The recent passing of Charlie Munger, just before his centennial, has left the financial world contemplating his monumental contribution to Berkshire Hathaway. In a heartfelt letter, Warren Buffett recounts the wisdom and partnership of Munger, whose foresight engineered the conglomerate's colossal success.
Charlie Munger: The legend behind the legend
Charlie Munger is widely regarded as an investing giant, best known for his role as the vice-chairman of Berkshire Hathaway, where his partnership with Warren Buffett has become the stuff of legend. Born on January 1, 1924, in Omaha, Nebraska, Munger’s life has been a tapestry of varied experiences that have contributed to his unique perspective on investing and business.
A graduate of Harvard Law School, Munger's early career saw him practising as a lawyer. However, his interest in real estate and investing soon led him to leave his legal practice and focus on managing investments. His foray into this world eventually resulted in his partnership with Buffett in 1978, though the two had met much earlier and had begun collaborating on various ventures.
Munger’s philosophy of “value investing” — seeking out undervalued companies with intrinsic qualities that are not reflected in their stock prices — dovetailed with Buffett’s approach, which was influenced by the teachings of Benjamin Graham. Yet, Munger brought a different nuance, advocating for focusing on high-quality businesses with a long-term growth perspective, even if it meant paying a fair price. This departed from the strict Graham-style value investing that sought out deeply undervalued, often lower-quality businesses.
This blend of philosophies has been credited with transforming Berkshire Hathaway from a struggling textile mill into one of the world's largest and most successful conglomerates, with a diverse portfolio that includes insurance, energy, transportation, and consumer goods companies.
Munger is also known for his sharp wit and his pithy wisdom encapsulated in quotes widely shared and admired in the investing community. His speeches and writings, including a popular commencement speech at the University of Southern California, where he introduced the concept of “elementary, worldly wisdom,” offer insights into his broad range of knowledge and deep understanding of human psychology, economics, and business.
Charlie Munger remains a towering figure in the investing world and beyond, embodying disciplined investment principles, intellectual rigour, and ethical living. His legacy is not only cemented in the massive success of Berkshire Hathaway but also in the minds and practices of investors worldwide who continue to learn from his teachings and example.
Warren Buffett's Letter to Berkshire's Shareholders
Charlie Munger - The Architect of Berkshire Hathaway
Charlie Munger died on November 28 (2023), just 33 days before his 100th birthday.
Though born and raised in Omaha, he spent 80% of his life domiciled elsewhere. Consequently, it was not until 1959 when he was 35 that I first met him. In 1962, he decided that he should take up money management.
Three years later he told me - correctly! - that I had made a dumb decision in buying control of Berkshire. But, he assured me, since I had already made the move, he would tell me how to correct my mistake.
In what I next relate, bear in mind that Charlie and his family did not have a dime invested in the small investing partnership that I was then managing and whose money I had used for the Berkshire purchase. Moreover, neither of us expected that Charlie would ever own a share of Berkshire stock.
Nevertheless, Charlie, in 1965, promptly advised me: "Warren, forget about ever buying another company like Berkshire. But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale." With much back-sliding I subsequently followed his instructions.
Many years later, Charlie became my partner in running Berkshire and, repeatedly, jerked me back to sanity when my old habits surfaced. Until his death, he continued in this role and together we, along with those who early on invested with us, ended up far better off than Charlie and I had ever dreamed possible.
In reality, Charlie was the "architect" of the present Berkshire, and I acted as the "general contractor" to carry out the day-by-day construction of his vision.
Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades. In a way his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered he never - never -reminded me of my mistake.
In the physical world, great buildings are linked to their architect while those who had poured the concrete or installed the windows are soon forgotten. Berkshire has become a great company. Though I have long been in charge of the construction crew; Charlie should forever be credited with being the architect.