 2% annual interest, you double your money every 35 years.

It's not perfect, but pretty close if you compound monthly. It works with your examples too.

100% interest (compounded monthly) doubles at about 0.75 years, and 0.75 interest doubles at around 100 years.

41% interest doubles at around 1.75 years, and 1.75 interest doubles at around 41 years

Compounded monthly? That's rather cherry-picked. 0.75% interest compounded monthly doubles in 93 years, not 100. You're compounding the left side differently than the right side.

When talking about stock market returns, people are talking about year-over-year returns. There is no "compounded monthly"; 41% interest "compounded monthly" is actually 49.7% interest. Everyone would call that 49.7%, except credit card commercials that are trying to trick you.

The point is that GP presented the %-switching thing like a rule, but it's not. They've confused how that rule is applied.

Edit: I tried compounding every second. The rule works exactly. e is just such a magic number that continuous compounding is exactly the point at which this rule becomes true. So the more often you compound, the better this rule is. Wild. I still don't recommend using it for annual percentages.

I’m bad at reading zeros but isn’t that a bit over 2 billion with a b?

I love Munger, but I guess his freshman survey courses didn't cover pharmacology.

    Glotz wants to use a name that has somehow charmed him: Coca-Cola.

Just why was Glotz charmed by that name?

    Ctrl-F "cocaine" - 0 hits

Oh. Charlie is telling a just so story that doesn't comport with the facts.

All of this is retcon. The whole thing is just fantasy. Like, that's just not how it happened. From wiki:

    Confederate Colonel John Pemberton, wounded in the American Civil War
    and addicted to morphine, also had a medical degree and began a quest 
    to find a substitute for the problematic drug.

Like sure - a cocaine tonic sounds just the thing to help an alcoholic doctor kick a heroin habit.

    Pemberton claiming it a cure for many diseases,
    including morphine addiction, indigestion, nerve disorders, headaches,
    and impotence.

Oh yeah, baby! Dude was selling coca-wine, and then temperance kicked in and he had to de-wine the wine. Here's Munger talking about adding colour:

    For similar Pavlovian reasons, it will be wise to have 
    our beverage look pretty much like wine, instead of sugared water. 
    And so we will artificially color our beverage if it comes out clear.

Lol, no. The color needed to emulate wine because his current users were used to a wine cocaine tonic. Got the bring the exiting user-base along.

The technical term for Munger's story is bullshit. He doesn't consider it a lie, because the facts are unimportant to his story.

Honestly, reading this diminished my opinion of him. To talk the whole time about pavlovian and operant conditioning without once mentioning drug tolerance and withdrawal discomfort is just beyond. He can't be that stupid, so I must suspect dishonest motive. Or even worse: obscurantic Straussianism.

https://en.wikipedia.org/wiki/Coca-Cola#19th_century_histori...

It is refreshingly rare to see anyone who's made it rich tell their actual story rather than some revisionist hit piece.

Sadly, more often than not, someone else has to do it for them.

It probably helps that 2 M USD in 1884 money is worth like 63 M today. /s

Yes, in general, we are not great at learning from history. How does blending academic psychology with other departments change that? Like how will that information disseminate *through/permeate society?

This is the money quote, imho:

“This brings me, at last, to the main purpose of my talk. Large educational implications exist, if my answer to Glotz’s problem is roughly right and you make one more assumption I believe true – that most Ph.D. educators, even psychology professors and business school deans, would not have given the same simple answer I did. And, if I am right in these two ways, this would indicate that our civilization now keeps in place a great many educators who can’t satisfactorily explain Coca-Cola, even in retrospect, and even after watching it closely all their lives. This is not a satisfactory state of affairs.”

This paragraph left me with the impression that Charlie Munger has a chip on his shoulder about academia.

> This paragraph left me with the impression that Charlie Munger has a chip on his shoulder about academia.

Yep.

As a former academic (left precisely due to this sort of absurdity), I largely agree with his view.

That is doubling 20 times.

If 100 million people flipped 20 coins, 95 would get 20 heads.

There are approximately 25M millionaires in the US.

Problem is flipping the coin 20 times. I don’t think even 1 in 100 million would do that.

> Problem is flipping the coin 20 times. I don’t think even 1 in 100 million would do that.

2^20 = 1048576

So roughly 1 in 1 million.

You're off by 100x.

I believe OP is talking about the human emotion of flipping that coin the 19th time (or indeed the 18th, or 17th...). While the math might be as simple as doubling x times it's very different to actually do it!

Are you forced to bet everything on every flip?

If your goal is to double your money on each successful flip (as implied in [0]), then yes.

[0] https://news.ycombinator.com/item?id=37586995

I think that's the implication: https://en.wikipedia.org/wiki/St._Petersburg_paradox https://en.wikipedia.org/wiki/Martingale_(betting_system)

That's where skill comes in and invalidates the point that it's all luck.

Suppose to have an idiotic model like for example "investing is flipping a coin". Then you calculate how many coin flips waiting a certain amount of time corresponds to. Then you conclude, see, these N people are the lucky coin flippers.

Now suppose of all the crazy investing philosophies in existence, you learn that all N greatest investors (or "N luckiest coin flippers" according to you), suppose you learn all of them have the exact same investing philosophy.

Would this make you reconsider whether your "investing is coin flipping" model is a useful model?

I might as well link to it for those who haven't read it:

"The Superinvestors of Graham-and-Doddsville"

https://www8.gsb.columbia.edu/sites/valueinvesting/files/fil...

I take quiet satisfaction imagining that I say really smart stuff I read elsewhere, get dismissed by morons, and then the morons 3 years later read the exact same idea from a reputable source and go "hold on a second, that's what that guy on those forums was saying" :-)

I think you're likely wildly over-estimating the number of times that last thought enters into people's minds (even if it's the case, I think it doesn't occur to most people).

Typically their model is regulatory capture.

Regulatory capture doesn't generate money.

These people like repeating their memes, let them.

That's not a very useful model for four reasons: First, there are many more possible outcomes of making an investment than 100% gain or 100% loss. Second, the outcome of an investment is a function of time. And third, what matters is not the actual number, but the purchasing power that number represents, so you have to measure your returns relative to inflation. You can "guarantee" yourself a positive return by buying T-bills, but the average rate on those is 2% and the average inflation rate is higher than that. So you can "double" your money in ~35 years, but your actual spending power will almost certainly go down. Finally, investment returns necessarily regress to a mean that is the growth rate of the overall economy, which historically has been positive. So to the extent that you are flipping a coin, it's a coin that is biased towards positive returns.

It's what is commonly called a baseline.

True, but with some tweaks this is a representative model.

You can just carry any non-100% gain/loss "swimlane" as a game still-in-progress. Eventually on larger time scale, puchasing power adjusted or not, a swimlane of an investment will certainly hit one of those outcomes.

The outcome is a function of time but a large number of swimlanes guarantees that you can sample any time and observe the same distribution of settled outcomes. You can reasonably assume that the probability of transition from unsettled to settled state at any time is constant. You could model it as markov process. In fact there are many economic agent models doing something like this (OLG models where generations of economic agents overlap in time as child/worker/retiree). Even though these models make sense only on generational scale, with enough agents you can see the micro-structure being consistent in smaller time scales by "ticking" or sampling at smaller time steps the markov process.

The spending power issue could be ignored as "without loss of generality" in most cases or the thesis could be restated in terms of something that preserves purchasing power as part of the coin toss game.

Investment returns mean-revert only if allowed to by policy. Policy can override economic forces for very long generational time scales, thus making it still relevant for individuals.

And I personally don't agree with (or don't understand) these models being used for micro-structure analysis, but I think macro-level interpretations such as wealth distribution may be valid.

> The spending power issue could be ignored as "without loss of generality"

Great! Then you will have no problem accepting the following offer: you give me $1000 today, I will give you an arbitrary amount of money that you get to specify (so it has to be computable -- no busy beavers allowed). The catch is that I get to specify when the payout happens (of course with the same proviso: the payout will happen after a computable amount of time).

Well, no. This game sucks for individuals. That's not the point though. The point is that even though the game sucks, this is the game that represents the economic reality. And while this tweak of you or somebody deciding when to pay is a real part of the game, it is still a markov process that will result in the same wealth distribution due to the law of large numbers and people settling at the endpoints all the time, no matter how delayed in time or how small the chance.

> Well, no.

What a surprise.

> this is the game that represents the economic reality

No, it isn't. Economic reality is nothing like flipping coins, neither for individuals, nor in the aggregate, except insofar as both contain a random element.

> it is still a markov process

So what? Saying "it's a Markov process" is simply making the observation that there is a random element. Yes, flipping coins has a random element, and yes, the market has a random element. It does not follow that flipping coins is a good model of the market. On this logic, coin-flipping would be a "good model" of any non-deterministic process.

The interesting thing about Markov processes is not that they contain random elements. The interesting thing about Markov processes is that you can make reliable predictions about some of them despite the fact that they contain random elements. But coin-flipping is not one of those processes about which interesting predictions can be made. The economy is.

I keep saying Markov process because it encodes any kind of chance over time on a large scale. It encodes how smart the entrepreneurs and investors are born, how many opportunities they get per time step, how corrupt the regulators are, how the competition will interfere. There are real averages in numerical terms for all of these parameters that can be used. A coin flip can represent an arbitrary model if you tweak the time lags and the payouts. And if the game is large enough you can fix the payouts and extend the lags until you hit your desired fixed payouts. Coin flipping on a large scale can capture almost any economic model.

And yet you won't accept my investment offer. Gee, I wonder why.

// There are approximately 25M millionaires in the US.

Really? Population of the US is like 350M. Is 7% of US population millionaires? Like, one of out every 14 people out there? I guess that's believable but counter-intuitive.

Property wealth

One Million Dollars isn't exactly a lot of money anymore. Seems as if single family homes cost nearly a million in many larger cities.

If average house prices in desirable densely populated areas are above 1M$ it is not hard to have a lot of millionaires.

The US is still much wealthier than other industrial nations.

Remove minors from the population, and it's 1 in 10 americans that are millionaires.

https://www.census.gov/content/dam/Census/library/publicatio...

"The median household wealth in 2021 was $166,900. The 10th percentile of household wealth was zero dollars, meaning 1 in 10 households had wealth of zero dollars or less. The 90th percentile of household wealth was $1,623,000, meaning 1 in 10 households had wealth exceeding $1.6 million."

We live in an amazing country. Presumably some of the <0 folks are recent grads with student debt etc rather than the classical poor as well.

Plenty of classic poor too. 4 in 10 americans can’t cover a $400 expense without selling assets or taking on debt.

As of 2020 there were 21,951,000 U.S. millionaires (Net Worth), according to Credit Suisse[0]. So the number isn't far off.

[0] https://financebuzz.com/us-net-worth-statistics#sources

The USA is crazy rich even compared to Europe or most western nations.

To be clear, you need 100 million people to risk *100% of their wealth on a coinflip* 20 times in a row.

>> If 100 million people flipped 20 coins, 95 would get 20 heads

If they were starting out with $2 million and betting it on a coin flip, they would owe 37% income tax on the winnings of each flip.

And try finding someone to bet you $1 trillion on a coin flip.

Charlie Munger's strategy was not to start out with $2 million and bet it with a 0.0001% chance of winning $2 trillion and a 99.9999% chance of losing it all.

Some people invest money out of each paycheck, study how to best allocate that money between the investment options available to them, do that for many decades, and become millionaires. Some people buy a $2 lottery ticket and become millionaires that day. They both just got lucky, am I right?

Several times in my life, years of difficult and inexplicable behavior by someone important to me (or myself), has benefited from an awareness of a neurotype, learning style, thinking practice, personality disorder, trauma pattern, etc.

It's important not to "diagnose" people. But these patterns are real and shed light on logics we operate with.

A little understanding goes a long way.

It makes sense that our brain, like any device class, has common patterns of high/low performance and failure.

I don't know where in education exposure to practical psychology makes sense. But a formal psychology class is too late, too narrow, too short, and too segregated a context: as the article points out.

We don't want to interrupt children's development with psychological concepts they are not ready for. But it would be nice to understand each other better, earlier.

That is an interesting education problem.

A related thought. There are so many areas of vitally useful knowledge, but turning each area into a formal subject isn't possible or necessary.

All that is needed for many great ideas is exposure.

Many geniuses' benefited as children from frequent informal discussions with knowledgable curious persons.

Perhaps a daily open discussion lunch hour could provide that exposure. Where all manner of subjects are discussed, and all kinds of questions are welcome.

It could be the easiest most impactful class of the day.

> Turning $2M Into $2T

Be born when opportunities were big and $2M only buys a 2 bedroom house that needs fixing

This analysis, like many from Charlie Munger, is worth considering carefully but misses two curious aspects of the Coca-Cola story.

First, the price of a 6.5 fl. oz. bottle of Coca-Cola was set at 5¢ in the 1880s and remained 5¢ through the 1890s, the 1900s, the 1910s, the 1920s … all the way until the 1950s when the price was finally raised. The dynamics that led to this remarkable phenomenon is described in a Planet Money podcast [1] and on Wikipedia [2].

Second, “starting in Atlanta, then succeeding in the rest of the United States, then rapidly succeeding with our new beverage all over the world” is much easier said than done. Coca-Cola somehow hit this jackpot, but Munger himself would cite See’s Candies as a counterexample of a brand that, for whatever reason, does not travel as successfully from its place of origin.

[1]: https://www.npr.org/transcripts/456410327

[2]: https://en.wikipedia.org/wiki/Fixed_price_of_Coca-Cola_from_...

> First, the price of a 6.5 fl. oz. bottle of Coca-Cola was set at 5¢ in the 1880s and remained 5¢ through the 1890s, the 1900s, the 1910s, the 1920s … all the way until the 1950s when the price was finally raised.

No, that's explicitly mentioned in the story:

> And thereafter the real Coca-Cola company did lose half its trademark and did grant perpetual bottling franchises at fixed syrup prices. And some of the bottlers were not very effective and couldn’t easily be changed. And the real Coca-Cola company, with this system, did lose much pricing control that would have improved results, had it been retained.

>The academically correct reaction to this immense and well-publicized fiasco would have been the sort of reaction Boeing would display if three of its new airplanes crashed in a single week. After all, product integrity is involved in each case, and the plain educational failure was immense.

Irony.

Also a missed opportunity for an obvious pun, 'plane educational failure'

Are these numbers right? Is 1/4th of all water ingestion a coca-cola product?

Mungers' comment is part of a speculative forecast being made in a fictional story set in 1884, so it's not clear to me what relationship it's supposed to have to the real world.

But according to the link below, "3.1% of all beverages consumed around the world are Coca-Cola products" :

https://www.businessinsider.com/facts-about-coca-cola-2011-6

This is supported as follows:

> Of the 55 billion servings of all kinds of beverages drunk each day (other than water), 1.7 billion are Coca-Cola trademarked/licensed drinks.

> Source: Coca-Cola 2011 SEC Filings, Coca-Cola

So that 3.1% apparently excludes water and would be even smaller if water is counted.

Hard eyeroll. How many proprietary soft drinks did different pharmacies and restaurants provide across the nation in 1886? The concept of the soft drink business is so pervasive that in the US, the lemonade stand is the most basic business we teach kids. So a lot, probably. Somehow common sense logic and business basics should have turned any of them into a $2Tn empire, 150 years later (oh and $66mm in seed money in today's terms with no time restriction from the investor). I haven't seen hindsight applied with such conviction since I hung out with the last super successful investor who fell pray to applying his expertise in one domain to another where it doesn't belong. Whatever Mr Munger did for Mr Buffet, writing insights of this type was not it.

> "The concept of the soft drink business is so pervasive that in the US, the lemonade stand is the most basic business we teach kids. So a lot, probably. Somehow common sense logic and business basics should have turned any of them into a $2Tn empire, 150 years later"

That doesn't work because look at all the companies selling generic cheap soft drinks, competing for the lowest cost, and not being anywhere near 150 years old or $2TN. Munger's talk is about what Coca-Cola would need to do over and above ordinary "selling a soft drink" to achieve such a thing.

You have to get to the end of the speech. His point is that there are a handful of relatively simple things that can add up to such an outcome, and that academic institutions teach in such siloed ways that people aren't learning how to do the cross-field synthesis required to understand something, even retrospectively.

Though that is a valid point about great business, the text here does not teach/demonstrate this skill in a way that would help one realistically apply it.

The important points to make, are that it's far more important to maneuver oneself into a position where you can see the landscape clearly, deliver the power to make moves, and then just use uncluttered thinking to chose those moves but chose them you must as the more moves you make, the faster you learn. As opposed to lingering in the ivory tower devising ever more ingenious strategies to excuse weak execution.

He's been making the point about silos in academia and the benefits of cross discipline education for decades, and not just in business. It is what it is.

Folks, a) every town had a soda fountain, and a local favorite in 1880's. b) Every town has 3 social media apps, but smart college students in 1999. c) every town has 5 new LLM model companies, in 2023

Charles Munger is such a smart man in many ways, and it is sad to see his thinking get muddy in his old age. I am surprised he falls for 'Survivorship Bias` in his own thinking.

Yeah, also thinking that coca-cola behaved legally outside the US.

Step 1: Have $2M in 1880s Step 2: Wait 150 years

that only gets you to the 10 billion mark roughly, if i calculated right with wolframalpha curated data

Ben Franklin left Philly and Boston $1,000 each and after 200 years, that was $2m and $4.5m respectively. https://www.mentalfloss.com/article/627475/200-year-old-gift...

He had some fairly guarded rules on how to manage it though, it wasn't thrown into Apple and Exxon shares.

Corporations were really different back then and were only created strictly for their purpose and rarely allowed to be created. Like the NYC water system is one of those old corporations. Now we can create a corp in another state for practically no money.

Michael Meyer's recent book Benjamin Franklin's Last Bet details the origin and fate of his bequests to Philadelphia and Boston.

The funds were intended to be loaned to aspiring tradesmen, who would repay their loans with interest over ten years. The two cities would receive some of the funds for public works after 100 years and the balance after 200 years. Both cities failed to manage the funds as Franklin intended.

From Meyer's book, I learned more about Benjamin Franklin's life, about the challenges of fund management, and about the difficulty of controlling events from beyond the grave.

[1] https://www.harpercollins.com/products/benjamin-franklins-la...

You would be starting at a much higher amount since $2,000,000 in 1880 is worth $60,201,176.47 today.

The challenge is to get to these initial amounts in the first place.

Source: CPI Inflation Calculator [https://www.in2013dollars.com/us/inflation/1880?amount=20000...]

There should really be a law that says that "just waiting" gives you $0, otherwise your monetary theory is unstable and you need to go back to school.

There can only be x amount of dollar that can return y return.

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