Ask us anything: What's the key lesson from legendary investor Charlie Munger?

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0:50Welcome to our mini festive episodes. We're taking a little break from what we usually do to answer some of your amazing questions. And if you stick around to the end, we've got a little surprise gift for you. So Louis asked, what is the one key lesson that we can learn from Charlie Munger's legacy? The one thing, the guy was like famous for being very direct, no bullshit at all, had a very sharp mind, he was very funny. But the one thing that I took from him, I guess was, there's one thing he said where he was like in relation to inflation, he said, I'm optimistic about the future and I'm 98.

1:25So you should be able to handle a little bit of inflation in your life. And I think what he was saying, he was, you know, I'm nearly dead and I'm still optimistic about the future. And it's that always optimistic, always like real about the situation that's in front of you. Nothing's ever the end of the world unless it's crypto. That's what I've taken away from him. His no BS simple approach of describing quite complicated topics and his always been optimistic even at the end of his life. there's a saying that goes Andrew Craig said it actually didn't he pessimists sound smart optimists make money you know well I'm the most optimistic guy on the show and you're making money at the minute yeah you're doing well aren't you you're not going to confirm oh I don't want to tax my company for me it was a question I'm doing alright can't complain so so next question free busky asks were either of your parents financially savvy or was everything self-taught that's a good question um my parents were guess traditional nigerians work hard get a job as a doctor um in oil uh my mom doctor of oil doctor of oil no my mom's a doctor my dad's in oil loads of people in oil in Nigeria and then it's either lawyer or like politician and they just always said work hard save up your money they're not in the property market and they own a house but they didn't buy loads of properties they do have like an offshore island yeah it's called it's called to main island they have like an offshore financial advisor who puts everything in a fund and manages all that so they're big on investing but they don't do it themselves Did they talk to you about money much?

3:16It's very like, isn't it? You always said in the past that they don't talk about money. I mean, Nigerians don't, as far as I'm aware, we don't really talk about money. We do display it sometimes with like lavish cars or like, you know, jewelry or whatever, but it's not really something you talk about. It's just, it's a bit crude. So you just kind of work hard and like, well, yeah, work hard and save your money. Yeah. Yeah. So my dad was an absolute mess with money, but he wasn't in my life. I was raised by my mom as a single parent and my dad passed away when I was young, but he was a car crash.

3:48There was nothing to be learned from his approach to money at all. And then my mom, she was a really good influence, but her sphere of money is born out of being a single parent raising a child. And while I think that was easier in the past than it is today financially, it was all like budgeting and running a spreadsheet and things like that. So I had that kind of grounding, but there was never anything from investment or anything like that. And I think that's why I got into a bit of a mess in my twenties and I had to self-learn. So yeah, my mom taught me good money habits in terms of budgeting, but nothing around the investment side.

4:23And I think like what's really important that my parents instilled me at a young age was like do work experience. So like every summer from like the age of 13, they were like, had me working for a law firm, like working in different industries, different businesses, so that my CV was like solid. So I guess they didn't really teach me much about investments, but they said, make sure you've got a solid CV. You've got a lot of experience, make some money, and then you can worry about what to do with it when you have the money. So it was always about work ethic and knowing the value of money. That's what was important.

4:49Yeah, I think like parents are the platform that the kids kind of are like pushed off and my mom walked so I could run. Do you know what I mean? In that sense, like she did the hard stuff of like raising me and taking, she could have easily slipped into poverty and such, but she made sure there was like a stable home and I got a good education, I had everything I needed. And, you know, I've now been in my later life, been able to invest and thrive all because of that work, I think. So, you know, it might not be that she didn't teach me anything, but I wouldn't be able to do what I did if she didn't do what she did.

5:23And in the same way with your parents, it's like - They laid the foundation. Yeah, they laid the foundation. So you might not learn much from your parents, but you might learn what you're learning today because of the sacrifices and the things that they did. Yeah. And then I turn around, I'm like, dad, I'm into crypto. And he's like, what are you doing? I've wasted my whole life. Why are you still living in this house? You got your own little flat thing going on in the house. Yeah, they give me a little wing in the house. Yeah, he's got his own door because he rolls in so many times. For the record, I don't actually live with my parents, but I do have a bed there.

5:51It's a Nigerian thing. You've got to like, no matter how old you get, you can always go back to your parents' house, which is something that like, you don't really see in English culture. They're like, get out. You're 16, you're 18, go sort your life out. But like, I've had uncles who like, went back to live with my grandparents in Nigeria when they were like in their 40s, just for like a while. We should normalize living with parents again, I think, because within like Western culture or within the UK, it's almost like you're a failure if you live with your parents. But actually, it's really good for setting yourself up financially.

6:17Exactly. Yeah. And there's certain cultures where it's not like that at all, is it? Like you say, maybe in Nigeria. I know Poland, people live with their parents a lot longer and stuff. And it allows you to. I mean, that's how I spent the last like few years before. Yeah. You can travel, you can save up, you can travel. You don't have any rent to pay. rent is pretty much everyone's biggest expense isn't it so or like it's your main expense depends on how you structure your income but like if you don't have to worry about rent it gives you so much freedom yeah it's like if you live with your parents you're a failure but if you're in loads of debt up to your eyeballs barely affording your rent then you're a success you've got no heating you've got the six fiddies on when you go to bed next question so byron asks what are the true risks with doing nothing with your money?

7:04Good question. So when you say do nothing, I think it means to just leave it in your bank account. So let's just assume nothing in this means collecting it in a bank account that doesn't really have any interest rate. That is about one of the riskiest things you could do with money because you're guaranteeing that that money will go backwards by whatever the rate of inflation is. So traditionally, let's say 2%, but in the last year, let's say we've touched 10%. If you've got a thousand pounds in there, that money's going backwards by spending power-wise of a hundred pound in that year. So that is a very definite risk.

7:39If you want to talk bigger than that, the risk is that your spending power will not keep up with inflation long-term. And even though you're saving, you'll get to a point where you've saved your whole life and you've just got this pot of cash that doesn't do much for you. So within 30 years, an inflation rate of 2%, 3%, we'll need about 70K to buy what 30K does today. So he might save and actually never get anywhere. The main reason we invest in the market is to produce a return that's above inflation so that our spending power continues to grow or at least keep up. By doing nothing, you're residing yourself to the fact that you're not going to keep up with inflation.

8:17How much did you say you need to retire? Have like a comfortable life? Well, Lisa Conway Hughes would say that 25 times, whatever you want to spend, because that allows you to draw 4 % a year, pretty sustainably. I would say 33 times, because I think 3 % is more sustainable. But yeah, whatever you want to spend times it by 33. But a lot of that's assuming that you've got like a paid off house and these kinds of things. Obviously if you haven't, it gets more, but most people probably don't realize that a million quid is 30 to 40 grand a year in income in retirement. And most people will probably say that's not that much.

8:55But if I gave them a million quid, they'd be like, oh, I'm done. Do you know what I mean? I'm not working anymore. And then a few years later they'd be like, oh, I do need to work again. Yeah. By the time we're like 60, 70, we'll be talking about, we'll probably be talking about the fact that a million pound home in the side in London is cheap. Do you know what I mean? Because inflation will just keep pushing the goalpost in that sense. But yeah, if you're not taking risk with money long term, you're not exposing it to the market and things like this. You're guaranteeing that that money's going backwards spending power-wise.

9:30So Damo, tell me, what's all this Christmas gift malarkey you're talking about? Here we go. Books. I'm going to get underwear for Christmas. Unlucky. So this is a collection of all of the books from the guests that we've had on from previous episodes and some that haven't been on yet that we've already recorded. And we're going to give someone a chance to win them. There's some great ones in here. So there's Deborah Meaden's book. It's actually signed by Deborah Meaden, I think. If I'm right. Yep. Signed there. That's a great one. How to Own the World by Andrew Craig. Probably one of the best personal finance books ever written.

10:05Follow the Money by Paul Johnson. This is a great book. Great episode. But yeah, there's a load here and we want to give them all away to one lucky winner. So how does that lucky winner get a hold of these books, get a chance to find them? So you click the link in the description below and just sign up using your email and we'll pick one person out of there and we'll post them to them. Merry Christmas, you filthy animals.