Charlie Munger’s Investment Principles

First — business valuations are a tricky thing.

Valuing anything at all is a tricky thing.

If a business is worth $30M but nobody is willing to pay that much for it, is it really worth $30M? To make a valuation stick, the “value” (what they get) must match the “cost” (what someone else is willing to pay).

When I’m looking at brands or offers to buy / invest in there are three things that stand out.

Earnings + Future Earnings

Most of my portfolio consists of online brands or service brands. These companies are asset-light. Their balance sheets have mostly cash & computers. Cashflow is taken from the brands and placed into long term “storage” (real estate, brokerages, more businesses, etc). We aren’t amortizing or depreciating a ton of items so the main components of value come from earnings.

  • TTM (trailing twelve months) and 3-year statements
  • Future earnings (projected based on diversity of income)

We must use the past to conceptualize the future. This goes for all things, not just money or income. Our best prediction of what will happen comes from reflection around what has happened previously…

The trailing twelve month statements give you a snapshot of how much revenue was generated and what the cost structures look like in side of the business.

I talk about diversity of customer acquisition in detail in my book (available here), as my primary way of monitoring how much a business should do next year comes from how many unique channels they have to create customers.

How to Think Better → How to Invest Better

The late Charlie Munger (partner to Warren Buffett) was one of the clearest thinkers on the planet. His principles for valuing opportunities & investing capital are widely studied. Here are a few of his tenets (mental models) for keeping your decisions profitable & fruitful.


Incorporate margin of safety. Avoid detailing with people of questionable character. Avoid big mistakes & shun permanent capital loss.


Require independence of thought. Other people agreeing doesn’t make it right.


Develop into a lifelong self-learner through voracious reading & curiosity. The will to prepare beats the will to win.

Intellectual humility

Stay within your circle of competence. Resist the craving for false precision and false certainties. NEVER FOOL YOURSELF.


Continually challenge and willingly amend your best-loved ideas. Recognize reality even when you don’t like it.


Reputation & integrity are your most valuable assets. Keep things simple and remember what you set out to do. Don’t overlook the obvious by drowning in minutia. Exclude indeed information or ‘slop.’

Analytic rigor

Determine value apart from price; progress apart from activity; wealth apart from size. Consider the totality of risk and effect; look always at potential second-order and higher-level impacts. Think forward and backward.


Remember the highest & best use is always measured by the next best use (opportunity cost). Good ideas are rare — when the odds are greatly in your favor, bet heavily.


Resist the natural human bias to act. Avoid unnecessary transactional taxes and frictional costs. Be alert for the arrival of luck.


Be fearful when others are greedy and greedy when others are fearful. Opportunity doesn’t come often, so seize it when it does.

Important note: I am not a full time investor. I am a builder — I love the building process. There are phases to the game and I am in the phase where I love to be involved.c

My passion is finding great businesses with great founders who do not know how to get to the next level. If you want help, take this business assessment and we will make you an offer. This could range from an offer to purchase your company or to invest time and resources to help you grow it.


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