For years, Charlie Munger was at the head of the investment holding company Berkshire Hathaway alongside investor legend Warren Buffett. Now the billionaire has died at the ripe old age of 99.
Charles Thomas Munger, who was mainly called Charlie, was the closest confidant of star investor Warren Buffett – and was often in his shadow. The qualified lawyer hardly appeared in public and at Berkshire Hathaway’s annual shareholder meetings he usually left most of the spotlight to Warren Buffett. Munger’s investment style was no less successful than that of his good friend and business partner. In fact, he has even had an impressive impact on Buffett’s way of investing.
From lawyer to successful investor
Charlie Munger was born on January 1, 1924 in Omaha, Nebraska, the eldest son of a family of lawyers. Warren Buffett was born in the same city a few years later, and Munger even worked for a time in Buffett’s grandfather’s grocery store as a boy. However, Munger initially took a different career path: He studied mathematics and later meteorology for some time in order to work in this area for the army, before he enrolled at Harvard to study law after his military service and successfully completed it. He then practiced law in Los Angeles for several years and founded his own law firm together with several partners.
Munger became interested in the investment business after meeting Warren Buffett at a dinner party in 1959 and having a lengthy conversation with him. In 1962, Munger founded his own investment company called “Wheeler, Munger & Co.” and began building investments in interesting companies. Even though Munger and Buffett were still operating independently of each other at this point, they still bought some of the same companies. For example, both invested in Diversified Retailing, a holding company for various clothing stores. It was through this investment that the business relationship between Munger and Buffett at Berkshire Hathaway came about in 1978.
Under pressure from the US Securities and Exchange Commission, Buffett had to merge his investments into the Berkshire Hathaway holding company. Diversified Retailing, in which Buffett held a large majority, was also merged with Berkshire. In exchange for his minority stake in Diversified Retailing, Munger received two percent of Berkshire and the position of vice chairman. In addition, from 1984 he also took over the management of the Berkshire subsidiary Wesco Financial Corporation, which was only completely absorbed into the parent company in 2011.
However, Munger was not only vice chairman of Berkshire Hathaway, but also, thanks to private investments, a board member of the Los Angeles newspaper publisher Daily Journal Corporation and the wholesale chain Costco Wholesale.
Munger’s investment strategy and his influence on Warren Buffett
Munger’s investment philosophy was similar to Buffett’s in many ways. In fact, Charlie Munger was often called “Buffett’s alter ego” because he had the same mannerisms and mindset as the Oracle of Omaha. Both are said to have immediately understood each other’s decisions – but that didn’t mean that they always had the same opinion.
In fact, Munger arguably had a greater influence on Buffett’s investing style than the other way around. Because unlike Buffett, he refused to buy junk companies just because they were trading on the stock market below their intrinsic value. Munger believed it was “better to pay a fair price for a good company than a ridiculous price for a scrap company.” He was ultimately able to convince Buffett of this point of view and thus shaped the investment strategy for which Buffett became known.
However, Munger’s investment philosophy was based on three other pillars. High ethical and moral standards were very important to him in the companies in which he invested. “A business model based on trickery is doomed to fail,” he once said in an interview.
He was also convinced that in order to be a good investor, you had to have broad knowledge in many areas – including non-disciplinary ones (“elementary, worldly wisdom”). In order to acquire this knowledge, he read as much as possible. Even when his left eye had to be removed after an unsuccessful operation due to unbearable pain, he did not give up this activity. He once joked that his children would think he was a book with a few legs sticking out of it.
Furthermore, Munger used numerous mental models from various disciplines when making investment decisions in order to be able to predict the behavior of others and the effects of a decision. From around 90 such mental models, the investor should have selected all those that were applicable to the current situation.
In addition, his work as an investor also benefited from another helpful skill that he had learned during his time in the army: playing cards. “You have to learn to give up early when the odds are against you,” Munger said of this important skill. “But when you have a big advantage, you have to bet big on it because you don’t get a big advantage often. The opportunity comes, but it doesn’t come often, so you have to grab it when it comes.” A guiding principle that can also be easily transferred to investing.
Personal life and charity
Munger was married twice. In 1945, at the age of 21, he married Nancy Huggins. The couple had two daughters and a son, who died of leukemia in 1955 at the age of just nine. At this point, however, Munger and Huggins had already been divorced for around two years, which resulted in considerable financial losses for Munger. In the course of the divorce he lost everything to his wife, even his house and his car, and lived in very poor conditions for some time. In 1956 he married his second wife, Nancy Barry. This second marriage, which produced four sons, lasted until Nancy Barry’s death in 2010.
Although Munger was a billionaire and a close confidant of Warren Buffett, he was not a member of The Giving Pledge, a charity that Buffett co-founded Bill Gates had founded. However, he supported numerous educational institutions with generous financial donations. Among others, the University of Michigan received a three-digit million dollar amount from him, but Stanford University and the University of California, Santa Barbara also received several donations. Munger also worked on the designs for student residences at Stanford and Michigan Universities, the construction of which he supported financially.
Charlie Munger died on November 28, 2023 at the age of 99 in a hospital in California.
Editorial team finanzen.net
Selected leveraged products on Berkshire Hathaway
With knock-outs, speculative investors can participate disproportionately in price movements. Simply select the lever you want and we will show you suitable open-end products on Berkshire Hathaway
The leverage must be between 2 and 20
Advertising