Investment Guru Charlie Munger Passes Away, Looking Back at His Legendary and Multifaceted Life

Farewell to Iconic Investor Charlie Munger A Reflection on His Legendary and Versatile Life

Source: The Wall Street Journal

Translation: LianGuaiBitpushNews Mary Liu

There is no business partner as famous as Charlie Munger who excels at playing the role of a “sidekick.”

Charlie Munger, the Vice Chairman of Berkshire Hathaway, the billionaire, and long-time friend and advisor to Warren Buffett, peacefully passed away in a California hospital at the age of 99.

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In public, especially in front of tens of thousands of attendees at the Berkshire annual meeting, Munger would hand over the microphone and spotlight to Chairman Buffett. Munger often said in a hoarse voice, “I have nothing to add.”

But privately, Buffett often listened to Munger’s advice.

Munger changed Buffett

In 1971, Munger convinced Buffett to acquire See’s Candies for three times its net worth – a “high price,” as Buffett later recalled, far exceeding what he was accustomed to paying for businesses.

In the decades to come, See’s would continue to bring in approximately $2 billion in cumulative earnings for Berkshire Hathaway.

As Buffett wrote in 2015, “This acquisition ended my quest for ‘cigar-butt’ investments – buying mediocre companies at ‘cheap’ prices – and set me on a course to search for outstanding businesses selling at [reasonable] prices. Charlie had been pushing me to learn this lesson for decades, but I was slow.”

Buffett referred to Munger as an “abominable no-man” because he rejected potential investments, including some that Buffett himself may have pursued. But Munger, fascinated by engineering and technology, also led Buffett, who had a fear of technology, to make significant investments in electric vehicle manufacturer BYD and Israeli toolmaker Iscar.

Munger himself is an exceptional investor. He started managing an investment partnership in 1962. From then until 1969, the S&P 500 index averaged a yearly gain of 5.6%. Buffett’s partnership achieved an average annual return of 24.3%. Munger performed even better, with an average annual return of 24.4%.

In 1975, shortly before joining Berkshire Hathaway as Vice Chairman, Munger closed his investment partnership. Over the course of 14 years, his investment portfolio averaged an annual gain of 19.8%; the S&P 500 index only grew by 5.2%.

Over the years, these two individuals have had different investment approaches. Buffett, influenced by his mentor Benjamin Graham, would buy almost any company, even if it was on the verge of bankruptcy, as long as it was cheap enough.

Berkshire Hathaway is one of the results of Buffett’s “cigar-butt” investment philosophy. When Buffett acquired the company in 1965, it was still a dilapidated textile manufacturer.

While Buffett transformed Berkshire Hathaway into a diversified holding company encompassing insurance, he always looked for cheap mediocre businesses. In contrast, Munger focused on large companies with acceptable prices, believing that their ability to generate cash in the future would compensate for the premium paid in advance.

After years of discussion, Munger convinced his partner to make a change.

In 1988, Buffett said, “Charlie has had a huge influence on me. Lord, if I had only listened to Ben (Graham), I might be poorer?”

In 2015, Buffett wrote that Munger taught him, “Forget about buying underperforming businesses at fantastic prices that you know. Instead, buy exceptional businesses at a fair price.”

Buffett added that Berkshire Hathaway was “built according to Charlie’s blueprint.”

Early Life

Charles Thomas Munger was born on New Year’s Day in 1924 in Omaha, Nebraska. His mother Florence was a homemaker and a passionate reader.

Munger studied mathematics at the University of Michigan and left school to join the U.S. Army Air Corps during World War II. The military first sent Munger to the University of New Mexico and the California Institute of Technology to study thermodynamics and meteorology, then stationed him at an Air Force base in Nome, Alaska, where he served as a weather forecaster.

After the war, Munger persuaded a dean from Harvard Law School to admit him without a college degree, and he graduated with excellent grades.

Before settling in Southern California, he considered joining his father’s clinic in Omaha. He and several partners eventually opened their own law firm in 1962. Today, the firm named Munger, Tolles & Olson has about 200 lawyers.

His first marriage to Nancy Huggins ended in divorce. In 1956, Munger married his second wife, Nancy Barry Borthwick, who passed away in 2010. They have four children, two of whom are from Munger’s previous marriage.

Charlie Munger’s life has also experienced great sorrow: in 1955, his 9-year-old son Teddy died of leukemia.

Munger recalled his desperate walks on the streets of LianGuaisadena, saying, “I slowly lost a child.” Over sixty years have passed, but the pain of losing his son still brings him to tears.

In 1978, a surgeon made a mistake during a cataract surgery, causing Munger to lose sight in one eye, which had to be surgically removed. But he didn’t blame the doctor and pointed out that 5% of such surgeries have complications. As always, the numbers were the most important thing for him.

Munger taught himself Braille and discovered that his remaining vision was enough for him to read.

Even in his early nineties, he was still able to drive by himself, which often amazed his friends and family.

The two operators of Berkshire Hathaway first met in 1959 when Munger had already moved to Los Angeles and attended a dinner in his hometown, which Buffett also attended.

They already knew each other’s names: Munger worked at Buffett’s grandfather’s grocery store when he was a child. One of the first investors in Buffett’s partnership gave him money because he said, “You remind me of Charlie Munger.”

Buffett’s first wife, Susan, recalled that dinner in 1998 and said, “I think Warren felt that Charlie was the smartest person he had ever met, and Charlie also felt Warren was the smartest person he had ever met.”

They hit it off and soon became inseparable, often talking several times a day.

A photo from a trip to Savannah, Georgia in the 1980s captured the striking resemblance between these two investors: speaking and walking in sync, both wearing khaki pants and open-collar blue dress shirts. From height to hairline, from glasses frames to folds on their clothes, everything seemed to match.

The humorous investment giant

Munger’s hero was Benjamin Franklin, whom he admired for his curiosity, originality, and wisdom. Munger’s own common sense, sharp wit, straight talk, and disdain for conventional wisdom made him a celebrity among investors.

During the Q&A session at Berkshire Hathaway’s annual meeting, Munger often remained silent while Buffett gave long speeches. Investors who knew him understood that Munger was about to show his wit.

At the 2000 Berkshire Hathaway annual meeting, a shareholder asked what impact speculative behavior in internet stocks would have on the economy. Buffett responded with nearly 550 words.

Munger, however, summed it up in one sentence: “Even if you mix raisins and feces, they’re still feces.”

When a shareholder asked how Berkshire Hathaway sets executive compensation at the 2004 meeting, Buffett talked for over five minutes, while Munger calmly said, “Well, I’d rather throw a rattlesnake into my shirt than hire a compensation consultant.”

At the age of 99 in 2023, Munger wrote a column for The Wall Street Journal calling for the US government to ban Bitcoin and other cryptocurrencies, describing them as “a form of almost pure gambling contract.” Previously, he referred to Bitcoin as “rat poison” and a “disgusting activity.”

Talkative and amazing stamina

Munger’s concise image is only a disguise to avoid stealing Buffett’s thunder. When Munger is not the center of attention with Berkshire Hathaway’s chairman, he becomes very talkative. At regular lunches and dinners with friends and family, as well as at the annual meeting of the small media company he runs, the “Daily Journal,” he can talk for hours.

As many friends have pointed out, if he stops to take a sip of water and someone else starts speaking, Munger will haughtily raise his index finger to prevent the other person from interrupting before he finishes his drink.

His stamina is also extraordinary.

In 2019, at the age of 95, Munger, with the Wall Street Journal reporters appearing at his home in Los Angeles at 6 p.m., talked almost non-stop until close to midnight. After 10 p.m., several times, one or two of the reporters hesitated to get up and leave; Munger gestured for them to sit back down.

In August 2023, at the age of 99, Munger insisted on going to Minnesota with his large family (including over ten grandchildren and great-grandchildren), where they have been going fishing every year for decades.

His friend and chairman of aerospace component manufacturer Glenair, Peter Kaufman, said that Munger at that time was “mentally better than ever before.”

Munger is satisfied with his public image as Buffett’s irritable assistant and has accumulated his own wealth.

He donated to institutions such as Stanford University, Good Samaritan Hospital Los Angeles, and Planned Parenthood. He was also an amateur architect, living in the house he designed himself in the 1950s. In his later years, he became obsessed with designing buildings for college and high school campuses.

In addition to investment returns, he also had passionate followers. Munger served as the chairman of Wesco Financial, a subsidiary of Berkshire Hathaway, whose stock was publicly traded until its parent company fully acquired it in 2011. Fans came from afar, some from China and India, to listen to his speeches at Wesco’s annual meetings and later at the Daily Journal annual meetings.

A collection of writings about Munger titled “Poor Charlie’s Almanack,” written by Kaufman, became an international bestseller.

Munger never stopped advocating traditional virtues, and his two favorite words were diligence and calmness.

In a speech in 2007, he said he liked diligence because “it means sitting down and doing it until you get it done.” He often said that the key to investment success is years or even decades of patience, waiting for the right opportunity to “move aggressively” and buy cheap assets.

He liked calmness because it reflected his investment and life philosophy. Munger often said that the stock market would decline 50% every few decades, and every investor should be able to handle it calmly.

Even in his 90s, Munger maintained his sense of humor, despite being almost blind and unable to walk. His beloved wife Nancy passed away years before him.

Around 2016, an acquaintance asked him, who was the most grateful person in his long life? Munger replied without hesitation, “My second wife’s ex-husband, thanks to him, I had the opportunity to love this woman for 60 years, just because I was a man who wasn’t as bad as him.”

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