Charlie Munger - Investing Genius, Vice Chairman of Berkshire Hathaway

Charlie Munger is one of the most respected and influential investors of all time. He is best known as the vice chairman of Berkshire Hathaway, the conglomerate controlled by his longtime friend and partner, Warren Buffett. Together, they have built Berkshire Hathaway into a $540 billion powerhouse of American capitalism, generating enormous wealth for themselves and their shareholders.

But who is Charlie Munger, and what can we learn from his investment philosophy and wisdom? In this blog post, I will explore the following topics:

• Who is Charlie Munger?
• What is his investment style?
• What are his most legendary investing tips?

Who is Charlie Munger?

Charlie Munger was born in Omaha, Nebraska, on January 1, 1924. He served in the U.S. Army Air Corps during World War II, and then graduated from Harvard Law School in 1948. He practiced law in California for several years, before switching to real estate development and investing.

He met Warren Buffett in 1959, and they became close friends and business partners. Munger joined Berkshire Hathaway in the 1970s, and became its vice chairman in 1978. He also served as the chairman of Wesco Financial Corporation, a subsidiary of Berkshire Hathaway, from 1984 to 2011. He is currently the chairman of the Daily Journal Corporation, a publishing and technology company, and a director of Costco Wholesale Corporation, a retail giant.

Munger is also a renowned philanthropist, having donated millions of dollars to various causes, especially education and science. He is the namesake of several institutions, such as the Munger Graduate Residence at Stanford University, the Munger Center for Social and Cognitive Neuroscience at the University of Michigan, and the Munger Institute for Learning and Memory at the Massachusetts Institute of Technology.

Munger has an estimated net worth of nearly $3 billion, making him one of the richest people in the world. He is also one of the oldest, having celebrated his 99th birthday in January 2023.

What is his investment style?

Munger is a value investor, meaning he looks for undervalued companies that have strong and durable competitive advantages, or moats, and that can generate high returns on capital over the long term. He is also a concentrated investor, meaning he prefers to invest in a few high-quality businesses, rather than diversify across many mediocre ones.

Munger is influenced by the teachings of Benjamin Graham, the father of value investing, and Philip Fisher, the pioneer of growth investing. He combines the principles of both schools, seeking companies that are both cheap and good. He also draws insights from various disciplines, such as psychology, economics, physics, and biology, to understand the complex and dynamic nature of business and markets.

Munger is a long-term investor, meaning he holds his stocks for decades, or even forever, as long as the underlying businesses remain sound and profitable. He is also a patient investor, meaning he waits for the right opportunities to buy, and does not chase fads or trends. He is also a disciplined investor, meaning he sticks to his investment criteria, and does not let emotions or biases interfere with his decisions.

Munger is a contrarian investor, meaning he often goes against the crowd, and buys when others are fearful, and sells when others are greedy. He is also a rational investor, meaning he bases his decisions on facts and logic, and not on opinions or predictions. He is also a humble investor, meaning he admits his mistakes and limitations, and learns from them.

What are his most legendary investing tips?

Munger has shared his investment wisdom with the public through various speeches, interviews, books, and letters. Here are some of his most legendary investing tips:

• “Spend each day trying to be a little wiser than you were when you woke up.” Munger believes that continuous learning is the key to success in investing and life. He reads voraciously and widely, and encourages others to do the same. He says that knowledge is cumulative, and that the more you know, the more you can do and achieve.
• “Invert, always invert.” Munger likes to look at problems backwards, and ask what he does not want to happen, rather than what he wants to happen. He says that this helps him avoid mistakes and pitfalls, and find solutions and opportunities. He says that inversion is a powerful mental tool that can improve your thinking and decision making.
• “A great business at a fair price is superior to a fair business at a great price.” Munger prefers to invest in high-quality businesses that have strong moats, loyal customers, and consistent earnings, even if they are not cheap. He says that these businesses are more likely to grow and compound their value over time, and that paying a fair price for them is better than buying mediocre businesses that are cheap but have no growth prospects or competitive edge.
• “Success means being very patient, but aggressive when it’s time.” Munger says that successful investing requires both patience and aggressiveness. He says that patience means waiting for the right opportunities to buy, and not being tempted by the noise and movements of the market. He says that aggressiveness means acting decisively and boldly when the opportunities arise, and investing large sums of money in your best ideas.
• “The big money is not in the buying and the selling, but in the waiting.” Munger says that the secret to making money in the stock market is not to trade frequently, but to hold your stocks for the long term. He says that by holding your stocks, you can benefit from the power of compounding, and avoid the costs and taxes of trading. He says that the best investors are those who buy great businesses and forget about them.
• “All intelligent investing is value investing.” Munger says that the essence of investing is to buy something for less than it is worth, and sell it for more than it is worth. He says that this applies to all types of investing, whether it is growth, income, or dividend. He says that the only way to make money in the market is to buy low and sell high, and that this is what value investing is all about.
• “People calculate too much and think too little.” Munger says that many investors rely too much on numbers and formulas, and not enough on common sense and judgment. He says that numbers are important, but they do not tell the whole story. He says that investors should also consider the qualitative aspects of a business, such as its culture, management, vision, and competitive advantage. He says that thinking is more important than calculating, and that investors should use both their left and right brains.
• “We have three baskets for investing: yes, no, and too tough to understand.” Munger says that he simplifies his investment process by categorizing his potential investments into three baskets: yes, no, and too tough to understand. He says that he invests in the yes basket, which contains the businesses that he understands well and that meet his criteria. He says that he avoids the no basket, which contains the businesses that he does not understand or that do not meet his criteria. He says that he also avoids the too tough to understand basket, which contains the businesses that are too complex or uncertain for him to analyze. He says that by doing this, he can focus on his best ideas, and avoid wasting time and money on his worst ones.

Conclusion

Charlie Munger is one of the greatest investors of all time, and one of the most influential thinkers of our era. He has taught us valuable lessons on how to invest wisely, and how to live well. By following his investment philosophy and wisdom, we can improve our chances of achieving financial success and personal happiness. Thank you for reading. 😊