At a net worth of about $2.5 billion, Charlie Munger is the quiet giant of investing.

Although not as cited as Warren Buffet, Munger is one of Berkshire Hathaway’s key “masterminds” and has been instrumental in its phenomenal performance.

Though as he likes to remind people, “I’m not a polymath.” Instead, he believes his success required something most people never consider: temperament.

“It’s perfectly possible to do splendidly well if you have the right temperament,” he explained in an especially candid interview.

The 99-year-old veteran recently sat down with Buffet’s younger protégé Todd Combs and revealed the lifelong lessons that shaped his investment philosophy.

Here, we share those insights. You’ll learn the temperament needed to win, the Wooden system of stock picking, and Munger’s 20-card hole punch approach.

Lesson 1: Think long term

Charlie Munger learned his first investment lesson when he was just seven years old.

It happened one day when he was playing with a close friend. His friend’s father was the chief mathematician at the University of Nebraska.

“He was an enormously talented man,” recalls Munger. Then something went wrong.

There was a leak. Just an ordinary household leak. And yet, his friend’s father “went berserk,” Munger explains. The inconvenience and cost sent this man into a fit.

The rational, logical, practical man Munger thought he knew temporarily disappeared. In his place was a wildly irrational being. Munger thought, “Here's this genius going berserk. [In a] world where even geniuses are that nuts, I have a chance.”

Munger saw that with so many people so prone to acting irrationally, there would be many opportunities to benefit from great investments that others miss.

“There's going to be an opportunity. There's so much irrationality out there,” he recalled. “And, of course, that occurs in the investment world too.”

Key takeaway: Avoid what Munger calls the “Lollapalooza effect,” which is the tendency to let various biases and irrationalities pull you away from a logical, long-term approach to investing.

Set a long-term plan for yourself. Write it down. When irrationality takes hold, re-read what you wrote and stay the course.

Lesson 2: Use the “Wooden system of stock picking”

In the interview, Munger also revealed his “Wooden system of stock picking.”

He named this after John Wooden, one of the most successful basketball coaches of all time. Munger recalls that Wooden “had the best basketball coaching record in the world, and nobody else was even close.”

How did he do it? He concentrated almost 100% of the playing time on his top seven players.”

The way this translates to investing, according to Munger, is to focus on a small group of stocks. Doing so allows the investor to get to know the industry from the inside out—which will provide a real sense of what the company is worth.

“There is no way to know enough about a thousand different stocks to be very good at it,” he remarked. Success means taking the time to uncover the overlooked gems that are selling well below their true value.

This is what Munger means when he talks about being a “fanatic.” Getting the best results means having the focus to “just keep searching for the great businesses.”

Key takeaway: Zero in on what you know. Take the time to research the underlying value of the company. Eventually, great opportunities will surface. That’s the time to invest.

A handful of great companies is better than hundreds of mediocre ones.

Lesson 3: Invest as if you’ve got a 20-hole punch card

Imagine you have a lifetime limit to the number of stock trades you can make.

For example, imagine you are allowed only 20 trades over the course of your entire life. This is what Munger calls the 20-card hole punch rule of investing.

In this hypothetical scenario you “get 20 investments in your life and then you have to quit and put all your money in cash.” Once you’ve punched your ticket 20 times, that’s it.

Why do this? Because it forces you to make trades with a long-term perspective. Today there are so many ways to speculate with cash that it’s too easy to get swept up in the “seductive craziness,” as Munger puts it.

There are two stock markets, he says. One is a place for long-term investors. The other is a “casino.” The problem is that the two are combined.

This means that the frenzied trading of those who are gambling can lead to irrational fluctuations and push even normally judicious long-term investors off their game.

Key takeaway: buy and hold. Wealth accumulation happens slowly and with patience. There will always be stories of lucky traders who scored big overnight, but luck is not an investment strategy.

Having the staying power of a man like Charlie Munger requires steel-cold discipline. As Munger advised, don’t overstretch yourself, focus on what you know best—and most important, play the long game.