The challenge I gave myself with this blog post was to take quotations from Bill Murray (the actor and comedian) and apply his advice to investing. Writing this has been like one of those cooking competition shows where you get some ingredients in a basket (for example, cotton candy, spam, kiwifruit and pimento cheese) and you must make a delicious meal with it using other ingredients that are in the pantry. I decided to throw in Charlie Munger as my other ingredient in this post, since he can make almost anything make more sense. Charlie Munger is the investing equivalent of butter in cooking since his wisdom makes almost anything taste better.
The task is actually easier than it seems. Investing is mostly about making wise decisions, and many people like Bill Murray who aren’t professional investors have learned strategies to make better decisions – especially after making some less-than-good decisions over the years. Learning to make better decisions most often comes from having made bad decisions in the past, and actually paying attention to the reasons why they were bad decisions.
Here are the Bill Murray quotations in bold text, followed by my thoughts interweaved with the views of Charlie Munger.
1. “I try to be alert and available. I try to be available for life to happen to me.” “Eh, it’s not that attractive to have a plan.” This advice from Bill Murray is straight-up consistent with Charlie Munger, who believes: “[Successful investing requires] this crazy combination of gumption and patience, and then being ready to pounce when the opportunity presents itself, because in this world opportunities just don’t last very long.” The Murray/Munger approach is simple: Don’t try to predict the future. Be patient, alert to opportunity, and ready to act aggressively when the time is right. In looking for optionality, it is essential that the optionality be mispriced by the market. The approach followed by Bill Murray preserves optionality and enables him to take advantage of mispriced bets that don’t happen very often.
This quote from Bill Murray’s character in Ghostbusters is a great example of the right attitude in a situation with positive optionality: “If I’m wrong, nothing happens. We go to jail — peacefully, quietly. We’ll enjoy it. But if I’m right, and we CAN stop this thing… you will have saved the lives of millions of registered voters!” Small downside and big upside is the essence of optionality, which is the essence of business and investing. When you see a huge potential upside with a small downside in business or investing, you should grab the opportunity.
Nassim Taleb wrote in Antifragile: “the idea present in California, and voiced by Steve Jobs at a famous speech: “Stay hungry, stay foolish” probably meant “Be crazy but retain the rationality of choosing the upper bound when you see it…. Any trial and error can be seen as the expression of an option, so long as one is capable of identifying a favorable result and exploiting it…”
2. “I think we’re all sort of imprisoned by — or at least bound to — the choices we make…. You want to say no at the right time and you want to say ‘yes’ more sparingly.” Most of the time in life when you are asked to do something, the best thing to do is nothing. Saying “yes” too often can destroy positive optionality. For Bill Murray this means things like not accepting every movie offer that come along. Charlie Munger puts it this way: “When Warren lectures at business schools, he says, “I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches—representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all.”
I have this friend who likes to say “when someone wants to hand you a turd, don’t feel obligated to take it.” It’s a pretty simple idea that many people forget. The correct response when someone tries to hand you a turd is: “Hey, thanks for thinking of me, but no thanks. You can keep that turd. Have a nice day.”
3. “What do they give you to do one of these things?” And they said, ‘Oh, they give you $50,000.’ So I said, ‘Okay, well, I don’t even leave the fuckin’ driveway for that kind of money’.” Bill Murray is describing an opportunity cost analysis here. Two of the more important opportunity costs in life involve time and money. Of course, time is the most precious opportunity cost of all. Charlie Munger’s description of the same process is as follows: “…intelligent people make decisions based on opportunity costs — in other words, it’s your alternatives that matter. That’s how we make all of our decisions.”
The funny part of the story related to Murray’s quote is that it concerned his decision to do the voice of Garfield in an animated movie. He ended up taking the part because he thought a Coen brother was involved. Murray said: “I had looked at the screenplay and it said ‘Joel Cohen’ on it. And I wasn’t thinking clearly. It was spelled Cohen, not Coen.”
4. “Don’t walk out there with one hand in your pocket unless there’s something’ in there you’re going to bring out.” You gotta commit.” “Let’s just roar a little bit. Let’s see how high we can go.” When you see an opportunity to make a bet that has odds substantially in your favor, you should bet big. Otherwise, don’t bet more than is needed to stay in the game. Charlie Munger: “The chief thing I learned from poker was that when you really have an edge, you have to push hard because you don’t get edges that often.” Often that bet is about time as well as an emotional and intellectual commitment, not just money. Going “all in” can be fun as hell.
5. “I made a lot of mistakes and realized I had to let them go. Don’t think about your errors or failures, otherwise you’ll never do a thing.” You will never stop making mistakes, so dwelling on mistakes does you no good. A trick to making wise decisions in life and in business is recognizing the poor decisions you and people you know have made, and understanding why they were poor decisions. Then, try to learn as much from those experiences as you can, to help you make a higher ratio of new mistakes to old mistakes.
The world does not stop being an unpredictable nest of complex adaptive systems because you are getting older and, on the margin, a bit wiser. This quote reminds me of a story about a young woman who attends a church near my home. After the sermon was over one Sunday, she lingered after the other members had shook hands with the minister on their way out. As the young woman finally shook hands with the minister, she asked, “Reverend, do you believe someone should profit from the mistakes of others?” “Certainly not,” replied the minister. “Well, in that case, could I have the $300 back that I gave you for officiating my marriage?”
6. “You have to hope that [good things] happen to you… That’s the only thing we really, surely have, is hope.” Bill Murray is talking about the value of optimism. In this way Bill Murray is more like Warren Buffett than Charlie Munger, who has said: “I don’t see how anybody could be more optimistic that Warren. He has this real faith in the long term. I’m not quite so enthusiastic, but he’s right that there’s a lot good that’s happening.” Being positive is, well, a positive thing. As an analogy, in terms of characters from The Hundred Acre Wood, it is far better to be a mix of Owl and Tigger, than Eeyore. As for Charlie Munger, his view is: “Is there such thing as a cheerful pessimist? That’s what I am.”
I think optimism is the better approach, but sometimes we are who we are. There’s a old joke about this idea: A family had twin boys, who had very different personalities even though they were identical twins. One boy was an eternal optimist, the other a complete pessimist. Just to see what would happen, on the twins’ birthday their father loaded the pessimist’s room with a huge pile of toys and games. In the optimist’s room, he brought in a huge pile of horse manure. That night the father visited the pessimist’s room and found him sitting next to his new gifts crying bitterly. “Why are you crying?” the father asked. “Because my friends will be jealous, I’ll have to read all these instructions before I can do anything with this stuff, I’ll constantly need batteries, and my toys will eventually get broken,” answered the pessimist twin. The father then went to the optimist twin’s room and father found him happily digging deep in the pile of manure. “What are you so happy about?” the father asked. The optimist twin replied: “There’s got to be a pony in here somewhere!”
There’s a joke about this topic that goes like this: Two friends, one an optimist and the other a pessimist, could never quite agree on anything it seemed. The optimist hatched a plan to pull his friend out of his pessimistic thinking. The optimist owned a hunting dog that could walk on water. His plan was to take the pessimist and the dog out duck hunting in a boat. They got out into the middle of the lake, and the optimist brought down a duck. The dog immediately walked out across the water, retrieved the duck, and walked back to the boat. The optimist looked at the pessimistic friend and said: “What do you think about that?” The pessimist replied: “That dog can’t swim, can he?”
7. “When you play with great players, you play better, it just elevates your game.” Working with smart people makes you smarter, and that feeds back on itself in a recursive way. Success of all kinds feeds back on itself in a process called “cumulative advantage.” Being lucky and talented leads to exposure to other talented people, experiences and training that makes you more talented [repeat]. Of course, some people are born on third base and have convinced themselves they hit a triple. Bill Murray is about as far from that as you get – even though he is an actor. He will, occasionally, comment on the economy. He once said: “A few decades ago we had Johnny Cash, Bob Hope and Steve Jobs. Now we have no Cash, no Hope and no Jobs. Please don’t let Kevin Bacon die.”
8. “The [work] I like most [is] where I connected with great people.” This quote is slightly different that the previous one, since this point is about how much you enjoy something rather than what makes you more skilled. Charlie Munger: “Even Einstein didn’t work in isolation. Any human being needs conversational colleagues.” Working with smart motivated people makes you smarter and more motivated. It is a virtuous cycle when you get it right. If you are just working to make money and are not in that process connecting with great people, it may be work, but its not really living.
9. “It’s hard to be anything.” Lots of aspects in life and business are simple, but not easy. It is emotions and psychology that make both investing and life hard. Charlie Munger: “If [investing] weren’t a little difficult, everybody would be rich.” If things aren’t going well, keep working. Never give up. Be relentless. That time in life when nothing is hard is when you are dead. There’s no need to rush that.
Even though life is hard, try to look on the bright side, like the Bill Murray character Spackler in the movie Caddyshack: “And I say, ‘Hey, Lama, hey, how about a little something, you know, for the effort, you know.’ And he says, ‘Oh, uh, there won’t be any money, but when you die, on your deathbed, you will receive total consciousness.’ So I got that goin’ for me, which is nice.”
10. “You need all kinds of influences, including negative ones, to challenge what you believe in.” Charlie Munger expresses a similar view: “Any year that passes in which you don’t destroy one of your best loved ideas is a wasted year.” If you are not being challenged, you are not growing. As you go through life if you are not discovering that the amount that you know you don’t know is growing even faster than what you do know, you are not paying attention.
If you don’t get excited when you are wrong about something and understand why you were wrong, that is actually a bit of a tragedy. You are very unlikely to be a good investor if that is the case. Anthony Bourdain said once, on his preconceptions of Ferran Adria’s Michelin 3-star restaurant elBulli the first time he ate there, “I like being wrong about things.” I agree with Andy Bourdain. Being wrong occasionally is the way people learn. Some people refuse to admit when they are wrong, and are terrible investors as a result.
11. “The gratification part is: I worked with that son of a bitch. I worked with her. If you get that thing done, you’re professional friends for life. There are people who drove me crazy, but they got the job done. And when I see that person again, I nod my head. Respect.” There’s nothing like a shared experience to bring people together. This shared experience is powerful enough that you can end up with a bond with people you never would have been friends with otherwise. When that creative process results in something valuable, it is not only gratifying but also creates a treasured bond with the people who were involved in that shared experience.
12. “[When I saw Ivan Reitman’s early cut of “Ghostbusters] I knew I was going to be rich and famous, and be able to wear red pants and not give a damn.” GQ’s Dan Fierman wrote about Murray in a 2010 interview: “If [Bill Murray’s] three and a half decades in the public sphere have taught us anything about the actor, it’s that he simply does not give a good goddamn.” The best thing about money is that you have the option to be independent. You have choices when you have money. Conversely, people who are poor or even rich people who have lots of debt tend to have lousy options in life. What you want to avoid are situations where you only have two choices: take it or leave it.
Charlie Munger: “Like Warren, I had a considerable passion to get rich, not because I wanted Ferraris – I wanted the independence.” Having a lot of money and toys is over rated — having a lot of great choices is highly underrated. Cash has optionality that is valuable in and of itself. The ability to be exactly who you are and make the choices you want is a very wonderful thing indeed.