Trite Munger quotes that hit me, FY24 edition: big money in waiting?

I’ve got a few annual and semi-annual loose traditions¹ on the blog. One of those traditions are my “trite buffett” and “trite munger” quotes series. The basics of this series are simple: both Buffett and Munger say a lot of stuff that is, quite frankly, trite. But part of their genius is that, every now and then, I’ll be working on something and a huge light bulb will go off that unlocks some deeper meaning for me in something I heard them say and laughed off 5-10 years ago.

So the purpose of the series is to present some quote they said that I heard years ago that I’ve just been noodling or learning on. And the good news here is that I’ve been thinking about a lot of Buffett and Munger quotes this week; my friend Alex Morris wrote “Buffett & Munger unscripted”, and he sent me a prelease copy to prepare for a podcast we’re doing this week (feel free to lob in questions in advance of the pod if you have any!).

Anyway, as I’ve been prepping for 2025 and reviewing 2024, this Munger quote has been running through my mind:

“The big money is not in the buying and the selling — but in the waiting.”

Why have I been thinking about that quote?

It’s not because I’m here to hop up on a pedestal and lecture you about the virtues of thinking long term or playing the long game or anything.

But, as part of my prep for 2025, I’ve been going back through my investments in 2024 and seeing what I could improve on / have done better. And, while I made plenty of mistakes, there are two diametrically opposed mistakes that cost me the most money:

• Sucking my thumb when a position turned: I’ll use a very simple example: you buy a stock because it’s trading for 10x P/E, it’s buying back stock aggressively, it’s growing, and you like the business. Then one quarter you wake up and the growth has stopped….. but now the stock is trading for 8x P/E, buying back shares, and you still like the business, so you suck your thumb and do nothing. Then the next quarter the buybacks stop…. but now the stock is trading for 6x P/E and you still like the business, so you do nothing. Is the company cheap? Probably! Is it undervalued! Probably! But you were here for cheap + growth + buyback + liking the business, and now you only have two of the four, and maybe if you’re honest with yourself you don’t like the business as much anymore? My experience in those situations has not been kind!

• Selling a thesis too early: Again, I’ll use an example, and I can actually use a relatively live one. All through 2023, I was pounding the table on banks being undervalued on the heels of regional bank crisis / SIVB exploding. My thesis was simple: history suggested buying good banks below tangible book value worked out well for investors, and with their craziest competitors having been taken out + looming short term rate cuts, the banks could catch a lot of headwinds in a hurry. In the middle of 2024, I was long term on the majority of my positions, and most were trading right around tangible book value. I figured “I buy below tangible and sell around tangible,” and sold most of my bank stocks…. only to watch all of them rip 30-50% over the next few months as the fed cut and the market got excited about Trump.²

You can probably see how those are diametrically opposed: in the first example you hold on too long, in the second you don’t hold on long enough! But you can also see how those could bleed dangerously into one another! For example, in the banking example: what if the stocks continued to trade at a discount to tangible book value, but book value stalled out or was shrinking. If I held the stocks, would I be sucking my thumb or sticking to my thesis?

Let me back up a little and give another story. Over the summer, I was at an event where a very well known Munger acolyte / fan boy³ was speaking. Someone asked him a question along the lines of “you run a concentrated portfolio; how long can you hold on to something without it working?” His response was⁴, “three years. In general, if the market hasn’t come around to your thesis after three years, there’s something wrong with it.”

It’s hard for me to match that response up to Munger’s “the big money is made in the waiting” comment…. but, I would have to admit, when I’ve made an investment and it’s stalled out for three years, it’s pretty rare for it to start working in years 4/5.

So which is it? How do you blend making the big money from “waiting” versus creating huge opportunity cost by sucking your thumb holding on to something that isn’t working or, even worse, where the thesis is breaking?

How do you avoid being a short term trader who is selling a stock because they have one bad earnings report versus a long term investor who is selling a stock because the investment thesis has broken?

I will be honest- I do not know the answer! But looking at my 2024 results (and perhaps with some hindsight benefit), I think it’s clear there are some stocks were I sucked my thumb as the thesis broke and cost myself money, while there are others I sold too early and also cost myself money. I’m going to try to improve on both areas going forward.

Before wrapping this up, I know one frequent response is going to be, “Andrew, you’re talking about the run of the mill winners and losers. Munger was talking about career making winners; he was warnings against selling a stock simply because it’s up 3x when it still has a long runway to go and could be a hundred bagger if you held it for another decade!” (another will likely be: A lot of this was discussed in the art of execution; it’s next on my reading list so I can’t comment on it but I have read Gavin baker’s takeaways from it several times so I certainly know a lot of the points here it addresses).

I definitely understand that line of thinking, and obviously if you’ve found the next Apple / Amazon you want to buy it and hold on for dear life….. but I’d say the base rates are against that find. I’ve seen more investors get torched buying Snapchat and saying “this is the next Facebook!” and holding on as the stock gets cut in half over and over than I have seen actually buy Facebook and hold on as it goes through multiple peaks and valleys… and I think I see it happen more often during a growth / manic cycle (i.e. early 2021⁵, or perhaps the environment we’re in now!) and lead to tears when things inevitably cool down (i.e. 2022, or perhaps the environment we’re heading into!), with many selling out as the cycle cools down (how many people sold Netflix or Facebook in 2022, when the stock was way down and people were worried the top brass was losing it, only to miss out and a 5x over the next few years?).

I might have more to write on this in the near future, but I’ll leave it here for now!

1. I say loose traditions because they require me to remember them to continue them, and I’m ~50/50 on it!

2. Obviously this is n=1 / small sample size, but if I shortened this story to “I bought at 0.75x book thinking it was worth 1.25x book and book was growing, and I sold at 1x book only to see it ramp to 1.25x three months after selling” I think you can see how it would fit the pattern I’m going for!

3. I say this as a fellow Munger fan boy!

4. These are rough quotes from memory, not exact. But they are directionally correct.

5. This infamous fintwit thread is basically what I’m describing here, and to be honest it colored a lot of my thinking when writing this paragraph. For those who don’t feel like clicking, it was from early 2021 and asked for companies that could go up 50x, and the average stock mentioned was down 90% 2-3 years later.