Known for his financial wisdom and insightful aphorisms, Munger left an indelible mark on the investment world.
Born in 1924, he joined Berkshire Hathaway as vice-president in 1978, forming with Buffett a dynamic duo ("Wild Warren and Charmin' Charlie") that transformed a declining textile company into a gigantic conglomerate. Munger brought an investment approach based on patience, simplicity and clarity of thought, greatly influencing the company's investment philosophy.
Munger was a firm believer in long-term investment in quality companies, often saying that "investing is about finding a few great companies and then sitting back". He advocated discipline, favoring quality over quantity and rejecting ephemeral market trends.
His passion for simplicity was reflected in his investments and advice. Munger said: "We have a passion for keeping things simple. Our game is to recognize a great idea when it comes along, which doesn't happen very often". This approach has enabled Berkshire Hathaway to make sound investments and withstand market turbulence.
Munger's emphasis on continuous learning and recognition of one's own limitations was another pillar of his success. He believed that "recognizing what you don't know is the dawn of wisdom". This intellectual humility guided his investment decisions throughout his career.
According to him, much of his success in life and business came from knowing what he wanted to avoid: "All I want to know is where I'm going to die so I never go there". To this end, he practiced the principle of inversion ("Invert, always invert"), avoiding the simplest mistakes that have proven their worth throughout stock market history. Instead of trying to anticipate the market and find what nobody has yet seen on the markets, he avoided the factors that would destroy the value of his portfolio. Where there's more to lose on the downside than to gain on the upside.
Munger was also known for his distrust of misleading accounting metrics, such as adjusted EBITDA, which he saw as distorted indicators. "Every time you hear "EBITDA", substitute it with "bullshit" earnings", Charlie Munger (2003). He advocated transparency and honesty in company valuations.
Munger's investment approach was based on a deep understanding of human psychology, in addition to numbers. Trained as a lawyer, he had extensive experience in a variety of fields, and drew on this background to perfect his "mental model" approach to investing. He also believed that history was a valuable guide to the future, and that understanding past mistakes was crucial to future success.
Munger was also a voracious reader, convinced that reading was essential to developing the wisdom and knowledge needed to succeed. He said: "In all my life, I've never known a wise person who didn't read all the time. You'd be surprised how much Warren reads, how much I read. My kids make fun of me. They think I'm a book with two legs sticking out."
Beyond his investment skills, Munger was revered for his integrity and reputation, which he considered his most valuable assets. He taught that success in business and in life came from knowing what to avoid, and he lived by that principle.
Munger's investment philosophy not only shaped Berkshire Hathaway's success, but also influenced generations of investors. His teachings and legacy will live on, continuing to inspire those who seek to understand the complexities of the financial markets. Charlie Munger was unquestionably an investment titan, and his impact on the financial world will outlive him by many years.
"Spend every day trying to be a little wiser than you were when you woke up. Day by day, and at the end of the day - if you live long enough - like most people, you'll get out of life what you deserve. The best armor for old age is a life well spent perfecting it." - Charlie Munger
Good bye, Charlie!