The Epictetus Charlie Munger knew

Chances are very high you’ve heard of Charlie Munger, Warren Buffett’s right-hand man for over 60 years. Considering how invaluable the Oracle of Omaha found him to be, Munger was hard to miss in the investment world.

The two were an inseparable team from nearly the time they met in 1959 until Munger’s death in November 2023. And Buffett credited his friend with more than one brilliant idea, including stepping away from buying “cigar-butt companies.”

He “actually hit me over the head with a two by four from the idea of buying very so-so companies at very cheap prices,” Buffett would recall. Munger taught him that just because a business was trading cheap didn’t make it automatically worthwhile.

Instead, he believed they should only pursue quality companies, purchasing them at fair-value or better price points. Can you imagine teaching someone like Warren Buffett something like that?

Yet that kind of influential advice wasn’t abnormal, it seems. Buffet once said that, “every time I’m with Charlie, I’ve got at least some new slant” that “causes me to rethink certain things.”

Munger, for the record, had just as many good things to say about his business partner and friend. But he also gave credit where credit was due all the way back to the first century A.D.

That was when Epictetus lived, a man who began his life as a slave under Epaphroditus, Roman Emperor Nero’s secretary. And he stayed a slave for decades.

Yet he went on to become one of history’s most famous and influential stoic philosophers of all time. So much so that he actively inspired Warren Buffett’s best friend, one of the most brilliant investing minds the world has ever seen.

On May 13, 2007, Charlie Munger gave the commencement address at the University of Southern California Law School.

Among the many wise words he passed on that day was how life can deal “terrible blows. Horrible blows.” Worse yet, they’re not always even close to being deserved.

Munger was one of the richest men in the world when he spoke those words. Yet they were deeply personal to him after a life filled with some of the most painful losses imaginable.

This included the death of his nine-year-old son, Teddy, in 1955 after a year-long battle with leukemia.

Two years earlier, he had to navigate divorce procedures with his first wife. And his second wife died in 2010 after 54 years of marriage.

Yes, she had lived a full life by then, but that otherwise happy fact doesn’t always make a loved one’s passing easier. Sometimes, it only makes it more difficult to bear.

Munger also experienced his share of financial struggles and health issues, such as complete vision loss in one eye after an agonizingly botched surgery. Yet he refused to wallow in self-pity.

Like Epictetus, who said, “it’s not what happens to you but how you react to it that matters,” Munger believed that kind of negative attitude was corrosive.

This was actually the foundation of Epictetus’ philosophy: that somethings are within our control and somethings – even most – are not. What we can decide is our judgement, our reactions, and our choices, including how much effort we make.

What we can’t is our “luck,” outcomes, or other people’s decisions. And the more we try to pretend otherwise, the more miserable we’ll likely be.

This stoic stance wasn’t and isn’t a philosophy of resignation, however. It’s actually a call to embrace reality and make the most out of it.

Modern culture with its emphasis on the ego often encourages people to do the exact opposite of what Epictetus preached.

Our Western world that was so heavily built on the Greek and Roman foundations Epictetus epitomized is now filled with stories of foolishness, bitterness, and a perpetual state of confusion. Too many people truly believe – whether correctly or incorrectly – that they’ve been wronged. And then they let that “wronging” define them in all the worst ways.

The stoicism that Epictetus and Charlie Munger both lived out teaches the exact opposite: that difficulty and even outright tragedy are opportunities to grow.

They understood how much worse we can make our lives when we let negative emotions take over… and how much better we end up when we learn how to work with and through misfortunes instead of against them.

I’m sure you have your own examples of how this was true. Perhaps you have more than one.

I’ve got a few myself, such as when my real estate business partnership fell apart. As I recounted yesterday:

That experience left me so financially devastated that I almost gave up multiple times and gave in to outright despair. My first instinct was to focus on what had been taken from me and how unfair the whole situation was.

And trust me, it was unfair. The money. The assets. The years of effort I’d spent building up my wealth. The enormous toll it took on my family of seven (including a toddler still in diapers).

It was exceptionally difficult not to get wrapped up in the emotional, mental, physical, and financial details – every single one of them negative. Yet as I also wrote yesterday, because of my partner’s “‘poor business practices,’ I got to see an invaluable example of leverage, governance, liquidity, and human behavior gone bad.”

And that ended up being an enormous gamechanger in the best kind of ways.

Because of what my business partner did, I learned to think about risk in a much more constructive light. I realized the importance of studying not just what a company has done, is doing, and wants to do…

But also who’s in charge of making those decisions.

Studying executive teams on top of financial specs has changed my entire way of investing. I now buy into higher-quality companies and avoid recommending less stable ones.

My portfolio – and the portfolios of so many of my followers – is now growing strong in ways I might never have otherwise achieved.

As Epictetus warned two thousand years ago, I couldn’t control my business partner’s actions. Nor could I do much to control the outcome once I became aware of what was going on.

I could only control my responses.

The timeless truth Epictetus passed down for people like Charlie Munger, you, and me is that adversity is inevitable. It’s only a matter of whether we allow it to make us or break us.

Will we emerge from our troubles with better judgement, stronger characters, and a deeper understanding of what truly matters?

Whenever we do, we tend to find the highest return on investment of all.

Happy SWAN investing,

Brad Thomas
Editor, The Wide Moat Daily

The markets may be up, but that doesn’t mean every single stock is. In fact, there are 10 previous market “darlings” that now trade at a steep discount.

Cell tower giants… specialized real estate… tech consulting firms… These out-of-favor companies may span the sectors, but they all beg the same question.

Are they bargains or value traps?

That’s what Nick Ward and I discussed in last week’s Wide Moat Show, with some interesting conclusions all around.

Catch the full episode right here.