Out of all the possible topics in the world that Munger could have chosen to begin his letter to investors of Berkshire Hathaway, Munger began talking about the management system and policies that allowed Berkshire Hathaway to be so successful after giving a brief outline of what was to come. Although Munger didn’t explicitly say this, there is a reason why processes and systems are so important: they provide a template that systematically converts your labor into passive (or generally passive) sources of income.
There is a reason why high-profile football players and basketball players find themselves in long-term financial difficulty. It is because they fail to embark on this journey—either they spend the money they make and never truly convert the profits from labor (playing a sport) into something passive or they try their hands at business ownership and fail to select something that lends itself to holding over … Read the rest of this article!