This is the second post in a series of posts on the wit and wisdom of Charlie Munger, a former lawyer and investing savant. Part 1, in which we covered his maxim that the most important marketing a solicitor can do is the current work on his desk, can be found here.
“A great business at a fair price is superior to a fair business at a great price.” Charlie Munger
In this quote, Munger is able to distill into a sentence one of his investing maxims. First, focus on the product you are buying, then see whether the price is fair. It’s better to pay a fair price for the product that is good and fit for purpose than pay a cheaper price for an inferior product. Some may call it being cheap.
Of course, if you’re buying plastic cups where one product is indistinguishable from the next (i.e. a commodity) then the price can become the differentiating factor with little to no downside.
When you’re purchasing something that isn’t a commodity (e.g. a service like legal advice) the product or service offered needs to be of sufficient quality to get the job done. Otherwise, potential disaster awaits. And it follows if potential disaster awaits, then what price savings you gained are lost in the ensuing problems.
Of course, some may suggest that legal advice IS a commodity, something you’ll be shocked (SHOCKED I TELL YOU) to hear I disagree with. Given the disparity in backgrounds, offices, and personnel it would be foolish to suggest “one size fits all” legal advice will be sufficient.
So when next deciding between products and services decide whether you want a great product at a fair price or a great price for a fair product.
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