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

Explaining how your general appreciation may get killed

Anthony Andranik Moumjian
8 min readJul 23, 2020


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.

Buffet said this in 2000 in Berkshire’s annual report. It’s actually on page 14. It’s pure gold because you don’t quite grasp it fully until you begin to think about what he’s saying.

Rationality can take sedatives. This is because the market is governed by people, no matter if they are an individual on forums like Reddit’s WallStreetBets or institutional behemoths at a regional trading shop.

When it comes to segmented, isolated niches, like technology, far and few people understand the capabilities and limitations of that technology. Most of the time, like an accordion, a technology company will reach its fair value or cross it, only to far exceed any rational valuation in the near-term. Sustainability is then thrown out of the equation, further distorting the alignment of the marketplace.

When this happens, we get a ripple effect throughout the economic sector.

Here’s a thought-experiment: Technology filters through the stock exchanges in America in the…



Anthony Andranik Moumjian

UC Berkeley, mathematics. Los Angeles. Long-time runner. Top writer on Quora, 100M+ total content views. New to Medium. Inquiries: Moumj@berkeley.edu

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