Charlie Munger on his experience in 1973-1974...
That is a very good question. When I operated a partnership,
I got hit in 1973 and 1974, which was the worst collapse since the 1930s. So I
got hit with a once-in-50-years-type event. It didn’t bother me with my own
money, but it made me suffer the tortures of hell as I thought through the loss
of morale of the limited partners who had trusted me. And the agony was
compounded because I knew that these assets were sure to rise because they
could be liquidated for more than I’d bought them for in due course. But the individual
securities were traded in liquid markets so I couldn’t mark them up from the trading
price because the opportunity cost for my partners was set by the trading
price. I would say that was pure agony. The lesson from that for all of you is
that you can have your period of pure agony and live through is for many
decades. It’s a test of character an endurance.
I don’t think any fully engaged young man wouldn’t have
gotten into the pain that I did in 73-74. If you weren’t aggressive enough and
buying on the way down and having some agony at the bottom, then you weren’t
living a proper investment life. I wouldn’t quarrel with anyone who was more
cautious and less aggressive than I was. But what got me into the agony was
buying things for far less than what I was sure I could liquidate them for in
due course. I don’t think it was wrong, but it was agony.
