I Read Every Charlie Munger Speech Since 1986. Here's His Secret Decision-Making Checklist
The systematic decision-making framework he used for 60 years but never formally published
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I’ve done something most investors would consider borderline obsessive:
I read every public Charlie Munger speech, interview, and Q&A session from 1986 to 2023. That's 37 years of wisdom from one of history's greatest investment minds.
What I discovered wasn't just investment advice – it was a decision-making operating system that Munger refined over decades.
While everyone quotes his famous one-liners, they miss the systematic checklist he actually used to evaluate every major decision.
This isn't about witty sayings – it's about the methodical process that helped create billions in wealth.
Here's the framework nobody talks about:
1. The Risk Reality Check
"All investment evaluations should begin by measuring risk, especially reputational."
Munger's first question was never "How much can I make?" It was always "What could go permanently wrong?"
His process:
Margin of Safety: Always buy with a substantial cushion
Character Assessment: Avoid anyone who compromises integrity
Proper Compensation: Only take risks if the reward justifies the danger
Inflation/Interest Rate Impact: Factor in silent wealth destroyers
Permanent Loss Avoidance: Distinguish between volatility and actual destruction
The insight everyone misses: Munger didn't just avoid risk – he systematically categorized different types of risk and developed specific responses to each.
Most investors focus on upside potential.
Munger started with downside protection.
2. The Independence Test
"Only in fairy tales are emperors told they are naked."
Before every major decision, Munger asked: "Am I thinking for myself, or am I following the crowd?"
His methodology:
Contrarian Analysis: What does conventional wisdom say, and why might it be wrong?
True Value vs. Consensus: Focus on correctness of analysis, not popular opinion
Herd Mentality Check: If everyone agrees, dig deeper for what they're missing
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3. The Preparation Standard
"The only way to win is to work, work, work, and hope to have a few insights."
This was Munger's most systematic process. Before any investment, he demanded:
Lifelong Learning Application: How does this connect to principles from other disciplines?
Mental Model Integration: Which models from psychology, physics, economics apply here?
Question Cascading: Keep asking "why, why, why?" until you reach fundamental causes
4. The Humility Filter
"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."
Munger's humility checklist:
Circle of Competence Boundaries: Can I actually understand this business?
Disconfirming Evidence Search: What data contradicts my thesis?
Overconfidence Check: Am I being overconfident because recent decisions worked out?
The brutal honesty: In 1999, Munger publicly admitted he didn't understand technology stocks well enough to invest in them. He missed the dot-com bubble entirely – and was grateful for it.
Knowing what you don't know prevented more losses than brilliance ever created gains.
5. The Analysis Deep-Dive
"Knowing what you don't know is more useful than being brilliant."
Munger's analytical framework:
Value vs. Price Assessment: What is this business actually worth vs. its market price?
Simplicity Preference: Favor obvious opportunities over complex "clever" plays
Full Picture Thinking: Consider all ripple effects and unintended consequences
Business Analysis Priority: Focus on business fundamentals, not market trends
Inversion Practice: Always think forwards AND backwards
The game-changer: Munger would literally write down the opposite scenario of his investment thesis and try to prove that case first.
6. The Allocation Philosophy
"It's not supposed to be easy. Anyone who finds it easy is stupid."
His capital deployment system:
Opportunity Cost Analysis: Is this the absolute best use of capital available?
Conviction Sizing: When odds strongly favor you, bet heavily
Emotional Detachment: Avoid getting "married" to any position
The shocking reality: Munger's portfolio was dramatically more concentrated than most people realized.
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7. The Patience Protocol
"The big money is not in the buying and selling, but in the waiting."
Munger's patience framework:
Compounding Protection: Never interrupt compounding without extraordinary reason
Cost Minimization: Avoid fees and taxes that destroy long-term returns
Luck Preparation: Position yourself to capitalize when fortune strikes
Process Enjoyment: Find satisfaction in the methodology, not just results
8. The Decisiveness Trigger
"When conditions align, don't hesitate."
Despite emphasizing patience, Munger was lightning-fast when opportunities met his criteria:
Opportunity Recognition: Act immediately when all checklist items align
Contrarian Timing: Be greedy when others are fearful, fearful when others are greedy
Rare Opportunity Seizure: Recognize that great opportunities are infrequent
The defining characteristic: When Munger's checklist was satisfied, he moved decisively and with substantial capital commitment.
9. The Change Adaptation
"The world won't adjust to fit your preferences. Adapt as it evolves."
His change management approach:
Complexity Acceptance: Don't oversimplify genuinely complex situations
Belief Challenging: Regularly question your own long-held assumptions
Fact Confrontation: Face uncomfortable truths immediately
Reality Recognition: Accept inconvenient situations as they actually are
The evolution: Munger's investment approach continuously evolved over 60+ years. The principles remained constant, but the application adapted to changing markets.
10. The Focus Imperative
"Step by step you get ahead, but rarely in fast spurts. But you build discipline by preparing for fast spurts."
His focus methodology:
Simplicity Maintenance: Avoid overcomplicating successful approaches
Reputation Protection: Guard integrity as your most valuable asset
Hubris Prevention: Stay humble despite success
Distraction Filtering: Ignore noise that doesn't serve long-term goals
Big Problem Addressing: Tackle significant issues immediately
The foundation: Everything ultimately came back to Preparation. Discipline. Patience.
But Wait!
Understanding Munger's checklist is just the beginning.
The real value comes from systematically applying these principles to actual investment opportunities.
If this approach resonates with you and you want to see how we apply these principles to actual investment opportunities, our premium research provides detailed analysis of our current holdings and the reasoning behind each position.
You can get that here if you want:
Until next week,
Dom
Schwar Capital
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