Charlie Munger, born on January 1, 1924, in Omaha, Nebraska, is an American investor, businessman, and philanthropist. He was best known as the vice chairman of Berkshire Hathaway, the conglomerate controlled by Warren Buffett.
Munger’s early life was marked by hard work and determination. He served as a meteorologist in the U.S. Army Air Corps during World War II. After the war, he took advantage of the G.I. Bill to study mathematics at the University of Michigan. He later attended Harvard Law School, where he graduated magna cum laude.
In the early 1960s, Munger founded his investment firm, Wheeler, Munger, and Company. Despite some early success, the firm struggled during the economic downturn in the 1970s. However, this experience taught Munger valuable lessons about the importance of investing in stable, reliable companies.
Munger’s investment philosophy has been heavily influenced by the concept of “value investing” popularized by Benjamin Graham. He believes in investing in strong companies with a long-term growth perspective, rather than looking for short-term gains.
In 1975, Munger partnered with Warren Buffett at Berkshire Hathaway. The two had met a decade earlier at a dinner party. Their partnership has been incredibly successful, with Berkshire Hathaway becoming one of the largest and most successful investment companies in the world.
Munger has been instrumental in some of Berkshire Hathaway’s most successful investments, including See’s Candies and the Coca-Cola Company. His strategy of “sit on your ass investing” has become legendary in the investment world. This approach advocates for thorough research and patience, buying only a few stocks, and holding onto them for a long time.
Munger’s investment philosophy could be summarized as follows:
- Extreme Buy-and-Hold Approach: Munger was known for his extreme buy-and-hold approach, selecting only companies he felt were a sure bet and then holding on to them for years. He believed that great investment opportunities would only come a few times in an investor’s career.
- Invest in Wonderful Businesses at Fair Prices: Munger believed it was preferable to find “wonderful businesses at fair prices,” which led him to have an extremely non-diversified portfolio of just a handful of companies at any given time.
- Weed Out Bad Opportunities: One of Munger’s approaches involved weeding out opportunities that were bad or only decent. He made investment choices under the belief that “life is not just bathing you with unlimited opportunities”.
- Value Investing and Rational Decision-Making: Munger’s investment philosophy was a commitment to value investing and rational decision-making. His approach involved a meticulous understanding of a business before considering an investment, seeking companies with enduring competitive advantages.
- Avoid Excessive Debt: After making millions in real estate, he shifted his focus toward generating wealth while keeping debt to a minimum. Munger realized that taking smart, well-informed risks with borrowed funds could pave the way to success.
Despite his success, Munger has maintained a relatively simple lifestyle. He was known for his frugality, which he considers a virtue. He has also been a generous philanthropist, donating millions of dollars to educational institutions and other causes.
Munger was also known for his wit and wisdom, often sharing his insights on investing and life in his speeches and interviews. His book, “Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger,” is a collection of his speeches and is considered a must-read for anyone interested in investing and business.
Charlie Munger’s life was a testament to the power of hard work, patience, and simplicity. His investment philosophy and approach to life offer valuable lessons to investors and individuals alike.
Recommended reading by Charlie Munger
- Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger by Charles T. Munger
- Influence: The Psychology of Persuasion by Robert B. Cialdini
- Seeking Wisdom: From Darwin To Munger by Peter Bevelin
- The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William N. Thorndike Jr.
- Getting to Yes: Negotiating Agreement Without Giving In by Roger Fisher
- Man’s Search for Meaning by Viktor E. Frankl
- Guns, Germs, and Steel: The Fates of Human Societies by Jared Diamond
- The Selfish Gene by Richard Dawkins
- Living within Limits: Ecology, Economics, and Population Taboos by Garrett Hardin
- Barbarians at the Gate: The Fall of RJR Nabisco by Bryan Burrough