Charlie Munger (born 1924) is the Vice Chair and second-in-command to Warren Buffett, the distinguished investor who chairs Berkshire Hathaway, a $354.6-billion various conglomerate based in Omaha, Neb.
As Buffett’s closest industry partner and “right-hand man” for over 4 a few years, Munger has been instrumental inside the expansion of Berkshire into a big various preserving company with a market capitalization of over $700 billion (as of February 2022) and subsidiaries running in insurance policy, freight rail transportation, energy generation/distribution, manufacturing, and retail.
In conjunction with serving as Unbiased Director of Costco Wholesale Corporate, Munger is Chair of the Board of Day by day Mag Corporate, a Los Angeles-based jail creator with a tool industry inside the automatic court docket reporting market. From 1984 through 2011, he served as Chair and CEO of Wesco Financial Corporate, a subsidiary of Berkshire Hathaway.
Key Takeaways
- As Vice Chair of the $355-billion conglomerate, Berkshire Hathaway, Charlie Munger has been second-in-command to renowned investor Warren Buffett since 1978.
- As Buffett’s “right-hand man,” Munger has been instrumental inside the expansion of Berkshire into a big preserving company with a market capitalization of $700 billion.
- He dropped out of the Faculty of Michigan in 1943 to serve inside the U.S. Army Air Corps, where he was once professional as a meteorologist.
- Although he not at all earned an undergraduate degree, he graduated magna cum laude from Harvard Legislation Faculty with a J.D. in 1948.
- As of 2022, Munger has a internet price of $2.5 billion, consistent with Forbes.
Investopedia / Alison Czinkota
Education and Early Profession
Born in Omaha in 1924, as an adolescent, Munger worked at Buffett & Son, a grocery store owned by the use of Warren Buffett’s grandfather.
All over International Combat II, he enrolled inside the Faculty of Michigan to study mathematics then again dropped out a few days after his 19th birthday in 1943 to serve inside the U.S. Army Air Corps, where he was once professional as a meteorologist and promoted to second lieutenant. He later endured his analysis in meteorology at Caltech in Pasadena, Calif., the city that was his lifelong area.
After getting into Harvard Legislation Faculty—without an undergraduate degree—he graduated magna cum laude with a J.D. in 1948. As a real assets attorney within the ones early years, he founded Munger, Tolles & Olson, a renowned California legislation corporate.
Transition From Legislation to Finance
After meeting at a dinner in Omaha in 1959, Munger and Buffet stayed in touch over the years as Buffett endured building his investment corporate and Munger endured running as a real assets attorney.
On Buffett’s advice, Munger gave up on the observe of legislation inside the 1960s to concentrate on managing investments, along with a partnership with the billionaire newspaper executive, Franklin Otis Gross sales area, on precise assets development.
Prior to changing into a member of Berkshire, Munger ran his non-public investment corporate, which—as his friend Buffett recognized in his 1984 essay, “The Superinvestors of Graham-and-Doddsville”—generated compound annual returns of 19.8% between 1962 and 1975, a ways upper than the 5% annual appreciation price for the Dow all through that time frame.
In 1962, Buffett began to buy shares of Berkshire Hathaway; by the use of 1965, he had taken keep watch over of the company as Chair and CEO; in 1978, Munger was Vice Chair of Berkshire Hathaway.
From “Cigar-Butt” to Buffet-Munger Price Investing
Buffett has all the time been a price investor—actively on the lookout for and analyzing stocks purchasing and promoting for less than their true value—a technique he learned from his mentor, Benjamin Graham.
Then again, in his 1989 letter to shareholders, Buffett credited Munger with setting him in an instant on the fact that Berkshire should not pursue the “cigar-butt” style of value investing—a period of time to provide an explanation for buyers who acquire a loss of life industry in recent times price $1 for $0.75 merely “to get the $0.25 of free puff” that’s left inside the industry.
As Buffett explains it, he began his non-public occupation as that roughly cigar-butt investor—and it was once Munger who understood the foolishness of that way long previous than he did: “Charlie understood this early; I was a slow learner.”
Operating with Munger, what he in any case learned was once that the cut price price for a industry with a couple of flaws too incessantly grew to turn into out to be a false discount in any case, and any fast achieve would briefly be eroded by the use of low returns. As a substitute, Munger and Buffett would quite acquire “a great business for $1.25, when it is currently worth $1 but is definitely going to be worth $15 in 10 years.”
In several words, the Berkshire style of value investing was phenomenally a good fortune by the use of following Munger’s mantra: “Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.”
Munger Investment Philosophy
- A core driver of their spectacularly a good fortune industry partnership has been that Munger and Buffett are completely aligned on maintaining industry-leading necessities for ethical industry practices.
- Munger has incessantly discussed that prime ethical necessities are integral to his philosophy—and to his success.
- One in every of his most continuously quoted maxims is: “Good corporations are ethical corporations. A industry sort that relies on trickery is doomed to fail.”
- An avid reader of great thinkers and clear communicators like Ben Franklin and Samuel Johnson, Munger offered the concept of “fundamental, worldly wisdom” inside the industry and finance sector in a couple of speeches and in his information Poor Charlie’s Almanack.
Berkshire Hathaway’s “Four Giants”
As Vice Chair, Munger may be second-in-command of all assets, along with what Buffett calls Berkshire’s “4 Giants”—the 4 investments that account for almost all of Berkshire’s value.
Insurance policy Flow: Heading the report in 2021 is a cluster of wholly-owned subsidiary insurance policy companies that have made Berkshire the sector leader in insurance policy drift—an investment period of time for all of the money from insurance policy premiums that Berkshire can dangle for years and invest for their own benefit previous than paying it once more on claims. All over Munger’s tenure, Berkshire’s insurance policy drift has grown from $19 million to $147 billion, as of 2022. Even with periodic underwriting losses from catastrophic events (for example, the terrorist attacks on Sept. 11, 2001), enormous, long-term value introduction is the reason insurance policy drift heads the report of Berkshire’s 4 giants.
Apple, Inc: An in depth runner-up to insurance policy drift is Berkshire’s investment in Apple, Inc. Against this to the company’s wholly-owned investments, Berkshire owns best possible 5.55% of Apple as of year-end 2021, which makes it an extraordinary preserving for the company. Then again, Apple meets the very most sensible Munger-Buffett investment bar for the simple reason that their 5.55% ownership stake better from 5.39% the previous twelve months due handiest to Apple’s repurchase of their own stock. Given Apple’s huge value, each and every 0.1% of the upward thrust from 5.39% to 5.55% ownership earned Berkshire $100 million—and not using a Berkshire value vary spent.
BNSF (Burlington Northern Santa Fe Corporate): Berkshire’s third huge, BNSF, operates one of the largest freight railroad networks in North The us, with 8,000 locomotives and 32,500 miles of rail across the western two-thirds of the U.S. This investment is a antique example of the Munger-Buffet need for investing in companies with an monetary moat—a built-in competitive receive advantages that protects long-term source of revenue and market share from festival. On the subject of railroads, the large amount of start-up capital required to place railroad tracks across the U.S. protects railroads from fighters, very similar to a moat spherical a medieval citadel. In 2021, Berkshire had document earnings of $6 billion from BNSF.
BHE (Berkshire Hathaway Energy): The fourth huge, BHE, a portfolio of locally managed corporations inside the instrument sector, is each and every different antique example of the Munger-Buffet need for companies with an monetary moat—the large capital required to place power lines across the U.S. protects BHE from festival. Underneath Munger’s control, not best possible did BHE earn a document $4 billion in 2021 (up from $122 million in 2000, when Berkshire first purchased a stake), but it surely no doubt has moreover grown from 0 renewable energy capacity right into a primary player in wind, solar, and hydro transmission right through the U.S. In 2021, Berkshire owned 91.1% of BHE.
What Is Charlie Munger’s Web Worth?
As 2022, Munger has a internet price of $2.5 billion, consistent with Forbes.
Why Does Charlie Munger Hate Bitcoin?
Munger is as well known for his directness as he is for his investment genius. When Buffett diplomatically dodged questions about cryptocurrency all through a Q&A session at a 2021 shareholder meeting, Munger discussed bluntly that bitcoin was once “created out of thin air” and is a “go-to payment method for criminals.” He was once alarmed that billions of bucks have been being sent to “somebody who just invented a new financial product out of thin air.” He has moreover praised China’s ban on cryptocurrency and criticized heavy U.S. heavy involvement inside the overseas cash.
What Are Charlie Munger’s Charitable Causes?
Munger’s philanthropy is serious about education, along with large donations to the Faculty of Michigan Legislation Faculty ($3 million for lighting improvements in 2007 and $20 million for housing renovations in 2011). He has moreover donated to Stanford Faculty ($43.5 million in Berkshire Hathaway stock to build a graduate student housing difficult in 2004) and the Faculty of California, Santa Barbara ($200 million for state-of-the-art student housing in 2016).
The Bottom Line
As Buffett’s “right-hand man,” Munger has been instrumental inside the expansion of Berkshire into a big preserving company with a market capitalization of $700 billion.
As Vice Chair, Munger may be second-in-command of all assets, along with what Buffett calls Berkshire’s “four giants”—the 4 investments that account for almost all of Berkshire’s value: 1) “insurance float” from subsidiary insurance policy companies; 2) Apple, Inc; 3) BNSF (Burlington Northern Santa Fe Corporate); 4) BHE (Berkshire Hathaway Energy).
Buffett has credited Munger with ensuring that Berkshire value investing adhered to Munger’s mantra: “Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.”
Munger has incessantly discussed that prime ethical necessities are integral to his philosophy—and to his success.
