Charlie Munger, vice-chair of Berkshire Hathaway and Warren Buffett’s longstanding partner for six-decades, passed away at the age of 99 in a California hospital. A news release from Berkshire confirmed his passing.
Munger, a seasoned lawyer whose name remains associated with the Los Angeles-based law firm Munger, Tolles & Olson, played a crucial role in transforming Berkshire into the investment powerhouse it is today. Part of his influence involved guiding Buffett away from a strategy centered on acquiring financially distressed companies at low costs, irrespective of their potential business prospects.
Publicly, particularly in front of the tens of thousands attending Berkshire’s annual meetings, Munger often let Buffett take the spotlight, humorously quipping, “I have nothing to add.”
Behind closed doors, despite Buffett’s prominence, he frequently deferred to Munger. Munger convinced Buffett in 1971 to acquire See’s Candy Shops at a premium price, three times its net worth. This purchase marked a shift in Buffett’s investment strategy away from “cigar-butt” investments, prompting him to focus on high-quality businesses at reasonable prices. See’s Candy Shops subsequently generated approximately USD 2 billion in earnings for Berkshire Hathaway over the following years.
Warren Buffett expressed his gratitude, acknowledging Munger’s pivotal role in Berkshire’s journey, recognizing that Charlie’s wisdom and participation were instrumental in the company’s success. Buffett wrote in 2015, “Charlie had been urging this course for some years, but I was a slow learner.”
Munger’s passing marks a shift for Berkshire Hathaway, with a future led by a new cohort of leaders less familiar to investors, signaling the inevitable transition from the reins held by Buffett, who, at 93, is expected to pass them on. Munger inadvertently hinted at Greg Abel’s potential successorship during Berkshire’s preparation for this change. Under Munger and Buffett’s guidance, a handpicked team, in line with their investment philosophy, managed Berkshire’s stock portfolio of USD 319 billion.
Despite his title as vice-chair, Munger’s influence extended beyond being Buffett’s second-in-command. Even in his later years, he actively contributed to the company’s decision-making, was involved in major takeovers, and continued scrutinizing potential deals.
Early Life And Career
Born in 1924 in Omaha, Nebraska, Munger met Buffett in 1959, with both becoming intellectual sparring partners before collaborating on investments. Buffett persistently urged Munger to shift from law to investments, remarking that while “law was fine as a hobby, but he could do better”. This led to the establishment of Munger’s investment partnership, Wheeler, Munger & Company, which yielded impressive returns. Similar to Buffett, the returns from Munger’s venture were exceptional, averaging an annual return of 24.3% from 1962 to 1975, significantly surpassing the 6.4% return of the Dow Jones Industrial Average during the same period. Following the closure of his investment shop, Munger later became part of Berkshire Hathaway’s board in 1978.
The duo’s investment acumen and their resilience to market downturns attracted tens of thousands of shareholders to Omaha annually. Munger’s direct and sharp manner stood in contrast to Buffett’s more thoughtful speeches.
At the latest meeting, he shared his perspective, advising attendees: “I think the best road ahead to human happiness is to expect less. I think it’s going to get tougher.”
In a 1995 speech at Harvard, he outlined 24 cognitive biases that he believed affected decision-makers, emphasizing the importance of recognizing these biases to counteract irrationality in investing, business, or life.
Munger was a steadfast advocate of old-fashioned values, often emphasizing two of his favorite terms: “assiduity” and “equanimity.”
Regarding the first, he humorously explained its significance in a 2007 speech, describing it as “sit down on your ass until you do it.” His investment philosophy revolved around patience and the willingness to wait for opportune moments, even spanning years or decades, to make bold moves when favorable deals emerged.
His fondness for “equanimity” reflected both his investment principles and life philosophy. Munger frequently advised investors to maintain composure, suggesting they should be able to respond with calmness to significant market declines, even enduring a 50% loss in the stock market every few decades.
Even into his 90s, despite failing eyesight, limited mobility, and the loss of his beloved wife, Nancy, years prior, Munger’s sense of humor remained intact. Around 2016, when asked about the person he felt most grateful to in his long life, he spontaneously quipped, “My second wife’s first husband,” highlighting how he cherished the devoted love of his remarkable wife for 60 years simply by being a somewhat better spouse than her previous husband.
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