Charlie Munger obituary: Warren Buffett's “alter ego” is dead

Who was Charlie Munger?

The born on January 1, 1924 in Omaha, Nebraska, Charles Thomas Munger looks back on a long and successful career in the business and financial world. Fate took its course when Charlie Munger was already working as a student at the “Buffett & Son” supermarket, which was then owned by Warren Buffett's grandfather. But the two star investors, who were almost destined for each other, did not get to know each other until many years later. Munger studied mathematics at the University of Michigan in the 1940s. However, he dropped out of his studies to serve as a meteorologist in the Army Air Corps during the Second World War. He then graduated magna cum laude from Harvard University in 1948, although he did not have a college degree. With a degree in his pocket, he founded the law firm Munger, Tolles & Olson in California. Munger worked there until he gave up his job as a lawyer in 1960 to concentrate on investment management. Especially because of a landmark meeting with Warren Buffett.

From “blind date” to Berkshire Hathaway

A couple from Omaha invited Warren Buffett and Charlie Munger to a joint lunch in 1959 because “the two asset managers were so similar and therefore simply had to get to know each other.” In fact, Warren and Charlie were on the same wavelength from the start. Buffett once said: “Charlie laughed at his own jokes, just as I always do. And I knew that I would never meet someone like him again. ”

Since both also pursued similar investment approaches, they founded the investment company Wheeler, Munger & Co. In 1962, whose profit development of an average of 19.8% p.a. left the leading US index Dow Jones in the shadow until its liquidation at the beginning of 1976.

After that, the duo's entrepreneurial success story also began. Initially through Buffet's participation in the former Berkshire Cotton Manufacturing textile factory, whose origins date back to 1889. In 1962, Warren Buffett, who at that time managed assets of around seven million dollars, began to acquire shares in the stumbling company and restructure it. Buffett finally took over Berkshire completely and converted the company into an investment vehicle. However, under pressure from the US Securities and Exchange Commission, Warren Buffett had to merge the investment activities scattered at that time into Berkshire Hathaway in 1979, and Charlie Munger received two percent of Berkshire shares and the post of Vice Chairman as severance payment for his shares.

Billions with chocolates

In 1967, Berkshire Hathaway bought the first two insurance companies, which were expanded into Berkshire Hathaway's profit engine, as insurance premiums ensured a steady inflow of cash. One of Buffett and Munger's first big deals was also the purchase of the American chocolate chain See's Candies In the early 1970s for 25 million dollars. Buffett credits Munger with persuading him to make this investment. Because before buying See's, Berkshire's approach was to buy low-performing companies. It wasn't until they bought See's that Munger and Buffett came to appreciate the strength of a brand with loyal customers. In 2008, Buffett finally described See's as a “dream company” and explained that See's billions in profits provided the fuel for Berkshire's future growth.

For Munger, See's was not only a good investment, but also the key to his long life: “I eat this good peanut brittle. That's what you should do if you want to live to be 99 years old.” Munger told CNBC in February 2023.

With shares in wholesalers, convenience stores, discount stores, drugstores, restaurants, railroad companies, and much more, Berkshire Hathaway made billions in the following decades. Berkshire Hathaway also holds large positions in its stock portfolio in well-known publicly traded companies such as Apple, Bank of America, The Coca-Cola Company, Visa and American Express. The total portfolio was worth over 300 billion dollars at the end of November 2023.

Most valuable share in the world

From 1964 to 2022, Berkshire achieved a return of around four million percent. The conglomerate thus exceeded the broad-based S&P 500, which grew by 25,000 percent in the same period, many times over. In November 2023, Berkshire Hathaway's market capitalization reached over 780 billion US dollars. The A share is the most valuable in the world and is now in the six-figure range.

Charlie Munger had been Vice Chairman of the investment company since 1978 and one of the largest shareholders. This made Munger a billionaire whose Wealth estimated at 2.7 billion dollars was. He held the majority of it in Berkshire shares.

What investors can learn from Charlie Munger

Warren Buffett and Charlie Munger were very similar in many ways, but they also complemented each other in key ways. They both liked to claim that they had never quarreled in 60 years of cooperation. Warren Buffett explained how to do that as follows: “Whenever we disagree, Charlie ends the conversation by saying, “Warren, think about it and you'll agree with me. Because you're intelligent — but I'm right. ”

In fact, Munger was considered the more prudent of the investor duo. He preferred to stay in the background, was careful, focused on quality and was interested in science, psychology and philosophy in addition to economics. Because: “If you only have a hammer, every problem looks more or less like a nail.” Munger thus became known for his multidisciplinary problem-solving approach, which was based on findings from a wide range of areas outside the financial world.

He also convinced Buffett to change his investment approach towards “value investing.” “Instead of buying undervalued companies at good prices, Munger wanted to buy excellent companies at reasonable prices.” In a statement following Munger's death, Warren Buffett honored Munger's life's work with the words: “Berkshire Hathaway could not have been built up to its current status without Charlie's involvement, inspiration, and wisdom. ”