Avoid “Liquor, Ladies, and Leverage”, According to Charlie Munger and Warren Buffet

Explaining how your general appreciation may get killed

Source: AbsolutVision on Unsplash.

Every time you can turn a literal phrase into a beautiful metaphor, you take it. It’s likely that Buffet was being quite literal when talking about liquor and ladies, but many of his previous quotes actually reflect a lot of the same themes.

Buffet and Munger have lasted as long as they have because their ideas have stood the test of time. People complain that their edge isn’t as great as it used to be, and that’s true. Edge and success are a bit confusing when you begin to manage hundreds of billions of dollars, though.

Especially when you begin to look at the cumulative earnings dependent on overall performance:

Source: Chart courtesy of stockcharts.com. S&P 500 versus Berkshire Hathaway A class shares. S&P in blue, Berkshire in red.

When we decode the simple phrasing of three avoidance alerts, we begin to see what alcohol, women, and leverage really mean.

Nothing sedates rationality like large doses of effortless money.