Charlie Munger

Lacy O’Toole | CNBC

Billionaire Charlie Munger, the investment expert who made his fortune before becoming Warren Buffett’s right-hand man at Berkshire Hathaway, has died aged 99.

According to a press release from Berkshire Hathaway, Munger died on Tuesday. The conglomerate said members of Munger’s family informed him that he died peacefully in a California hospital this morning.

“Berkshire Hathaway could not have been built to its current status without Charlie’s inspiration, wisdom and involvement,” Buffett said in a statement.

In addition to being vice chairman of Berkshire, Munger was also a real estate lawyer, chairman and publisher of the Daily Journal Corp., a member of the Costco board, a philanthropist and an architect.

As of early 2023, his fortune was estimated at $2.3 billion – a staggering amount to many people, but far smaller than Buffett’s mind-boggling fortune, which is estimated at more than $100 billion.

During Berkshire’s 2021 annual shareholder meeting, Munger, then 97, apparently inadvertently revealed a well-kept secret: that Vice Chairman Greg Abel will “preserve the culture” after the Buffett era.

Munger, who wore thick glasses, lost his left eye in 1980 after complications from cataract surgery.

Munger was chairman and CEO of Wesco Financial from 1984 to 2011, when Buffett’s Berkshire bought the remaining shares of the Pasadena, California-based insurance and investment company that he did not own.

Buffett praised Munger’s expansion of his investment strategy from favoring distressed companies at low prices in the hope of making a profit to focusing on higher quality but undervalued companies.

An early example of change was illustrated in 1972 by Munger’s ability to persuade Buffett to agree to Berkshire’s purchase of See’s Candies for $25 million, even though the California candy maker had annual pretax profits of only about $4 million. Since then, Berkshire has generated more than $2 billion in sales.

“He turned me away from the idea of ​​buying very mediocre companies at very cheap prices because he knew there was a small profit involved and looked for really wonderful companies that we could buy at fair prices,” Buffett said told CNBC May 2016.

Or as Munger put it at the 1998 Berkshire shareholders meeting: “It’s not so fun to buy a company where you really hope that sucker gets liquidated before he goes bankrupt.”

Munger was often the honest man in the face of Buffett’s cheerful comments. “I have nothing to add,” he said after one of Buffett’s rambling answers to questions at Berkshire’s annual meeting in Omaha, Nebraska. But like his friend and colleague, Munger was a source of wisdom in investing and life. And like one of his heroes, Benjamin Franklin, Munger’s insight did not lack humor.

“I have a friend who says the first rule of fishing is to fish where the fish are. The second rule of fishing is to never forget the first rule. “We got good at fishing where the fish are,” Munger, then 93, said as he told thousands of people at the 2017 Berkshire meeting.

He believed in what he called the “Lollapalooza effect,” where an interplay of factors drives investment psychology.

A son of the heartland

Charles Thomas Munger was born on January 1, 1924 in Omaha. His father Alfred was a lawyer and his mother Florence “Toody” came from a wealthy family. Like Warren, Munger worked in Buffett’s grandfather’s grocery store as a youth, but the two future partners didn’t meet until years later.

At 17, Munger left Omaha and went to the University of Michigan. Two years later, in 1943, he enlisted in the Army Air Corps, according to Janet Lowe’s 2003 biography “Damn Right!”

The military sent him to the California Institute of Technology in Pasadena to study meteorology. In California, he fell in love with his sister’s Scripps College roommate, Nancy Huggins, and married her in 1945. Although he never completed his undergraduate studies, Munger graduated with honors from Harvard Law School in 1948, and the couple moved back to California, where he practiced real estate law. He founded the law firm Munger, Tolles & Olson in 1962 and focused on managing investments at the hedge fund Wheeler, Munger & Co., which he also founded that year.

“I’m proud to be an Omaha boy,” Munger said in a 2017 interview with Michigan Ross Business School Dean Scott Derue. “I sometimes use the old saying: ‘They took the boy out of Omaha, but they never took Omaha out of the boy.’ All those old-fashioned values ​​– family comes first; be able to help others when problems arise; prudent, sensible; moral duty to be reasonable [is] more important than anything else – more important than being rich, more important than being important – an absolute moral duty.”

In California, he worked in real estate with Franklin Otis Booth, a member of the founding family of the Los Angeles Times. One of their early developments proved to be a lucrative condo project on Booth’s grandfather’s property in Pasadena. (Booth, who died in 2008, was introduced to Buffett by Munger in 1963 and became one of Berkshire’s largest investors.)

“I had five real estate projects,” Munger told Derue. “I did both side by side for a few years, and in a few years I had $3 million to $4 million.”

Munger closed the hedge fund in 1975. Three years later he became vice chairman of Berkshire Hathaway.

“We think so similarly that it’s scary”

In 1959, at age 35, Munger returned to Omaha to close his late father’s law firm. At that point, he was introduced to the then 29-year-old Buffett by one of Buffett’s investor clients. The two got along well and stayed in touch despite living half a continent apart.

“We think so similarly that it’s scary,” Buffett recalled in a 1977 interview with the Omaha World-Herald. “He’s the smartest, most accomplished guy I’ve ever met.”

“We’ve never had an argument in the entire time we’ve known each other, almost 60 years,” Buffett told CNBC’s Becky Quick in 2018. “Charlie gave me the ultimate gift that a person can give another person.” He made me a better person than I would have been otherwise. … He gave me a lot of good advice over time. … Thanks to Charlie, I have had a better life.”

The merging of minds focused on value investing, which involves selecting stocks because their price appears to be undervalued based on the company’s long-term fundamentals.

“All smart investing is value investing – you get more than you pay for,” Munger once said. “You have to value the company in order to value the stock.”

Berkshire Hathaway CEO Warren Buffett (L) and Vice Chairman Charlie Munger attend the 2019 Annual General Meeting in Omaha, Nebraska, May 3, 2019.

Johannes Eisele | AFP | Getty Images

But during the coronavirus outbreak in early 2020, when Berkshire suffered a massive $50 billion loss in the first quarter, Munger and Buffett were more conservative than during the Great Recession, when they invested in U.S. airlines and financial companies such as Bank of America and Goldman Invested Sachs was hit hard by this downturn.

“Well, I would say, basically, we are like the captain of a ship when the worst typhoon ever comes,” Munger told the Wall Street Journal in April 2020. “We just want to get through the typhoon, and that’s what we would do.” Better to come out of it with a lot of liquidity. We don’t play: “Oh dear, fine, everything is going to hell, let’s plunge 100% of the reserves.” [into buying businesses].”

The Philanthropist/Architect

Munger donated hundreds of millions of dollars to educational institutions, including the University of Michigan, Stanford University and Harvard Law School, often on the condition that the school accept his building designs, even though he was not formally trained as an architect.

At Harvard-Westlake Preparatory School in Los Angeles, where Munger had been a board member for decades, he ensured that the girls’ restrooms were larger than the boys’ restrooms when the science center was built in the 1990s.

“Every time you go to a football game or an event, there’s a huge line outside the women’s restroom. Who doesn’t know that they pee differently than men?” Munger told the Wall Street Journal in 2019, “What kind of idiot would make the men’s room and the women’s room the same size? The answer is: a normal architect!”

Munger and his wife had three children, daughters Wendy and Molly, and son Teddy, who died of leukemia at age 9. The Mungers divorced in 1953.

Two years later, he married Nancy Barry, whom he met on a blind date at a chicken dinner restaurant. The couple had four children, Charles Jr., Emilie, Barry and Philip. He was also the stepfather of her other two sons, William Harold Borthwick and David Borthwick. The Mungers, who were married for 54 years until their deaths in 2010, donated $43.5 million to Stanford University to help build the Munger Graduate Residence, which houses 600 law and graduate students.

When asked by CNBC’s Quick in a February 2019 “Squawk Box” interview about the secret to a long and happy life, Munger said the answer is “simple because it is so simple.”

“You don’t have much envy, you don’t have much resentment, you don’t overspend your income, you remain cheerful despite your problems. You deal with reliable people and do what you do.” “And all these simple rules work so well to make your life better. And they’re so corny,” he said.

“And stay happy… because it’s a smart thing to do. Is it that hard? And can one be joyful when one is completely immersed in deep hatred and resentment? Of course that doesn’t work. So why should you accept it? “On?”

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