Not often do we see individuals embodying such character, values, virtues, and integrity as Charlie Munger. The world bid farewell to this exceptional personality on November 28th this year, as he passed away at the age of 99, leaving behind a legacy estimated at over $2 billion. Known as the vice-chairman of Berkshire Hathaway and Warren Buffett's indispensable right-hand man, Munger's impact on the investing world is immeasurable.
Munger's journey towards greatness wasn't conventional. He began working at Warren Buffett's grandfather's grocery store before pursuing education at the University of Michigan and the California Institute of Technology, but failed to complete an undergraduate degree at either. During World War II, he served in the Air Force in Alaska. Upon returning, he studied law at Harvard and became a qualified lawyer. In his early professional years, Munger often accepted shares in companies as payment for legal counsel instead of traditional fees, demonstrating an unconventional yet visionary approach.
Fate orchestrated the meeting between Munger and Buffett in 1959 at a mutual friend's house in Omaha. Surprisingly, both had worked at Buffett's family grocery store as children, but they had never crossed paths until that evening. At the time, Munger practiced law while investing privately, while Buffett was fully immersed in investment endeavours. This chance encounter laid the foundation for their legendary partnership, culminating in the formation of Berkshire Hathaway in the late 1970s. Their distinct yet complementary investment styles – a fusion of Buffett's "cigar butt" philosophy and Munger's focus on exceptional businesses – contributed significantly to Berkshire Hathaway's growth into an almost $800 billion conglomerate.
Buffett's early investment approach, influenced by Benjamin Graham, emphasised buying undervalued stocks and selling them upon reaching fair value. In contrast, Munger advocated for acquiring outstanding businesses at reasonable prices, highlighting the value of superior companies over undervalued ones. Their collaboration thrived on this diversity of thought, enriching their investment strategies and perspectives.
Munger's investment ethos centred on identifying outstanding businesses with enduring qualities like a competitive advantage, pricing power, brand equity, robust corporate culture, and scalable business models. His philosophy revolved around acquiring and holding onto these exceptional businesses indefinitely, leveraging the advantage of deferring taxes by considering capital gains tax as a delayed transaction tax.
Beyond investments, Munger devoted substantial time to writing, philanthropy, and fostering scientific innovation. His perspective on Wall Street reflected his belief in utilising talent for more meaningful pursuits than money management. He led a balanced life, dedicated to his family – often described as a community of "Mungers."
Both Munger and Buffett were philanthropic giants, contributing significantly to societal causes and advocating against inequality. Munger's estate of $610 million in Berkshire stock, as opposed to Buffett's $17 billion, reflects his focus on selling stock during his lifetime to support society, universities, and scientific advancements. In contrast, Buffett entrusted his wealth to his wife, Susan, pledging continuous support for his philanthropic endeavours.
The enduring success of Berkshire Hathaway, with investments like Coca-Cola and American Express, reflects Munger's willingness to pay full value for companies with exceptional cultures and business models that promise long-term compounding of earnings and dividends.
At 36ONE, our investment philosophy resonates with the Buffett/Munger approach, seeking opportunities in undervalued businesses and exceptional companies at fair prices.
Warren Buffett beautifully summarised Munger's impact, expressing, "Charlie has given me the ultimate gift that a person can give to somebody else, I've lived a better life because of Charlie." The legacy of Charlie Munger, a man of wisdom, integrity, and profound influence, continues to inspire generations in the realms of investing and beyond.