Remembering Charlie Munger

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As you have probably heard by now, Berkshire Hathaway vice chairman Charlie Munger died on Tuesday, November 28, 2023. He was just a month shy of reaching his 100th birthday. With his passing, the world lost a legendary investor and a man full of insight and wit. “If people weren’t so often wrong, we wouldn’t be so rich,” he once quipped.

Munger’s wit quickly turned my wife into a fan of his. Ask her about Berkshire Hathaway and she’ll quickly say, “Charles greatly admires Warren Buffett, but I love Charlie Munger.”

Munger was more than Buffett’s business partner and friend. It was Munger who convinced Buffett to evolve his strategy from Benjamin Graham’s deep-value approach to paying up for good companies. This shift was first apparent with Berkshire Hathaway’s purchase of See’s Candies in the 1970s. See’s Candies was what Robert Hagstrom described as a “high price-to-book business—almost the antithesis of the Graham methodology” in the November 2021 AAII Journal (“Warren Buffett and the Evolution of Value Investing”).

In the 1989 Berkshire Hathaway shareholder letter, Buffett discussed the change in his investing philosophy: “If you buy a stock at a sufficiently low price, there will usually be some hiccup in the fortunes of the business that gives you a chance to unload at a decent profit, even though the long-term performance of the business may be terrible … Unless you are a liquidator, that kind of approach to buying businesses is foolish … It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Charlie understood this early; I was a slow learner. But now, when buying companies or common stocks, we look for first-class businesses accompanied by first-class managements.”

Munger also deserves much credit for helping Buffett think through his decisions. “When we differ, Charlie usually ends the conversation by saying: ‘Warren, think it over and you’ll agree with me because you’re smart and I’m right,’” noted Buffett in the 2014 shareholder letter.

We’ll never know what mistakes Munger kept Buffett from making. At the 2019 Berkshire Hathaway shareholder meeting, Munger said he turned down about as many as 500 investments for every one he bought. Whatever the actual number is, it is probable that Berkshire Hathaway’s long-term performance is better than it would have been had Buffett not had Munger to bounce ideas off of.

A big part of Munger’s approach was to consider what could go wrong and try to avoid such situations. In an email yesterday, author William Green recalled how he had asked Munger specifically why he focused so much attention on avoiding common errors and predictable patterns of irrationality. “Because it works,” replied Munger. “If you try and be smart, it’s difficult. If you just go around and identify all of the disasters and say, ‘what caused that?’ and try to avoid it, it turns out to be a very simple way to find opportunities and avoid troubles.”

While Munger was nowhere near as verbose as Buffett is, he was never afraid to share an opinion when he had one on a subject. Here’s a quote from the 2017 Berkshire Hathaway shareholder meeting that CNBC shared yesterday: “What you don’t want to be is like the man who, when they had his funeral, the minister said ‘now’s the time for someone to say something nice about the deceased.’ And nobody came forward. He said ‘surely somebody can say something nice about the deceased.’ And nobody came forward. And finally one man came up and said, ‘Well, his brother was worse.’”

I’m sure there will be many people with nice things to say at Munger’s funeral. The world will miss you, Charlie.