USC Law School Commencement Address
Background
Charlie Munger was 83, the vice chairman of Berkshire Hathaway and Warren Buffett’s partner of more than four decades, when the USC Gould School of Law asked him to give its commencement address. On May 13, 2007, he spoke to nearly 300 graduates in USC’s Alumni Park — 194 Juris Doctor, 89 Master of Laws, and three Master of Comparative Laws recipients.
He called it “an account of certain ideas and attitudes that have worked well for me”: deserve what you want, keep learning all your life, invert, avoid intense ideology, and build a seamless web of deserved trust. The talk became Talk Ten in the expanded third edition of Poor Charlie’s Almanack, which Stripe Press now publishes free online. The text below is the book’s edited version, so it differs in places from the spoken delivery.
The speech
No doubt many of you are wondering why this speaker is so old. Well, the answer is obvious: He hasn’t died yet. And why was this speaker chosen? Well, I don’t know that. I’d like to think that the development department had nothing to do with it.
Whatever the reason, I think it’s fitting that I’m speaking here because I see a crowd of older people in the rear, not wearing robes. And I know, from having educated an army of descendants, who it is that really deserves a lot of the honors that are being given today to the robe-wearing students in front. The sacrifices and the wisdom and the value transfer that come from one generation to the next should always be appreciated.
I also take pleasure from the sea of Asian faces to my left. All my life I have admired Confucius. I like the idea of filial piety, of ideas or values that are taught and duties that come naturally that should be passed onto the next generation. You people who don’t think there’s anything in this idea, please note how fast Asian people are rising in American life. I think they have something.
All right, I’ve scratched out a few notes, and I’m going to try and give an account of certain ideas and attitudes that have worked well for me. I don’t claim that they’re perfect for everybody. But I think many of them contain universal values and that many of them are can’t-fail ideas.
What are the core ideas that helped me? Well, luckily I had the idea at a very early age that the safest way to try to get what you want is to try to deserve what you want. It’s such a simple idea. It’s the golden rule. You want to deliver to the world what you would buy if you were on the other end. There is no ethos in my opinion that is better for any lawyer or any other person to have. By and large, the people who have had this ethos win in life, and they don’t win just money and honors. They win the respect, the deserved trust of the people they deal with. And there is huge pleasure in life to be obtained from getting deserved trust.
Now, occasionally you will find a perfect rogue of a person who dies rich and widely known. But mostly these people are fully understood as despicable by the surrounding civilization. If the cathedral is full of people at the funeral ceremony, most of them are there to celebrate the fact that the person is dead.
That reminds me of the story of the time when one of these people died, and the minister said, “It’s now time to say something nice about the deceased.” And nobody came forward, and nobody came forward, and nobody came forward. And finally, one man came up and said, “Well, his brother was worse.” That is not where you want to go. A life ending in such a funeral is not the life you want to have.
The second idea that I developed very early is that there’s no love that’s so right as admiration-based love, and such love should include the instructive dead. Somehow I picked up that idea, and I’ve lived with it all my life. It’s been very useful to me. A love like that described by [William] Somerset Maugham in his book Of Human Bondage is a sick kind of love. It’s a disease, and if you find yourself with a disease like that, you should eliminate it.
Another idea—and this may remind you of Confucius, too—is that the acquisition of wisdom is a moral duty. It’s not something you do just to advance in life. And there’s a corollary to that idea that is very important. It requires that you’re hooked on lifetime learning. Without lifetime learning, you people are not going to do very well. You are not going to get very far in life based on what you already know. You’re going to advance in life by what you learn after you leave here.
Consider Berkshire Hathaway, one of the best-regarded corporations in the world. It may have the best long-term, big-assets-involving investment record in the history of civilization. The skill that got Berkshire through one decade would not have sufficed to get it through the next decade with comparable levels of achievement. Warren Buffett had to be a continuous learning machine.
The same requirement exists in lower walks of life. I constantly see people rise in life who are not the smartest, sometimes not even the most diligent. But they are learning machines. They go to bed every night a little wiser than they were that morning. And boy, does that habit help, particularly when you have a long run ahead of you.
Alfred North Whitehead correctly said at one time that the rapid advance of civilization came only when man “invented the method of invention.” He was referring to the huge growth in GDP per capita and many other good things we now take for granted. Big-time progress started a few hundred years ago. Before that, progress per century was almost nil. Just as civilization can progress only when it invents the method of invention, you can progress only when you learn the method of learning.
I was very lucky. I came to law school having learned the method of learning, and nothing has served me better in my long life than continuous learning. Consider Warren Buffett again. If you watched him with a time clock, you’d find that about half of his waking time is spent reading. Then a big chunk of the rest of his time is spent talking one-on-one, either on the telephone or personally, with highly gifted people whom he trusts and who trust him. Viewed up close, Warren looks quite academic as he achieves worldly success.
Academia has many wonderful values in it. I came across an example not too long ago. In my capacity as a hospital board chairman, I was dealing with a medical school academic named Joseph M. Mirra, MD. This man, over years of disciplined work, made himself know more about bone tumor pathology than almost anyone else in the world. He wanted to pass this knowledge on to help treat bone cancer. How was he going to do it? Well, he decided to write a textbook, and even though I don’t think a textbook like this sells more than a few thousand copies, they do end up in cancer treatment centers all over the world. He took a sabbatical year and sat down at his computer with all his slides, carefully saved and organized. He worked 17 hours a day, seven days a week, for a year. Some sabbatical. At the end of the year, he had created one of the two great bone tumor pathology textbooks of the world. When you’re around values like Mirra’s, you want to pick up as much as you can.
Another idea that was hugely useful to me was one I obtained when I listened in law school when some waggish professor said, “A legal mind is a mind that considers it feasible and useful, when two things are all twisted up together and interacting, to try to think about one thing without considering the other.”
Well, I could see from that indirectly pejorative sentence that any such legal approach was ridiculous. And this pushed me further along in my natural drift, which was toward learning all the big ideas in all the big disciplines, so I wouldn’t be the perfect damn fool the professor described. And because the really big ideas carry about 95 percent of the freight, it wasn’t at all hard for me to pick up about 95 percent of what I needed from all the disciplines and to include use of this knowledge as a standard part of my mental routines.
Once you have the ideas, of course, you must continuously practice their use. Like a concert pianist, if you don’t practice you can’t perform well. So I went through life constantly practicing a multidisciplinary approach.
Well, this habit has done a lot for me. It’s made life more fun. It’s made me more constructive. It’s made me more helpful to others. It’s made me richer than can be explained by any genetic gifts. My mental routine, properly practiced, really helps.
Now, there are dangers in it because it works so well. If you use it, you will frequently find when you’re with some expert from another discipline—maybe even an expert who is your employer, with a vast ability to harm you—that you know more than he does about fitting his specialty to the problem at hand. You’ll sometimes see the correct answer when he’s missed it. That is a very dangerous position to be in. You can cause enormous offense by being right in a way that causes somebody else to lose face in his own discipline or hierarchy. I never found the perfect way to avoid harm from this serious problem. Even though I was a good poker player when I was young, I wasn’t good enough at pretending when I thought I knew more than my supervisors did. And I didn’t try as hard at pretending as would have been prudent. So I gave a lot of offense. Now, I’m generally tolerated as a harmless eccentric who will soon be gone. But coming up, I had a difficult period to go through.
My advice to you is to be better than I was at keeping insights hidden. One of my colleagues, who graduated as number one in his class in law school and clerked at the US Supreme Court, tended as a young lawyer to show that he knew a lot. One day, the senior partner he was working under called him in and said, “Listen, Chuck, I want to explain something to you. Your duty is to behave in such a way that the client thinks he’s the smartest person in the room. If you have any energy or insight available after that, use it to make your senior partner look like the second-smartest person in the room. And only after you’ve satisfied those two obligations do you want your light to shine at all.”
Well, that was a good system for rising in many a large law firm. But it wasn’t what I did. I usually moved with the drift of my nature, and if some other people didn’t like it, well, I didn’t need to be adored by everybody.
Let me further develop the idea that a multidisciplinary attitude is required if maturity is to be effective. Here I’m following a key idea of the greatest lawyer of antiquity, Marcus Tullius Cicero. Cicero is famous for saying that a man who doesn’t know what happened before he’s born goes through life like a child. That is a very correct idea. Cicero is right to ridicule somebody so foolish as not to know history. But if you generalize Cicero, as I think one should, there are a lot of other things that one should know in addition to history. And those other things are the big ideas in all the disciplines.
And it doesn’t help you much just to know something well enough so that on one occasion you can prattle your way to an A in an exam. You have to learn many things in such a way that they’re in a mental latticework in your head and you automatically use them the rest of your life. If many of you try that, I solemnly promise that one day most will correctly come to think, “Somehow I’ve become one of the most effective people in my whole age cohort.” In contrast, if no effort is made toward such multidisciplinarity, many of the brightest of you who choose this course will live in the middle ranks, or in the shallows.
Another idea that I discovered was encapsulated by that story Dean McCaffery recounted earlier about the rustic who wanted to know where he was going to die so he wouldn’t go there. The rustic who had that ridiculous-sounding idea had a profound truth in his possession. The way complex adaptive systems work, and the way mental constructs work, problems frequently become easier to solve through inversion. If you turn problems around into reverse, you often think better. For instance, if you want to help India, the question you should consider asking is not “How can I help India?” Instead, you should ask, “How can I hurt India?” You find what will do the worst damage and then try to avoid it.
Perhaps the two approaches seem logically the same thing. But those who have mastered algebra know that inversion will often and easily solve problems that otherwise resist solution. And in life, just as in algebra, inversion will help you solve problems that you can’t otherwise handle.
Let me use a little inversion now. What will really fail in life? What do we want to avoid? Some answers are easy. For example, sloth and unreliability will fail. If you’re unreliable, it doesn’t matter what your virtues are, you’re going to crater immediately. So faithfully doing what you’ve engaged to do should be an automatic part of your conduct. Of course you want to avoid sloth and unreliability.
Another thing to avoid is extremely intense ideology, because it cabbages up one’s mind. You see a lot of it in the worst of the TV preachers. They have different, intense, inconsistent ideas about technical theology, and a lot of them have minds reduced to cabbage. That can happen with political ideology. And if you’re young, it’s particularly easy to drift into intense and foolish political ideology and never get out.
When you announce that you’re a loyal member of some cult-like group and you start shouting out the orthodox ideology, what you’re doing is pounding it in, pounding it in, pounding it in. You’re ruining your mind, sometimes with startling speed. So you want to be very careful with intense ideology. It presents a big danger for the only mind you’re ever going to have.
There is a warning example I use whenever I feel threatened by a drift toward intense political ideology. Some Scandinavian canoeists succeeded in getting through all the rapids of Scandinavia, and they thought they would continue their success by tackling the big whirlpools in northwest America. The death rate was 100 percent. A big whirlpool is something you want to avoid. And I think the same is true about intense ideology, particularly when your companions are all true believers.
I have what I call an iron prescription that helps me keep sane when I drift toward preferring one intense ideology over another. I feel that I’m not entitled to have an opinion unless I can state the arguments against my position better than the people who are in opposition. I think that I am qualified to speak only when I’ve reached that state.
This sounds almost as extreme as the iron prescription Dean Acheson was fond of attributing to William the Silent of Orange, who roughly said, “It’s not necessary to hope in order to persevere.” That probably is too tough for most people, although I hope it won’t ever become too tough for me. My way of avoiding overintensity in ideology is easier than Acheson’s injunction and worth learning. This business of not drifting into extreme ideology is very, very important in life. If you want to end up wise, heavy ideology is very likely to prevent that outcome.
Another thing that often causes folly and ruin is the self-serving bias, often subconscious, to which we’re all subject. You think that “the true little me” is entitled to do what it wants to do. For instance, why shouldn’t the true little me get what it wants by overspending its income?
Well, there once was a man who became the most famous composer in the world, but he was utterly miserable most of the time. One of the reasons was that he always overspent his income. That was Mozart. If Mozart couldn’t get by with this kind of asinine conduct, I don’t think you should try it.
Generally speaking, envy, resentment, revenge, and self-pity are disastrous modes of thought. Self-pity can get pretty close to paranoia. Paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity. I had a friend who carried a thick stack of linen-based cards. When somebody would make a comment that reflected self-pity, he would slowly and portentously pull out his huge stack of cards, take the top one, and hand it to the person. The card said, “Your story has touched my heart. Never have I heard of anyone with as many misfortunes as you.”
Well, you can say that’s waggery, but I suggest it can be mental hygiene. Every time you find you’re drifting into self-pity, whatever the cause, even if your child is dying of cancer, self-pity is not going to help. Just give yourself one of my friend’s cards. Self-pity is always counterproductive. It’s the wrong way to think. And when you avoid it you get a great advantage over everybody else, or almost everybody else, because self-pity is a standard response. And you can train yourself out of it.
Of course, you also want to get self-serving bias out of your mental routines. Thinking that what’s good for you is good for the wider civilization and rationalizing foolish or evil conduct based on your subconscious tendency to serve yourself is a terrible way to think. You want to drive that out of yourself because you want to be wise, not foolish, and good, not evil.
You also have to allow, in your own cognition and conduct, for the self-serving bias of everybody else, because most people are not going to be very successful at removing such bias, the human condition being what it is. If you don’t allow for self-serving bias in the conduct of others, you are, again, a fool.
I watched the brilliant and worthy Harvard Law Review–trained general counsel of Salomon Brothers lose his career there. When the able CEO [John Gutfreund] was told that an underling had done something wrong, the general counsel said, “Gee, we don’t have any legal duty to report this, but I think it’s what we should do. It’s our moral duty.”
The general counsel was technically and morally correct, but his approach didn’t persuade. He recommended a very unpleasant thing for the busy CEO to do and the CEO, quite understandably, put the issue off, and put it off, not with any intent to do wrong. In due course, when powerful regulators resented not having been promptly informed, down went the CEO and the general counsel with him.
The correct persuasive technique in situations like that was given by Ben Franklin. He said, “If you would persuade, appeal to interest, not to reason.” The self-serving bias of man is extreme, and should have been used in attaining the correct outcome. So the general counsel should have said, “Look, this is likely to erupt into something that will destroy you, take away your money, take away your status, grossly impair your reputation. My recommendation will prevent a likely disaster from which you can’t recover.” That approach would have worked. You should often appeal to interest, not to reason, even when your motives are lofty.
Another thing to avoid is being subjected to perverse incentives. You don’t want to be in a perverse incentive system that’s rewarding you if you behave more and more foolishly, or worse and worse. Perverse incentives are so powerful as controllers of human cognition and human behavior that one should avoid their influence. One of the things you’re going to find in at least a few modern law firms is high billable-hour quotas. I could not have lived under billable-hour quotas of 2,400 hours a year. That would have caused too many problems for me. I wouldn’t have done it. I don’t have a solution for the situation some of you will face. You’ll have to figure out for yourselves how to handle such significant problems.
Perverse associations are also to be avoided. You particularly want to avoid working directly under somebody you don’t admire and don’t want to be like. It’s dangerous. We’re all subject to control to some extent by authority figures, particularly authority figures who are rewarding us. Dealing properly with this danger requires both some talent and will.
I coped in my time by identifying people I admired and by maneuvering, mostly without criticizing anybody, so that I was usually working under the right sort of people. A lot of law firms will permit that if you’re shrewd enough to work it out with some tact. Generally, your outcome in life will be more satisfactory if you work under people you correctly admire.
Engaging in routines that allow you to maintain objectivity are, of course, very helpful to cognition. We all remember that Darwin paid special attention to disconfirming evidence, particularly when it disconfirmed something he believed and loved. Routines like that are required if a life is to maximize correct thinking.
One also needs checklist routines. They prevent a lot of errors, and not just for pilots. You should not only possess wide-ranging elementary wisdom but also go through mental checklist routines in using it. There is no other procedure that will work as well.
Another idea that I found important is that maximizing non-egality will often work wonders. What do I mean? Well, John Wooden of UCLA presented an instructive example when he was the number one basketball coach in the world. He said to the bottom five players, “You don’t get to play; you are practice partners.” The top seven did almost all the playing. Well, the top seven learned more—remember the importance of the learning machine—because they were doing all the playing. And when he adopted that non-egalitarian system, Wooden won more games than he had won before.
I think the game of competitive life often requires maximizing the experience of the people who have the most aptitude and the most determination as learning machines. And if you want the very highest reaches of human achievement, that’s where you have to go. You do not want to choose a brain surgeon for your child by drawing straws to select one of 50 applicants, all of whom take turns doing procedures. You don’t want your airplanes designed in too egalitarian a fashion. You don’t want your Berkshire Hathaways run that way either. You want to provide a lot of playing time for your best players.
I frequently tell the apocryphal story about how Max Planck, after he won the Nobel Prize, went around Germany giving the same standard lecture on the new quantum mechanics. Over time, his chauffeur memorized the lecture and said, “Would you mind, Professor Planck, because it’s so boring to stay in our routine, if I gave the lecture in Munich and you just sat in front wearing my chauffeur’s hat?” Planck said, “Why not?” And the chauffeur got up and gave this long lecture on quantum mechanics, after which a physics professor stood up and asked a perfectly ghastly question. The speaker said, “Well, I’m surprised that in an advanced city like Munich I get such an elementary question. I’m going to ask my chauffeur to reply.”
Well, the reason I tell that story is not to celebrate the quick-wittedness of the protagonist. In this world, I think we have two kinds of knowledge. One is Planck knowledge, that of the people who really know. They’ve paid the dues, they have the aptitude. Then we’ve got chauffeur knowledge. They have learned to prattle the talk. They may have a big head of hair. They often have a fine timbre in their voices. They make a big impression. But in the end, what they’ve got is chauffeur knowledge masquerading as real knowledge. I think I’ve just described practically every politician in the United States. You’re going to have the problem in your life of getting as much responsibility as you can to the people with the Planck knowledge and away from the people who have the chauffeur knowledge. And there are huge forces working against you.
My generation has failed you to some extent. More and more, we’re delivering to you in California a legislature in which mostly the certified nuts from the left and the certified nuts from the right are the ones allowed to serve. And none of them are removable. That’s what my generation has done for you. But you wouldn’t like it to be too easy, would you?
Another thing that I have found is that intense interest in any subject is indispensable if you’re really going to excel in it. I could force myself to be fairly good in a lot of things, but I couldn’t excel in anything in which I didn’t have an intense interest. So, to some extent, you’re going to have to do as I did. If at all feasible, you want to maneuver yourself into doing something in which you have an intense interest.
Another thing you have to do is have a lot of assiduity. I like that word because to me it means “Sit down on your ass until you do it.” I’ve had marvelous partners, full of assiduity, all my life. I think I got them partly because I tried to deserve them and partly because I was shrewd enough to select them, and partly there was some luck.
Two partners that I chose for one phase in my life made the following simple agreement when they created a little design-and-build construction team in the middle of the Great Depression: “Two-man partnership,” they said, “and divide everything equally. And whenever we’re behind in our commitments to other people, we will both work 14 hours a day, seven days a week, until we’re caught up.” Well, needless to say that firm didn’t fail, and my partners were widely admired. Simple, old-fashioned ideas like theirs are almost sure to provide a good outcome.
Another thing to cope with is that life is very likely to provide terrible blows, unfair blows. Some people recover and others don’t. There I think the attitude of Epictetus helps guide one to the right reaction. He thought that every mischance in life, however bad, created an opportunity to behave well. He believed every mischance provided an opportunity to learn something useful, and one’s duty was not to become immersed in self-pity but to utilize each terrible blow in a constructive fashion. His ideas were very sound, influencing the best of the Roman emperors, Marcus Aurelius and many others over many centuries. And you may remember the epitaph that Epictetus made for himself: “Here lies Epictetus, a slave, maimed in body, the ultimate in poverty, and favored by the gods.”
Well, that’s the way Epictetus is now remembered: favored by the gods. He was favored because he became wise, became manly, and instructed others, both in his own time and over following centuries.
I’ve another idea to emphasize in a brief account. My grandfather Munger was the only federal judge in his city for nearly 40 years. I admired him. I’m his namesake. And I’m Confucian enough that even now, as I speak, I’m thinking, “Well, Judge Munger would be pleased to have me here.” All these years after my grandfather is dead, I conceive myself as duty-bound to carry the torch for my grandfather’s values. One such value was prudence as the servant of duty. Grandfather Munger was a federal judge at a time when there were no pensions for widows of federal judges. So if he didn’t save from his income, my grandmother would become a destitute widow. And besides, net worth would enable him to serve others better. Being the kind of man he was, he underspent his income all his life and left his widow in comfortable circumstances.
But that was not all that his prudence enabled. Along the way, in the ’30s, my uncle’s tiny bank failed and couldn’t reopen without help. My grandfather saved the bank by exchanging over a third of his good assets for horrible bank assets. I’ve always remembered the event. It reminds me of [A. E.] Housman’s little poem that went something like this:
The thoughts of others
Were light and fleeting,
Of lovers’ meeting
Or luck or fame.
Mine were of trouble,
And mine were steady,
And I was ready
When trouble came.
You may well say, “Who wants to go through life anticipating trouble?” Well, I did, trained as I was. I’ve gone through a long life anticipating trouble. And here I am now, well along in my 84th year. Like Epictetus, I’ve had a favored life. It didn’t make me unhappy to anticipate trouble all the time and be ready to perform adequately if trouble came. It didn’t hurt me at all. In fact, it helped me. So I quitclaim to you Housman and Judge Munger.
The last idea that I want to give to you, as you go out into a profession that frequently puts a lot of procedure and some mumbo-jumbo into what it does, is that complex bureaucratic procedure does not represent the highest form civilization can reach. One higher form is a seamless, non-bureaucratic web of deserved trust. Not much fancy procedure, just totally reliable people correctly trusting one another. That’s the way an operating room works at the Mayo Clinic. If lawyers would introduce a lot of lawyer-like process, more patients would die. So never forget, when you’re a lawyer, that while you may have to sell procedure, you don’t always have to buy. In your own life, what you want to maximize is a seamless web of deserved trust. And if your proposed marriage contract has 47 pages, my suggestion is that you not enter.
Well, that’s enough for one graduation. I hope these ruminations of an old man are useful to you. In the end, I’m speaking toward the only outcome feasible for old Valiant-for-Truth in Pilgrim’s Progress: “My sword I leave to him who can wield it.”
© 2007 Charles T. Munger. Reproduced in full for reading and study from the text Stripe Press publishes free online in Poor Charlie’s Almanack.
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