Leadership

Billionaire Charlie Munger says living by this rule is key to his success

Charlie Munger
Lacy O'Toole | CNBC
Charlie Munger

Billionaire Charlie Munger knows a thing or two about what it takes to achieve success.

After enjoying a fruitful law career, Munger joined investment firm Berkshire Hathaway, where he has served as vice chairman for four decades. Now worth $1.64 billion according to Forbes, the 94-year-old shared his wisdom in a 2007 USC Law commencement speech.

The core ideology that has served him throughout life, Munger said, is the knowledge that the “safest way to try and get what you want is to try and deserve what you want.”

In other words, do unto others as you would have done unto you. In social psychology, this is widely referred to as the “Law of Reciprocity,” and the maxim can be found in various religious and cultural contexts.

Similar proverbs include “you reap what you sow” and “pay it forward.” The point is that when you give first, you get in return.

“By and large the people who have this ethos win in life, and they don’t win just money [or] just honors and emolument,” Munger told law students. “They win the respect, the deserved trust, of the people they deal with, and there is huge pleasure in life to be obtained from getting deserved trust.”

Social psychologists have found that reciprocity plays a key role in determining human behavior, because humans have a deep psychological need to be even with others. If a person does something nice, we feel obligated to respond in kind, and the reverse also holds true.

While the law shouldn’t be exploited — in fact, it works best when nothing is expected in return — this tactic can be leveraged in business. Lending a helping hand to a co-worker, for instance, will make them more likely to assist you with a project in the future, and staying late at the office will make your boss more likely to reward you with a promotion.

Plus, research shows that what you get back in return often exceeds what the value of what you originally gave.

In one study, behavioral scientist David Stromehtz found that including cheap mints with diners’ checks increased the tip by up to 21 percent.

In another, sociology professor Phil Kunz sent 578 Christmas cards to random strangers, and received 117 cards in return. A significant number of respondents even included handwritten notes, long letters and photos of family pets and children, and only six said they couldn’t remember Kunz.

Munger’s rule mirrors a popular sentiment held by Adam Smith, the pioneer of Western economic philosophy. In his influential book, “The Theory of Moral Sentiments,” Smith wrote:

“No benevolent man ever lost altogether the fruits of his benevolence. If he doesn’t always gather them from the persons from whom he ought to have gathered them, he seldom fails to gather them from other people, and with a tenfold increase. Kindness is the parent of kindness.”

While following the golden rule can have an impact on your career or business endeavors, Munger noted that it should be an overall way of life. Putting good into the universe, he told graduates, is about more than acquiring riches.

The billionaire cited the anecdote of a wealthy man who passed away. At his funeral, the minister requested that people come forward to say something nice about the deceased, yet no one did. Finally, one man stepped up and he said, “Well, his brother was worse."

“That is not the way you want to go,” Munger said, to laughter. When it comes to the delivering good in the world, he told the crowd, “there is no ethos in my opinion, that is better for any lawyer or any other person to have.”

Like this story? Subscribe to CNBC Make It on YouTube!

Don't miss: Charlie Munger: Avoid these 5 things that guarantee a life of misery