Investment master Charlie Munger's late-life recording says: In 1974, I went bankrupt at age 50. Not an exaggeration, I truly went bankrupt! The investment fund I managed lost 53% in one year.

A recording of a late-life remark by investing legend Charlie Munger
In 1974, at age 50, I went bankrupt. No exaggeration—I really went bankrupt!
The investment fund I managed fell 53% in one year. The clients lost half their money, and my own money also lost half. That year, I sat in my office looking out the window, thinking maybe this is how my life will be. At 50, I had accomplished nothing, and I also owed a pile of debt.
But this year, I’m 99 years old, and my net worth is over $10 billion. I’m not here to show off—I’m here to tell you that the most important thing in life isn’t where you fall; it’s how you get back up! And even more important is: what did you learn from your fall?
Today, I’m going to tell you how I went from bankruptcy to hundreds of millions and beyond—over a billion.
Not luck, and not talent, but three choices. Three choices I made in the darkest moments.
Let me start from the beginning. In 1962, at age 38, I left the law firm and began investing. I formed my own partnership fund, Mungerpartnership. Starting capital was $300,000, mostly money from friends and family. And also my own savings.
(In the) first few years after the fund was established, things went very smoothly. In 1963, (the fund’s) return was 13%. In 1964, it was 16%. In 1965, it was 24%. In 1966, it was 13%. I started to feel confident. I thought I had found a trick. I thought I was a genius! The clients were also very happy, and there was more and more money. By 1968, the capital I managed had grown to $65 million, with an annualized return of 24%. I had become well known in Omaha and Los Angeles.
People called me an investment genius, and I began to believe it. But then everything changed in 1973.
That year, the oil crisis hit, the economy went into recession, and the stock market crashed. My fund began to lose money. I told myself this was temporary. The market would come back. I stuck to my strategy and continued to hold those stocks I considered cheap and valuable, but the market never came back—it kept falling, and my fund kept losing. By late 1973, my fund was down 31%. Clients began calling, asking what was going on and when it would rise back. I said, “Soon. This is just short-term volatility,” but in my heart I didn’t really have any bottom.
1974 was even worse. The market kept falling. From the beginning of the year, my fund kept sliding downward: down 10% in March, down 29% in June, down 35% in September, down 35% in December. For the full year, it fell 53%. The clients’ money was cut in half, and my own money was cut in half too. Even worse, I had borrowed money and used leverage. I thought I was smart. I thought I could add more at the bottom. But after the “bottom,” there were even lower lows.
I remember the last day of December that year. I sat in my office and did the math on my account. I had lost half my net worth, and my clients had lost half their trust. I was 50—half my life was gone—but it felt like I was back at the starting point, and even earlier than the starting point, because I still had debts!
That night, I drove home and passed a gas station. At the gas station, there was a man—probably in his 40s—pumping gas. He looked very tired, but also very calm. Suddenly I thought: if I hadn’t been investing back then and had continued practicing law, would my life be better now? At least I wouldn’t have gone bankrupt, and at least I wouldn’t have let the people who trusted me lose their money.
That Christmas was the hardest one of my life.
I had to face my family, face my friends, and face the people who had invested in my fund. I remember on Christmas Eve at a gathering at a friend’s house, an old friend walked over, patted me on the shoulder, and said, “Charlie, I heard you haven’t had a smooth year. It’s okay—next year will be better.” I forced a smile, but I clearly knew he was comforting me. The way other people looked at me had sympathy, had disappointment, and also a kind of superiority that I had known for a long time.
On the way home that night, I made a decision. I would admit failure, but I wouldn’t admit that I was a failure. It sounds contradictory—let me explain. Admitting failure means I have to face reality: my strategy was wrong, my judgment about the market was wrong, and my use of leverage was wrong, and I was too confident. These are all facts, and I have to acknowledge them. But not admitting that I’m a failure means that because of this failure, I won’t negate my entire life; I won’t deny my abilities; and I won’t give up my goals.
Failure is an event, not a person. I failed, but I’m not a failure. That distinction is very important!
In January 1975, I wrote a letter to all my clients. The letter was long, but the core points were these. First, I messed up, and I apologize for it. Second, I would liquidate the fund and return the remaining money to you. Third, I would start over, but I wouldn’t give up investing, because I believe I can do better. After I finished writing that letter, I cried. A 50-year-old man sitting in his office cried—not because of money, but because I had disappointed the people who trusted me. But after crying, I wiped away my tears and mailed the letter.
Then I started to think again: what exactly did I do wrong? Over the next few months, I did one thing—postmortem analysis! I took out every investment from 1962 to 1974 and reanalyzed each one. Why did I buy? Why did I sell? Why did I make money? Why did I lose money? I found several patterns.
The first mistake: I liked buying cheap things too much. In those years, my strategy was to find companies with a low price-to-book ratio, buy them, and wait for the price to rise back to a reasonable value before selling them. That strategy worked in the 1960s because the market always corrected itself and cheap things would come back up. But from 1973 to 1974, that strategy failed. Because those “cheap” companies were cheap for a reason: their businesses were really bad, and since the recession began, they had become even worse. They weren’t temporarily undervalued—they were deserving of being undervalued.
I remember buying a textile company with a price-to-book ratio of only 0.5x. I thought I had picked up a gem, but the company’s losses kept getting bigger. In the end, it went bankrupt, and my entire investment went to zero. I also bought a department store with a price-to-book ratio of 0.7x. I thought it was very cheap, but the company’s business model had been淘汰 by the times. It kept losing money, and the stock price went from “cheap” to even cheaper.
I finally understood it: cheap things often end up being terribly expensive! Because they can stay cheap forever, even turning into nothing.
The second mistake: I used leverage. I thought I could add more at the bottom and magnify returns, but I forgot that leverage also magnifies losses. More importantly, when you use leverage, you lose the most important thing—time! Without leverage, when the market falls, you can wait for it to recover. But with leverage, when the market falls, you have to sell at the lowest point. That’s exactly what happened to me in 1974.
The third mistake: I cared too much about short-term performance. I checked my account every month. Every time I saw losses, I got anxious and wanted to do something. So I adjusted positions too often and traded too frequently. The result was that I sold good companies because they fell in the short term, and I kept bad companies because I didn’t want to stop the losses.
These postmortems took me half a year. But that half year was the most valuable half year of my entire life. Because I found my real problem—not that I was unlucky, and not that the market was wrong, but that my investing philosophy was fundamentally wrong.
In the summer of 1975, I received a phone call. It was Warren Buffett. We had known each other for many years, but not very well. He said, “Charlie, I heard you shut down the fund.” I said, “Yes, I messed it up.” He said, “I’d like to meet you. Let’s talk.” That August, I went to Omaha to see him. We talked in a small restaurant for an entire afternoon. Warren asked me, “What did you learn from this failure?” I told him everything from my postmortem analysis. After he listened, he nodded and said, “You’ve got it now. Investing isn’t buying cheap things; it’s buying good things—and then holding them, doing nothing.”
This was completely different from how I used to do things. Before, I wanted to make money quickly—buy low, sell high, and trade frequently. Now I had learned to wait. I had learned patience. I had learned that the best investment is to sit there and do nothing.
In 1977, when I was 53, I made an investment that changed my life’s course.
That year, we saw a company—see Qishi Candy, a company that makes chocolate. It had annual revenue of $30 million and annual profits of $4 million. The seller’s asking price was $30 million. Many people thought it was expensive because that implied a price-to-earnings ratio of 75x. By my previous standards, that was way too expensive. I would absolutely not buy. When Warren said, “Charlie, take a look at this business. Every year on Christmas, Valentine’s Day, Mother’s Day, people buy Qishi’s chocolates. It’s a tradition; it’s a habit; it’s a brand. They have pricing power. Every year they can raise prices, and their costs are almost unchanged. That’s a moat.” We calculated that if we bought it, we could earn $4 million per year. Ten years would be $40 million. And that profit would also grow, because they have pricing power. So a $30 million price tag was actually not expensive. In the end, we bought it. This was the first big investment after I restarted—and it was the first real practice of the new method I had learned.
As a result, from 1977 to today—46 years—Qishi Candy has made us more than $2 billion! $2 billion, even though we only invested $30 million at the start. That’s the power of a great business!
In 1980, at age 56, we continued to invest with Warren. We bought Coca-Cola, the Washington Post, and American Express. For each investment, we held it for decades. People asked me, why don’t you sell? The stock price has gone up so much. I said, why would we sell? Great businesses should be held forever.
In 1990, at age 66, my net worth had returned to the level of 1974. It took me 16 years to earn back the money I had lost. But this time I was very calm, because I knew I was on the right path.
In 2000, at age 76, the internet bubble was everywhere. Everyone was buying tech stocks and selling tech companies. People said I was old and didn’t understand the new economy. I said, I really do not understand it. So I didn’t buy. That year my net worth didn’t rise, but it also didn’t fall. In 2001, when the internet bubble burst, those who had mocked me lost money, but I didn’t do anything—so relatively, I earned, because I didn’t lose.
In 2008, at age 84, there was the financial crisis. Everyone was panicking and the stock market crashed. But Warren and I were buying: we bought BYD, we bought bank stocks, we bought railroads. People said we were crazy, but I said it was an opportunity. I had been waiting for this opportunity for many years.
In 2010, at age 86, my net worth exceeded $1 billion. From going bankrupt at 50 to having $100 million at 86—36 years.
In 2020, at age 96, my personal net worth was close to $2 billion. Someone asked me, Mr. Munger, what’s your secret to success? I said, “It’s very simple. First, I went bankrupt. Second, I learned from bankruptcy. Third, I waited for a very, very long time. That’s it.”
Now I’m 99 years old. Looking back on this life—from bankruptcy to $2 billion—I want to tell you three truths.
Truth #1: Bankruptcy is not the end; it’s a turning point. In 1974, when I went bankrupt, I thought it meant the end of my life. But looking back now, it was the most important turning point of my life. If I hadn’t gone bankrupt, I wouldn’t have reflected, wouldn’t have changed, and wouldn’t have learned. I would have kept using the wrong methods, maybe making some small money, but I would never have truly succeeded. Bankruptcy showed me my own problems. It allowed me to set aside arrogance and made me willing to learn from others. So if you’re going through failure right now, don’t despair—this might be the best opportunity of your life. The question is: can you learn something from failure?
Truth #2: Success requires time, and the time is long. From bankruptcy at 50 to net worth of $2 billion at 99 took 49 years. Forty-nine years—that’s the length of a life. Many people want to succeed at 30, want to retire at 40, but true wealth requires time and compounding. We held Qishi Candy for 46 years. Warren Buffett held Coca-Cola for 35 years. We held BYD for 15 years. Every big success requires waiting for 10, 20, 30 years. If you don’t have that kind of patience, you will never become truly wealthy.
Truth #3: Most important isn’t making money—it’s not losing money. This sounds contradictory, but it’s the deepest lesson I’ve learned! In 1974, I lost 50%. I needed a 100% gain just to break even. It took me 16 years to get back to the starting point. If I hadn’t lost, that 16 years of compounding would have multiplied my wealth by several times. So Warren Buffett is right: the first principle of investing is don’t lose money, and the second principle is don’t forget the first principle.
How do you avoid losing money? First, don’t buy bad companies—no matter how cheap they are, don’t buy them. Second, don’t use leverage—leverage will force you out at the lowest point. Third, don’t trade frequently—each trade is a chance to make a mistake.
Now I want to say a few things to those who are in a low point. If you feel like you’ve accomplished nothing at 30, if at 40 your career hits a bottleneck, and if at 50 like I did back then, you go bankrupt—please remember:
First, admit failure, but don’t admit that you are a failure. Failure is an event, not a person. You can fail 100 times, but as long as you don’t give up, you haven’t truly failed.
Second, analyze your failure and find the real reasons. Don’t blame luck, don’t blame the market, and don’t blame other people. Ask yourself: what exactly did I do wrong? Find the real problem, then solve it.
Third, learn from the right people. Put down arrogance, find people who are stronger than you, and learn from them. I started learning from Buffett at 50. If I had started at 30, I would have been more successful, but it’s never too late.
Fourth, have patience. Real success requires 10, 20, 30 years—not one or two years. If you rush, you’ll make mistakes. If you move slowly, you’ll win.
Fifth, keep learning. I started studying Chinese at 89, and at 99 I’m still reading. Learning is never too late. Before going to sleep each day, be a little smarter than when you woke up in the morning—that’s enough.
I’m 99 this year, and my net worth is $2 billion, but what I’m most proud of isn’t those $2 billion. It’s that after going bankrupt at 50, I didn’t give up. In the darkest moments, I chose to learn, chose to change, and chose to wait. Many people succeed when they’re young, and then fail in middle age—and then they never get up again. I failed in middle age, but I got back up in old age, and I got higher. So: if you’re in a low point right now, remember this—life is long; long enough that you can fall, get up, fall again, and get up again! Finally, stand on the mountaintop and watch the sunrise.
When I was 50, I thought life was over. But now at 99, I know it’s only just beginning. I understand what true success really is. The power of choice is in your hands—you decide!!!.. Lifan退和新能泰山 did a ten-point low-buy high-sell tactic