by Shai Angel
Charlie Munger, the Vice Chairman of Berkshire Hathaway since 1978, Warren Buffet`s long-time business partner and friend, and an iconic investment influencer through many generations, passed away on November 28th, 2023, at the age of 99.
Munger, often called the “abominable no-man” by Buffett, was an iconic figure and investment guru, leaving behind a legacy that extends beyond his role at Berkshire Hathaway.
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While an abundance of material could be written about a 99-year-old man, Munger’s influence on investing and his multidisciplinary approach to problem-solving are particularly noteworthy. Described by Warren Buffett as “the smartest and most brilliant person I have ever known,” Munger’s contributions to the world of business and philanthropy are immeasurable.
In addition to co-leading the Berkshire affair and leading a number of other commercial and charitable endeavors, Charlie is renowned for his versatile, fluid thinking. Before focusing on business, Munger studied law at Harvard and as a meteorologist during World War II. He also studied psychology, economics, physics, biology, and history, among other subjects, to develop his “multiple mental models” system to solve challenging issues in intricate social systems. His perspectives on life and business are, therefore, distinct, uncommon, accurate, and remarkably consistent.
Munger’s brilliance extended to his investment acumen. Managing investment partnerships starting in 1962, he achieved remarkable success. From 1962 to 1969, his partnerships outperformed the S&P 500 with an average annualized gain of 24.4% compared to the S&P’s 5.6%. Even after shutting down his partnerships in 1975, his portfolio’s average annual gain stood at 19.8% over 14 years, far surpassing the S&P’s 5.2% growth rate.
Since becoming a Berkshire vice chairman, Munger worked closely with Buffett on allocating Berkshire’s capital and not mincing words when he thought his business partner was making a mistake. Munger was known for steering Buffett away from purchasing what Buffett called “cigar butts”—mediocre companies that had a puff of smoke left and could be bought for meager prices—and instead favoring quality. Buffett always credited Munger with pushing him beyond his early value investing strategies to buy great businesses like See’s Candy at reasonable prices. “Charlie has taught me a lot about valuing businesses and about human nature,” Buffett said in 2008.
Buffett nicknamed Munger the “abominable no-man” for his ferocity in rejecting potential investments, including some that Buffett might otherwise have made. But Munger, who was fascinated by engineering and technology, also pushed the tech-phobic Buffett into big bets on BYD, a Chinese battery and electric vehicle maker, and Iscar, an Israeli machine-tool manufacturer.
Charlie Munger significantly influenced several well-known investors, including Guy Spier, Li Lu, and Monish Pabrai.
Charlie Munger’s famous quotes regarding investment and life:
“If you skilfully follow the multidisciplinary path, you will never wish to come back. It would be like cutting off your hands.”
“Just because you like it does not mean that the world will necessarily give it to you.”
“I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge.”
“I always say I want to know where I would die so I can never go there.”
“The iron rule of nature is: You get what you reward for. If you want ants to come, you put sugar on the floor.“
“ I think Warren and I know the edge of our competency better than other people do.”
“Take a simple idea, and take it seriously.”
“We got a little less crazy than most people and a little less stupid than most people, and that really helped us.”
Shai Angel, CPA, the author, earned a master’s degree in law, a bachelor’s degree in accounting and economics, and a certificate in director training. He has previously held senior financial positions in well-known businesses. In his years of working in the financial industry, he has participated in the capital market and actively learned about “Value Investing” from some of the biggest investors in the world, including Warren Buffett, Peter Linz, Monish Fabray, and others. He has also applied their investment strategies.
