Why You Should Be Like Munger Instead of Musk

Elon Musk's tears... Odd lunch companions... Are you more like Charlie Munger or Musk?... The hard way and the easy way... The case for capital efficiency... A one-on-one with Porter Stansberry... Join in person or watch online... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Elon Musk's tears... Odd lunch companions... Are you more like Charlie Munger or Musk?... The hard way and the easy way... The case for capital efficiency... A one-on-one with Porter Stansberry... Join in person or watch online... --------------------------------------------------------------- Editor's note: Today, we're sharing a guest essay from Stansberry Asset Management Chief Investment Officer Austin Root. Longtime readers are likely familiar with Austin's name from his time as Stansberry Research's director of research from 2019 to 2021, and as editor of our Portfolio Solutions products. In 2021, Austin joined Stansberry Asset Management ("SAM"), a U.S. Securities and Exchange Commission-registered investment adviser. The firm is completely separate from our publishing business but uses our research, plus other sources, to help manage individual client portfolios. As Austin will explain toward the end of today's essay, he's sitting down with our founder, Porter Stansberry, during a free event on Tuesday – and Austin wanted to make sure all Stansberry Research readers have the opportunity to be there in person or tune in online... But, first, Austin begins by offering an interesting comparison of two of the most famous names in the financial world, Elon Musk and the late Charlie Munger... and what individual investors might be able to learn by understanding the differences between them... --------------------------------------------------------------- Elon Musk was sad... It was 2009 and the entrepreneur had just been knocked down a peg by one of the greatest investors in modern financial history... At a group lunch, Charlie Munger, Berkshire Hathaway vice chairman, walked the entire table, including Musk, through all the reasons why Tesla was doomed... The lunch happened at a critical time for Musk. He had already launched the Internet payment app PayPal, and Tesla was his next big project. Musk had just taken control of the electric vehicle company a year earlier. Its initial public offering and the release of its Model S were still a year off. And now, one of America's most successful investors was dismissing his big, new project as a quixotic folly. As Musk revealed in a post on his social media platform X (which everyone else still calls Twitter), Munger's critique "made me quite sad, but I told him I agreed with all those reasons & that we would probably die, but it was worth trying anyway." As we know... Tesla didn't die. Instead, the luxury carmaker is a $500 billion success story. Its cars are a status symbol. Its shares, while down nearly 50% since a high last summer, became one of the "Magnificent Seven" equities that powered the stock market over the past few years. Munger may have been wrong about Tesla's future, but as I (Austin Root) will explain today, he was right about Musk. And the difference between the two men can teach us a lot about how investors behave... After all, you don't rack up returns of almost 20% a year for nearly 60 years, as Berkshire Hathaway has, by courting death at every turn... Most folks would agree that Munger and Musk make odd lunch companions... Munger, who passed away last year just shy of his 100th birthday, was best known for serving as the vice chairman of Berkshire Hathaway and trusted confidant to legendary investor Warren Buffett. And like his investing partner, Munger was known for his self-effacing wit. For example, he once quipped, "It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent." Most people know Musk as the brilliant yet erratic founder of Tesla and as the owner (and incessant user) of X. And Musk's public comments tend to be... edgier. After a particularly large explosion of a failed launch of a SpaceX rocket in 2020, Musk posted a picture of the explosion with the accompanying quote: "So... how was your night?" As different as these two men appear, they share a couple of important similarities... Both men were serial entrepreneurs. They founded or helped lead multiple large and successful ventures, often many at the same time. In addition to helping build Berkshire Hathaway, Munger founded a law firm that focused on real estate law... He launched two investment firms before working with Buffett... He helped run Wesco Financial, now a wholly owned subsidiary of Berkshire Hathaway... And he became chairman of investment holding company the Daily Journal. Musk's resume goes way beyond Tesla and X. He also founded, led, or helped launch digital-payments pioneer PayPal... space-travel innovator SpaceX... satellite communications provider Starlink... and "brain-machine interface" pioneer Neuralink. The list goes on. No matter how you line them up, however, Munger and Musk represent the far ends of the investing spectrum... In short, Musk often takes the hard road while Munger always preferred the easy one. Throughout Munger's career, he tried to find the "sure thing" investments that were easily in sight. Musk, in contrast, is all about taking big world-changing swings – like revolutionizing the auto industry... or privatizing space travel. The difference was not lost on Munger... At last year's annual Berkshire Hathaway shareholder meeting, Munger and Buffett were asked about Musk. "[Musk] would not have achieved what he has in life if he hadn't tried for unreasonably extreme objectives," Munger responded. "He likes taking on the impossible job and doing it. We're different. Warren and I are looking for the easy job." Buffett went on to say that if he and Charlie could make money "playing tic-tac-toe" they'd do it and that they simply "don't want to compete with Elon in a lot of things." Munger punctuated the comparison, chiming in: "We have a wholly different way of going about life. We don't want that much failure." There's a very good reason to figure out which man, Munger or Musk, you are most like. I fear far too many investors are trying to be Musk when really, they should be Munger... You can see the appeal of the Musk playbook. Musk is going after huge market opportunities, and he's had some spectacular triumphs such as Tesla and SpaceX that have not only changed the world, they've also made him incredibly rich. And over the past few years, some of the biggest companies and best-performing stocks got there the "hard way," by innovating, disrupting, and reimagining entire industries. But here's the thing... it's REALLY hard to change the world. And it's even harder to get wealthy investing in companies that are trying to change the world. First, you have to be right. The companies you invest in have to be the ones that succeed in changing the world. That seems easier to do than it is in reality because of something called "survivorship bias." We spend most of the time talking and thinking about the disruptive winners that became big, valuable companies like Apple or Amazon. But for every Apple, hundreds of personal computing companies ended up like Gateway or Tandy – out of business. For every Amazon, thousands of Internet companies went bankrupt like Pets.com or eToys. The reality is that most companies with "unreasonably extreme objectives" fail to meet them. Second, for the Musk way of investing to make incredible returns, not only do you have to be right about the company you choose, you also must invest early, getting in when the company is still small and before most investors see the innovation. Unless you're a venture capital investor, that's tough to do today. Many companies are waiting longer to go public. For example, when Netflix went public in 2002, its market capitalization at the offering was roughly $300 million. When Uber went public in 2019, its market capitalization was $70 billion. Third, once you've invested in the right disruptive company early, you always run the risk that a better mousetrap comes along before your company really gets going. Research In Motion, creator of the Blackberry, was an incredibly innovative and disruptive company. But less than a decade later, its disruptive smartphones were trounced by an even better product – Apple's iPhone. Porter Stansberry started out as a Musk-like investor... As some longtime (really longtime) subscribers may remember, Porter Stansberry founded the publishing company that became Stansberry Research almost 25 years ago with a Musk-like outlook, and a different name. As he wrote in 2018... I originally called my financial research company "Pirate Investor"... My core idea as an investor was to buy small, aggressive companies that were using new, disruptive technology to "pirate" market share from massive companies that were too big to handle the radical changes taking place. That worked fine... until it didn't... [In] 2001 and 2002, I learned that investing in new technology isn't always easy. Not every innovation works. And not every expensive stock grows into its valuation. Mistakes in this kind of investing are usually catastrophic. I made my fair share of big mistakes. Eventually, those mistakes soured me on only investing in new technology. I got tired of making "all or nothing" bets every time I made an investment. Like Munger... Porter didn't want that much failure. So he started looking for the "easy" ways to make money in what today is still Stansberry Research's flagship newsletter, Stansberry's Investment Advisory... Eventually Porter hit on the concept of capital efficiency... At its heart, capital-efficient businesses are the ones that have some unique trait that allows them to grow sales and earnings for long periods without having to make large, corresponding increases in capital spending. To invest more like Munger, you also need to find a good business that generates strong profits and returns for its owners. And you need to look for businesses that will get bigger and better over time. Investing in capital-efficient stocks has been a foundational strategy for Stansberry Research now for more than 16 years, dating back to the Investment Advisory's December 2007 recommendation of chocolate maker Hershey (HSY). Over the past 20 years, Stansberry Research has recommended dozens of these companies... And the results have been impressive. I know from experience. As chief investment officer at Stansberry Asset Management, I have invested in many of these and similar companies on behalf of our clients. When you buy high-quality, capital-efficient, durable businesses at a reasonable price, it tends to have a very positive effect on your wealth over the long term. But even if you know this... There's one more attribute you need to look for to really be like Munger... This one attribute is often overlooked by most investors. And frankly, that's too bad, because it might be the most important one. Consider this real-world example... For the last 25 years, two companies have participated in the same industry, an industry you likely know well. And they've had essentially the same business model over that entire period, providing products and services that likely impact your life on a weekly, if not daily, basis. Both companies have all the key attributes described above: they're high-quality, profitable businesses. They're capital-efficient. And their business models should have staying power for decades. But Company A is missing this one more thing, this one additional attribute that you need to really unleash your inner Munger. Company B has it in spades. And that has made all the difference... Since November 2001 (the time during which both companies have been public), Company A has returned about 530% to investors, assuming reinvestment of dividends. That's roughly in line with the approximately 580% total return of the S&P 500 Index over the same period and assumptions. Company B, on the other hand, due almost exclusively to this one additional attribute that it possesses and that Company A lacks, has generated a return of more than 6,685%... more than 12 TIMES the return of Company A. What are these companies and, more importantly, what is this one additional attribute? Join Porter and me – live – on April 23 to find out... On Tuesday, April 23, at 5 p.m. Eastern time, I will be sitting down one-on-one with Porter in Baltimore, Maryland for a very special investment briefing. I plan to trade thoughts with Porter on all sorts of topics. That includes drilling down on exactly how best to invest in this market – whether your goals are growing your wealth or protecting what you have. I'll explain how we at SAM are helping our clients do just that, through good times in the market and bad. And I will reveal specifics on the one final, Munger-like attribute that could truly turbocharge your investment returns and long-term wealth. Porter has agreed that this will be a no-holds-barred event. No subject or question will be off-limits. As a subscriber of Stansberry Research, you're invited. But please note that while this event is free of charge, the live, in-person space in Baltimore is extremely limited at this point. [Click here for details]( and to see if space is still available. And please, only sign up to attend live if you're certain you can make it. But even if you can't make it in person, you're in luck... We're pleased to provide Stansberry Research readers a link to a livestream of the event, also free of charge. [Click here to secure your spot to the livestream](. Either way – in person or online – I'm excited to share this event with you. I'm certain that it will be an entertaining, educational, and excellent use of your time. I hope to see you there. --------------------------------------------------------------- Recommended Links: [Until Midnight Tonight, Claim Six Free Months of Crypto Capital]( Tomorrow, April 19, bitcoin's first "reboot" in four years could send this year's crypto rally to historic new highs... so buy these six small coins BEFORE the reboot occurs. 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In today's mailbag, feedback on yesterday's edition about the Federal Reserve's shift in tone on inflation and our suggestion about higher interest rates... Do you have a comment or question? As always e-mail us at feedback@stansberryresearch.com. "So how is raising rates going to kill inflation? It hasn't worked so far has it? Low rates did not cause inflation in the 2010s. "The inflation has been caused by a combination of extreme government deficit spending and hostile government policy on oil and gas production. How will raising rates solve those problems? "I'll admit that if you raise rates high enough for long enough that will cause a recession or worse, which will reduce inflation to some extent. But who wants a recession?" – Subscriber S.I. Warm regards, Austin Root Towson, Maryland April 18, 2024 P.S. Also, while Porter and I are good friends, we work for and run different businesses. I work for Stansberry Asset Management, which is a wholly separate business from MarketWise, Stansberry Research, and Porter & Company. Our businesses are run independently of one another. So of course, Porter's views will be his own, and mine will be my own. But in my mind, it's that independence that will make this event so interesting. We hope you enjoy the show on Tuesday. --------------------------------------------------------------- Disclosure: Stansberry Asset Management ("SAM") is a Registered Investment Advisor with the United States Securities and Exchange Commission. File number: 801-107061. Such registration does not imply any level of skill or training. For more information on SAM, please visit [here](. Stansberry & Associates Investment Research, LLC ("Stansberry Research") is not a current client or investor of SAM. SAM provides cash compensation to Stansberry Research for Stansberry Research's advisory client solicitation services for the benefit of SAM. Material conflicts of interest may exist due to Stansberry Research's economic interest in soliciting clients for SAM. Certain Stansberry Research personnel may also have limited rights and interests relating to one or more parent entities of SAM. For important information about Stansberry Research's relationship with SAM, [click here](. --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios Investment Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,356.2% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,307.9% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 882.6% Extreme Value Ferris WRB W.R. Berkley 03/16/12 736.1% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 605.2% Retirement Millionaire Doc HSY Hershey 12/07/07 447.7% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 438.3% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 370.5% Retirement Millionaire Doc NVO Novo Nordisk 12/05/19 350.9% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 331.0% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,540.5% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,219.2% Crypto Capital Wade MATIC/USD Polygon 02/25/21 801.5% Crypto Capital Wade CVC/USD Civic 01/21/20 372.1% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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