Charlie Munger, vice chairman of Berkshire Hathaway and a towering figure in the investment world, has died at age 99. The company announced Tuesday that members of the Munger family said the legendary investor passed away peacefully at a hospital in California.
Munger wasn't just Warren Buffett's right-hand man at Berkshire Hathaway, he was an accomplished investor on his own, with an impressive track record of success dating back many decades. Munger was instrumental in helping Buffett fine-tune his investment style and played a massive role in the 3,787,464% (not a typo) returns the company produced for shareholders from 1964 through the end of 2022.
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Munger's investment career
Munger was a lawyer by trade. He studied mathematics as an undergraduate and attended Harvard Law School, with a stint in the U.S. Armed Forces in between. Afterward, Munger co-founded a law firm and worked as a real estate attorney, but later stopped practicing to focus on investment management.
Munger is best known for his role as vice chairman of Berkshire Hathaway, but that wasn't the only impressive part of his investment career. In fact, Munger didn't assume that role until 1978, when he was already in his mid-50s.
From 1962 through 1975, Munger ran an investment partnership, Wheeler, Munger & Co., which liquidated thereafter. The partnership's results were extraordinary, producing a 19.8% annualized return (before fees), compared with just 5% for the Dow Jones Industrial Average during that time period. Interestingly, this is almost identical to the long-term compound returns produced by Berkshire Hathaway in the Warren Buffett era.
How Charlie met Warren
Charlie Munger was introduced to Warren Buffett in 1959 by a mutual friend, although Munger had worked at a grocery store owned by Buffett's grandfather as a teenager. Over the years, Munger has been perhaps the biggest influence on Buffett's investment style, aside from Buffett's mentor, Benjamin Graham.
For example, Munger helped shift Buffett's mentality away from investing in troubled businesses (which Buffett called "cigar butt" stocks) and toward focusing on high-quality businesses to own for the long run. The quote "a great business at a fair price is superior to a fair business at a great price" is often attributed to Buffett, but it was actually Munger who said it. In fact, Buffett initially bought shares of struggling textile manufacturer Berkshire Hathaway as a deep-value play, but later came to call it one of his worst investments -- and one that Munger would have likely steered clear of.
Munger also helped shape Warren Buffett's views on diversification, or lack thereof. One of the key differentiators of Munger's investment partnership compared with competitors was Munger's willingness to hold just a few stocks at a time. This is why Buffett is so comfortable with say, roughly half of Berkshire's stock portfolio being invested in Apple. Munger believed that the best way to achieve market-beating returns is to hold a concentrated portfolio, and looking at his track record, it's difficult to make the case otherwise.
Buffett put it simply in Tuesday's announcement: "Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation."
Top Charlie Munger quotes on investing
While Buffett is perhaps the most-quoted investor of all time (and for good reason), many of Munger's investing quotes have stolen the show at Berkshire meetings over the years.
With that in mind, here's a list of some of our all-time favorite Charlie Munger quotes:
- "It takes character to sit with all that cash and to do nothing. I didn't get to the top where I am by going after mediocre opportunities."
Munger and Buffett drew plenty of commentary in recent years for Berkshire Hathaway's cash hoard, which has ballooned over $150 billion. But the reason it has grown so large is that the pair were perfectly willing to wait indefinitely until attention-getting opportunities arose. Many investors would not be willing to leave this much cash on the sidelines while they wait for opportunities, but Munger considered this a big advantage over other investors.
- "You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time."
Munger didn't swing for the fences. He didn't buy the cheapest stocks, or the fastest-growing businesses, hoping to hit home runs. He was perfectly content with being an above-average hitter and doing so consistently. In the typical year in both his investment partnership and at Berkshire Hathaway, investors' average annualized returns were right around 20% -- superior to the market, sure, but not doubling or tripling their money.
But Munger's point is that's all you need to do, as long as you can maintain the elevated performance. Returns of 20% might not sound like home runs individually, but consider that a $1,000 investment in Berkshire Hathaway in 1964 would be worth about $38 million today.
- "We have three baskets for investing: yes, no, and too tough to understand."
Munger wasn't one for diversification, and that's partially because he wouldn't invest in businesses he didn't understand. Both Munger and Buffett missed out on many of the best-performing investments of the past 60 years because of this, but undoubtedly avoided many losses as well.
- "The big money is not in buying or selling, but in the waiting."
One of the most important lessons investors can learn is that 99% of great investing involves doing nothing. Munger aimed to put his money in great companies, and leave it there as long as they remained great companies -- even if that meant not making any other portfolio moves.
- "A lot of people with high IQs are terrible investors because they've got terrible temperaments."
Smart people lose money in the stock market all the time, and a big reason for it is that they don't have a good handle on their emotions. It's common knowledge that the central goal of investing is to buy low and sell high, but far too many people do the exact opposite in practice. When stocks rise to unsustainable levels and hype is at its peak, that's when they throw their money in. And when markets plunge, they panic and sell.
- "We both insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think."
It often surprises investors to learn that Munger and Buffett spent the vast majority of their work days just sitting in their office and reading -- not in meetings, checking stock quotes, analyzing financial statements, or other ways investment managers often spend their time. Munger believed that accumulating knowledge is the best way to gain a competitive advantage in investing, and life in general.
- On Bitcoin: "I think I should say modestly that the whole damn development is disgusting and contrary to the interests of civilization."
To say that Munger was critical of cryptocurrencies would be a major understatement. Munger detested cryptocurrencies, having referred to them as "poison," and believed that they are primarily a tool for scammers, criminals, and gamblers, with no legitimate place in the financial world.
- "When I was at Harvard Law School, we seldom traded a million shares on a day and now we trade billions. We don't need a stock market that liquid."
In addition to being critical of cryptocurrencies, Munger also criticized the boom in frequent trading, especially when it comes to day trading on app-based platforms like Robinhood where investors can continually make trades with no commissions. He felt this preys on the gambling instincts of the public and is counterproductive to how investing should be done (long-term, buy-and-hold).
Farewell, Charlie
If there were a Mount Rushmore of great investors, there are a few faces we think should definitely be on it. Buffett is an obvious choice, and Peter Lynch is another. Buffett himself has said that statues should be erected of Jack Bogle, the father of modern index fund investing. But Munger is just as deserving of a spot as all of them.
