Berkshire Hathaway Vice Chairman Charlie Munger, Warren Buffett’s best friend and famous investor, passed away on the 28th (local time) at the age of 99. Berkshire Hathaway announced today that Vice Chairman Munger died at his home in Santa Barbara, California.
Vice Chairman Munger has received less spotlight than the ‘investment genius’ Berkshire Hathaway Chairman Buffett, but he has been an inspiration to many as a master of humor and a down-to-earth person, and as an outstanding investor himself. Buffett has always mentioned that the value investment philosophy of ‘buying valuable companies at reasonable prices,’ which is famous for Berkshire Hathaway’s investment technique, was actually Munger’s idea. Munger’s fortune, estimated by Forbes this year, is about $2.6 billion (3.367 trillion won).
Born on January 1, 1924, in Omaha, Nebraska, Munger was the son of a lawyer father and a bookworm mother. When he was young, he worked at a grocery store run by Buffett’s grandfather, but he is said to have vaguely known Buffett by name but never met him at this time.
Munger, who loved numbers, entered the University of Michigan’s Department of Mathematics, but joined the Air Force after the Japanese attack on Pearl Harbor in 1941. In order to develop him into a weather forecaster, the U.S. military had him study meteorology at the California Institute of Technology (Caltech) and then stationed him at an Alaska Air Force base. According to the New York Times (NYT), after being discharged from the military, Munger applied to Harvard Law School, where his father graduated. Although he did not have an undergraduate degree, he was said to have been able to pass with the help of a former dean from Nebraska who was an acquaintance of his family.
He settled in California and opened the law firm Munger, Tolles & Olson as a lawyer, but difficult times came. He divorced his first wife, Nancy Huggins, in 1953, and two years later suffered tragedy when his nine-year-old son died of leukemia. He later recalled, “I walked the streets of Pasadena (California) crying because I thought I was losing my (sick) child little by little every day.” According to the Wall Street Journal (WSJ), Munger used to get choked up thinking about his departed son until recently, more than 60 years later.
Munger, who lost his son, was even close to penniless. He said he felt like he wanted to be one of the interesting clients rather than his role as a lawyer sending in bills. He was good with numbers, so he started studying investing on his own. He later said in Roger Lowenstein’s book ‘Buffett: The Birth of American Capitalism’, “Like Warren, I had a great passion to become rich,” and “It was not because I wanted a Ferrari, but because I wanted independence.”
In 1959, Buffett and Munger met at a local gathering in Omaha. We met Munger, who lived in California, when he came to sort out his father’s belongings. It is said that the two knew each other’s names. One of Buffett’s investment partners even said, “It’s similar to Munger.” Buffett said, “When I saw Munger rolling over and laughing at his own jokes, I felt that he was a similar person to me.” “Warren is no ordinary person,” Munger told her then-second wife, Nancy Barry, while Buffett’s then-wife recalled, “They both considered the other the smartest person.”
The two spoke on the phone almost every day and discussed investments. Eventually, thanks to Buffett’s persuasion, he went from being a lawyer to becoming a full-time investor. According to WSJ, Buffett, under the influence of his mentor and legendary investor Benjamin Graham, adhered to the investment method of buying companies that were failing when they were cheaper than the actual price. Munger, on the other hand, argued that you should buy great stocks at reasonable prices that will generate consistent cash in the future.
In 1971, with Munger’s persuasion, Warren acquired the chocolate shop ‘See’s Candy’ at a higher price than the company he had purchased. This investment generated $2 billion ($2.6 trillion) in profits for the company over the next few decades. Later, Buffett recalled that through this investment, he learned how to buy at bargain prices and completely change to ‘value investing.’
From 1962 to 1975, before Munger joined Berkshire Hathaway as vice chairman, his portfolio returned an average of 19.8% per year. During the same period, the Standard & Poor’s (S&P) 500 index returned only 5.2%. Although he is overshadowed by Buffett, this shows that he is an excellent investor in his own right.
The partnership between Munger and Buffett shined even brighter. Together, the two men, who said they had never fought in their lives, grew Berkshire Haaway into a giant corporation worth more than $500 billion. From 1965 to 2014, Berkshire’s returns increased by an average of 21.6% per year. This is a rate of return that is more than twice the average annual growth rate of 9.9% for the S&P 500 index during this period.
●“Investors, maintain diligence and composure.”
Myeonggeo, known as the ‘Quotes Maker’, was so humorous that a book containing only his quotes was published, but it is said that out of respect for Buffett as Chairman, he was sparing in words when working with him. He made the audience laugh whenever he happened to say something. According to the WSJ, at the 2000 Berkshire Hathaway shareholders’ meeting, when an audience member was asked about his opinion on the dot-com bubble, he responded, “If you mix raisins and poop, poop is still poop.”
When asked around 2016 who he was most grateful for in his life, Munger said:
“He is the first husband of my second wife (Nancy Barry, died in 2010). “I was only a slightly less terrible husband than he was, but I was able to enjoy the unwavering love of this wonderful woman for 60 years.”
He said he always liked two words. They are diligence and equanimity. Diligence is also related to waiting, which is consistent with his advice to ‘do nothing for a long time and then buy aggressively when the opportunity finally comes’, which he claims is the key to investment success. Also, regarding composure, Munger has said, “Every investor should not lose composure even if a 50% loss occurs every few decades.”
Although Munger nearly lost his eyesight after a failed cataract surgery and was unable to walk well at the end, he never lost his sense of humor. Audiences from all over the world flock to Munger and Buffett’s Berkshire Hathaway shareholders’ meeting to hear investment and life wisdom, to the extent that the term ‘Woodstock for capitalists’ is used. This is why he is nicknamed ‘The Sage of Omaha.’ Munger and Buffett seemed to anticipate questions about the bankruptcy of Silicon Valley Bank (SVB) at this year’s shareholders’ meeting, making the audience laugh by placing signs such as ‘For Sale’ and ‘Hold to Maturity’ on the table.
Munger’s final warning at the shareholders’ meeting that day was about insolvency in commercial real estate. He said, “US banks are loaded with non-performing commercial real estate loans,” and “the risk of non-performing loans emerging from the vast commercial real estate loan portfolios held by US regional banks is increasing.” He also wrote an article in WSJ arguing that virtual currencies should be banned.
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Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.