Munger's influence on investors spread far beyond the shores of the US. A business partner with Warren Buffett, his achievements and commentaries are part of the folklore of the investment industry.
Charlie Munger, the right-hand-man to investment tycoon Warren Buffett, has died at the age of 99.
The word “legendary” doesn’t quite do justice to Munger, whose influence on how people think about investment and portfolio management has been immense. Munger is very much associated with the notion of “value investing” – finding firms trading at cheap valuations and seeking to benefit from this process. He was influenced by investment writer Benjamin Graham.
In a statement on Tuesday on his Berkshire Hathaway website, Buffett said: "Berkshire Hathaway could not have been built to its present status without Charlie's inspiration, wisdom and participation."
Berkshire, of which Munger was vice chairman, has become a multinational conglomerate that wholly owns popular brands such as Dairy Queen and Fruit of the Loom, taking stakes in Apple, Coca-Cola, among others.
Munger was, like Buffett, a native of Omaha, studying maths at the University of Michigan, but dropped out at the age of 19 during World War II to serve in the US Army Air Corps. While in the Army, he studied meteorology at Caltech in Pasadena, California, and the state became his home. Munger later switched to the law, studying at the Harvard Law School. In the late 1950s, he met Buffett, and they forged a business friendship and partnership.
His influence was global. To illustrate this, here are comments from Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, based in the UK: “Every year Charlie Munger shared his wisdom, alongside his long-time investment partner, Warren Buffett, at Berkshire Hathaway’s annual general meeting. Every year I listened intently. It’s no exaggeration to say that without these meetings, I wouldn’t be half the investor I am today. I may not even be investing at all.
“Buffett aside, Charlie Munger has taught me more about investing than all other investors combined. No other person on the planet, not even his business partner, had his ability to boil down business and investment principles to their core essence. Munger was a man of few words, but everyone dripped with insight. Munger could pack more wisdom into a single sentence than some people get across in a lifetime.
“Munger was hugely intelligent, but so are a lot of people. It wasn’t his intellect that set him apart. It was his common sense and rationality. Munger paid zero attention to conventional wisdom and was the dictionary definition of independent. He excelled at pouncing on investment opportunities when everyone else was running for the hills. And he played a huge role in Buffett’s metamorphosis from an investor in cheap ‘cigar butts’ to embracing great businesses, like See’s Candies and Coca-Cola.
“But arguably, it isn’t his investment prowess that Charlie Munger will be most remembered for. It’s his understanding of human psychology. His magnum opus talk, ‘The Psychology of Human Misjudgment’, provides great insights on why we behave the way we do. In my opinion, no one understood the common flaws and biases in human behaviour and judgement better than Charlie Munger. No one internalised these principles to greater effect. And no one did more to share this wisdom with others.
“Many people seek success by trying to grasp the esoteric rather than master the obvious. Munger was the opposite. Key to Munger’s success was his ability to invert problems: finding what didn’t work – and then avoiding that like the plague. In Munger’s own words – `It's remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.’”