Poor Charlie's Almanack by Charlie Munger | with guest Alex Melia

0:01unknown:Welcome to Business Book Club, the show where top entrepreneurs break down the most powerful insights from the world's best business books. I'm your host, Sam Brown, and today we're diving into Poor Charlie's Almanac by Charlie Munger. Who is Charlie Munger? Warren Buffett called him our generation's Benjamin Franklin. Bill Gates hailed him as one of business's sharpest minds. As Buffett's right hand at Berkshire Hathaway for 45 years, Munger helped achieve a staggering 19.8 % annual returns. Over 45 years! That's double what the S &P achieved in the same time period. He popularised the power of compound interest and is a legend in investing circles.

0:45unknown:In 2023, at the age of 99, he died having amassed one of the largest fortunes on the planet. And today's book, Poor Charlie's Almanac, is his legacy. A collection of his best speeches peppered with decades of wisdom. Every page is a lesson in rational thought and multidisciplinary decision making. It's essential reading for investors, leaders or anyone seeking to sharpen their mind. And joining me to dive into this masterpiece is Alex Melia, the founder of Swoosh English. They help medical professionals pass English exams to achieve their dreams of living in English speaking countries. Alex I know you pretty well now and I know you have a pretty impressive library behind you choosing one book couldn't have been easy why Paul Charlie's Almanac it all started around 2012 2013

1:35Alex Melia:when I was first starting my business and I was devouring a lot of YouTube videos from business people and people started to talk a lot about this particular book and when I searched for it The only copies were around about£200 -£300 and I didn't have that to buy it. And I think there was also some mysticism with it as well for the fact that it wasn't easily available. It's not something you could just get in the WH Smiths around the corner. So because it was a little bit harder to track, it was something that intrigued me more. And also for the fact that he's someone who is widely revered, very well respected in business circles.

2:11Alex Melia:I thought this is definitely something I want to read and I want to learn about.

2:15unknown:Nice. I didn't realise that. I think it recently got produced by Stripe Press. So it's not£200 or£300 anymore. It is widely available and it's on Audible. Massive thanks to Stripe for doing that.

2:28Alex Melia:Yeah, I actually bought that copy first when it came out. I think it's about£20,£30 and I bought it. It's a beautiful hardback cover. Yeah, I've got it in front of me actually as well.

2:39unknown:I asked you to highlight your three most valuable lessons from this book and I realized that cutting this down must have been very difficult to do because there's just so many lessons all over it. So what's your first lesson?

2:52Alex Melia:Patience plus discipline equals success. This is about not being impatient, essentially. Charlie Munger talks a lot about inverting. What is key to being unsuccessful? It's to be impatient. I tell people all the time when people say, what do you do? And I say, I've got an English teaching business. We help doctors, nurses, university students pass English exams. and they say how long have you been doing it i say since 2013 this is a lifelong journey and i love what i do and you have peaks and troughs you know yourself with exiting a business you have highs you have lows and when i've been in those really precarious situations especially during covid where i had to unfortunately let some staff go and cut costs and things like that is just to see the bigger picture and that's what charlie munger does down to a tee and he's known for that is what you calls sit on your ass investing when things are going really badly in the market he's not straight away panic selling you know he's grinding it out he's waiting for things to recover because his approach is very contrarian he talks about this a lot in his book his kids are contrarian as well all the different stories about their father in the book their mindset is if everyone's going one way you go the other discipline in the sense of what he says day by day you get ahead but not necessarily in fast spurts, but you need to prepare for those quick or big wins.

4:12Alex Melia:And at the end of the day, if you grind it out long enough, you get what you want. You deserve what you want.

4:17unknown:Nice. So the query that you sent over to me straight from the book, the big money is not in the buying and selling, but in the waiting. So that's your selling your ass investing. Are there any examples that kind of jump out to you of how beneficial this has been for him?

4:30Alex Melia:Going back to what I was saying before about when everyone's going one way, he goes another. there. When people talk about having diversification in their portfolio, people think, oh, you need to have eight to 10 or 12 different stocks and shares. He has three. And when people talk about having many different investment vehicles, and I think about the ones that I've had over the years, I've made mistakes by not having a sitting on my ass investing style like him. And when I've made those mistakes and I've reflected upon them, I thought back to what he does, that I don't need 10, 12, 15 different vehicles.

5:03Alex Melia:I don't need to constantly move from this investment to this investment to this investment to do what everyone else is doing just to have a level of patience about me to think about what my next opportunity is yeah i think he talks about this in the book

5:14unknown:the key for his success really is around like how many decisions they actually really make how many buying decisions are selling decisions so it's not that they're not working a lot because they don't make very many decisions a year but they're just constantly working and constantly researching and figuring out where the opportunity is and then when they find it they're happy to just put in a stupid amount of money and leave it there. So it's just having that really high conviction of long-term benefits. What I found super interesting about this book and how Charlie talks about it is that he gives examples from investing, but there are applications in like all other areas of life.

5:48unknown:Have you found that?

5:49Alex Melia:Yeah. Well, I wanted to just touch on what you said there. Their approach is about inputs and outputs is the way I see it is Charlie Munger and Warren Buffett are spending hours upon hours upon hours every day in reading investor reports, in reading different books. Charlie's got a very multidisciplinary approach. So he's reading books from many different genres. He's not just, I'm only going to read books about business and investing. So I think it comes down to that. And it's difficult for me because I'm an ideas person. So I can come up with 50 ideas a week and I want to do all of them. I think it's important to have someone in your business who has a different approach to you, maybe has a more of a pragmatic approach than what I have to calm me down.

6:31Alex Melia:I'm sure Charlie has had a gazillion ideas, but to be able to just, in his case, have a few businesses that he wants to invest into, you might spend months upon months thinking about that and sitting on his ass before making that decision or waiting for the external environment to be more favorable for him to then invest. And I think about that for myself quite a lot because I've definitely

6:52unknown:made those mistakes let's bring this into your life a little bit then so how can this go wrong if you don't practice patience if you don't practice discipline yeah i think a lot of people

7:03Alex Melia:myself included jumped onto cryptocurrency quite a few years ago and i know charlie and warren buffett they loathe cryptocurrency and i did what a lot of people did i allowed my emotions to override my logic and I got suckered into what influences in the crypto space on YouTube and Twitter were saying in, oh, it's definitely going to 200k, it's definitely going to 500k. And I made a three and a half X on what I'd put in. You know, I didn't actually realize that in the end, that was the point in which to get out. And even with all the advice that was being provided from people I respected and people who'd been invested in all sorts of vehicles for many, many years there was three people in particular that i did not take their advice i just got suckered into the excitement and the wave of euphoria around it and i didn't take my money and i ended up breaking even on what i put in so at least i didn't lose money but i just go back to the philosophy and the principles of munger to say is this a fad obviously we all know is here to stay more so bitcoin than anything else so we know these things some of them are here to stay but when you've got some of the ludicrous names in crypto for coins, you know that that's a fad and you know it's a very short-termist approach, which is absolutely polar opposite to the philosophy of Munger.

8:23unknown:So how have you added patience into your different areas of business?

8:28Alex Melia:It's a good question because I've had an absolute rollercoaster journey with my business and I put it into things I can control and things I can't control. What I can control is the B2C market with students coming on board with switch whether it's our youtube channel that they've gravitated towards and opting into something that we have that we're marketing a free guide or whatever but then you've also got the uncontrollables on the b2b market and we have been severely impacted by externalities particularly the u.s government where we had big contracts in the u.s and they've just been absolutely decimated in the last few years with visas not being given to foreigners the anti-immigration sentiment from a certain president we know, that's been massively difficult and it's easy to just feel like, okay, well, this is never going to get back on track.

9:20Alex Melia:But I know that all of these things swing in roundabouts and we have to be there ready and prepared for when things in the market do become more favorable. So we'll be able to capitalize on it before anyone else does. So we've got resources in place. We know when things turn around, will be there to capitalize. But it does require an incredible amount of patience. And there's someone that we both know who recently sold her business for 30 million. She went through a process called retrogression in the United States. There was probably seven to eight years of waiting or sitting on her ass, as Munger calls it, for things to turn around.

9:57Alex Melia:And her business was nearly decimated. And once things did turn around, seven to eight years of waiting, she worked her ass off for about three years, going to American airports, American airports. She was one of our clients. Every time I spoke to her, she was at a different random airport in the US, in the Midwest or somewhere, probably somewhere like Nebraska, Omaha, where Munger is from. After three years, she sold it to a huge conglomerate for$30 million. And, you know, probably at the time, I'd say her business was not even worth a million when she was going through the retrogression period.

10:33Alex Melia:So it just shows patience plus discipline equals success.

10:36unknown:Yeah, amazing story. Let's move on to lesson number two that you've got.

10:40Alex Melia:Be a lifelong learner.

10:42unknown:I think you're preaching to the converted here. Everyone listening to this podcast, everyone listening now is on their journey of lifelong learning. Otherwise, why are you trying to learn from the world's best business books from successful entrepreneurs? What I'm really interested in is how does Charlie portray this lifelong learning in his life? And what advice does he have for other people to just really go deep on this?

11:05Alex Melia:From the stories that I've read about Charlie and also watched on YouTube, people who meet him, they want to get as much information out of him as possible. But what actually happens is he's the one who's asking them a million questions. He's the one who's learning new things about them. And he doesn't have the mindset of, well, I've been doing this for 60 years. I am the beacon of all knowledge. I can't learn anything from you. He's always learning new things from other people. So people leave the conversation going, wait a minute, I've just given everything that I know to a man who's in his eighties, nineties.

11:38Alex Melia:Obviously Charlie's not with us anymore, but when he met new people, he was constantly asking them questions, constantly showing interest in them, which as we all know, talking about ourselves is our favorite topic. So it's a whole whirlwind for people for once they leave him, they realize actually I've just given him everything I knew, but I didn't learn anything from him. And he's the one that I actually wanted to learn something from. Because I think from Charlie's perspective, he's just a curious individual. And I think that curiosity is something that obviously we want to breed throughout our lives.

12:10Alex Melia:I just learn a ton of things every day from different people by asking them questions. To the annoyance of some people, particularly my parents when I was growing up,

12:18unknown:I had this exact same thing. I had teachers telling me to stop asking so many questions.

12:23Alex Melia:And luckily, around the time the internet started, before proper Google searches, my mum would get out in an encyclopedia and figure out the weird questions that I've asked her as a kid.

12:34unknown:I feel very lucky that that was encouraged in me, but I think for a lot of people, it might have been a little bit squashed. I think that is part of being a founder and an entrepreneur is just that endless curiosity. and what comes along with that is a large amount of humility that you need to be able to say, I don't know everything. I want to know more and I'm going to go and find it.

12:52Alex Melia:It's interesting because business networking is a very divisive topic. Some people love it and some people really don't like it at all. But one thing you can get from it is you can learn a ton of things, particularly with founders and business owners in your particular field. But to use Munger's multidisciplinary approach. I'm even just thinking now it's an idea to go to business networking events that are not even in your field whatsoever, or they might be in the ecosystem of what you do, but not directly. Because it goes back to know a little about a lot. So you can still hold your own in any room and going into those different business networking circles that are not in your vicinity, so to speak, industry-wise.

13:32Alex Melia:I'm sure you could learn a ton from people just by asking them questions because I do that quite a lot where I ask people questions and their eyes light up like a Christmas tree. It's like, oh, cool. Someone's asking me questions that I've not been asked for a while. Or, oh, this is surprising that people are asking me questions in depth.

13:49unknown:I feel like if you do podcasts and you're a guest on podcasts,

13:52Alex Melia:you're more likely to be asked questions that perhaps you don't talk about in everyday conversation because just naturally things move on to other topics. But really diving deep from having a podcast with yourself in the past, producing it. When I used to ask people questions in depth, people felt completely validated. And some people even said it felt like a counseling session or talking about things from childhood or from their early life in business as a founder that people have not asked about asking about the journey, about all the failures, all the difficulties that they'd faced.

14:24unknown:So I think there's a lot to be said about that. And there's a lot of gold just wrapped up in people's experiences, isn't there? How has reading about different subjects influenced your business? because I know that he credits a lot of his success to this multidisciplinary approach that you're talking about and leaning on his ability to draw on knowledge from a huge amount of different fields. And there's a really great book on this as well, actually called Range, which Range, how generalists triumph in a specialized world, which I'd recommend to anyone. How was that approach of being this lifelong learner and learning from multiple different angles?

14:58unknown:How has that affected your business?

15:00Alex Melia:I've read a lot of self-help books from the age of 1920. So I started out in Hong Kong and that's where the business is registered and registered that in 2014. And I went through a particularly horrible stage of business in 2015, 2016, where just everything we were trying just wasn't working. I had huge anxiety. I was waking up in the morning with a sore jaw because I'd been grinding my teeth whilst I was sleeping because I got to a stage where I wasn't able to afford my staff and my teachers. those books really got me out of the predicament I was in particularly the Eckhart Tolle books Power of Now and A New Earth because the more I was able to be present the more I was able to not have stories spiraling and racing of all the negativity that I'd concocted in my mind the more I was able to focus on the here and now within my business and say okay let's not get wrapped up in all these stories Alex look at everything as it is and look at it at face value and actually things are not as bad as what you're making it out to be.

16:05Alex Melia:So I think self-help books have been incredibly important. Also, these kinds of books, there's always a few stories from people, whether it's psychologists talking about their clients who've gone through rough patches and how they dealt with it. Mugga's book is autobiographical as well because it's obviously a compilation of speeches down the years, maybe 25, 30 years. So you can see his mindset across that time and how things change and how things differ. I mean, his very sort of sardonic sense of humor, his directness is always there for everyone to enjoy. So he's got that about him. But I do like how his philosophy, how his mindset sort of changes in small doses over the years or just evolves.