Who is Charlie Munger? and his relationship with Warren Buffett
Who is Charlie Munger? and his relationship with Warren Buffett
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Charlie Munger (born 1924) is the vice chairman and vice chairman of Warren Buffett, a prominent investor and chairman of Berkshire Hathaway, Inc. is a $354.6 billion diversified conglomerate headquartered in Omaha, Nebraska.

As Buffett’s closest business partner and “right-hand man” for more than four decades, Munger is developing Berkshire into a large diversified holding company with a market value of over $700 billion (as of February 2022) as well as insurance, Rail freight, power generation/distribution, manufacturing and retail.1

In addition to serving as an independent director of Costco Wholesale Corporation, Munger is chairman of the board of directors of the Daily Journal Corporation, a Los Angeles-based legal publisher with a software business in the automated court reporting market. From 1984 to 2011, he served as Chairman and Chief Executive Officer of Berkshire Hathaway subsidiary Wesco Financial Corporation.

Central thesis

  • As the vice chairman of the $355 billion Berkshire Hathaway company, Charlie Munger has been the deputy to prominent investor Warren Buffett since 1978.
  • As Buffett’s “right-hand man,” Munger was instrumental in growing Berkshire Hathaway into a $700 billion holding company.
  • In 1943 he dropped out of the University of Michigan to join the United States. Army Air Corps, where he trained as a weather forecaster.
  • Although he never earned a bachelor’s degree, he graduated from Harvard Law School in 1948 with a Juris Doctor degree. Top student.
  • Munger has a net worth of $2.5 billion as of 2022, according to Forbes.

Education and Early Careers

Born in Omaha in 1924, Munger worked as a teenager at Buffett & Sons, a grocery store owned by Warren Buffett’s grandfather.

During World War II, he attended the University of Michigan to study mathematics, but dropped out a few days after his 19th birthday in 1943 to serve in the U.S. Army Air Corps, where he trained as a meteorologist and rose to the rank of second lieutenant. Later, he He continued his meteorological studies at Caltech in Pasadena, California, the city that became his lifelong home.

After attending Harvard Law School without a bachelor’s degree, he graduated summa cum laude with a Juris Doctor degree in 1948. leave. Early as a real estate attorney, he founded the well-known California law firm Munger, Tolles & Olson.

The transition from law to finance

After meeting at a dinner in Omaha in 1959, Munger and Buffett kept in touch over the years, while Buffett went on to build his investment firm and Munger continued to work as a real estate attorney.

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On Buffett’s advice, Munger left the legal practice in the 1960s to focus on managing investments, including a real estate development partnership with billionaire newspaper executive Franklin Otis Booth.

Before joining Berkshire, Munger ran his own investment firm, which, as his friend Buffett pointed out in his 1984 article “The Super Investors of Graham and Dodsville,” The average annual return between 1962 and 1975 was 19.8%, which is far better than the Dow’s 5% annual appreciation rate over that time period.

In 1962, Buffett began buying Berkshire Hathaway stock; by 1965, he took over the company as chairman and CEO. In 1978, Munger became Berkshire Hathaway’s vice chairman. 6

From Cigar Butts to Buffets – Munger Value Investing

Buffett has always been a value investor—he actively seeks out and analyzes stocks that trade below their true value—a strategy he learned from his mentor, Benjamin Graham.

In his 1989 letter to shareholders, however, Buffett praised Munger for making it clear that Berkshire should not pursue a “cigar butt” version of value investing — describing an investor buying a dying company currently worth $1 for $0.75 The company’s term is just “to get a free $0.25 puff” to stay in the store.

As Buffett explained, his career began as a cigar-butt investor—and Munger understood the folly of the approach long before him: “Charlie got it early; I learned it slowly. ”

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Working with Munger, he eventually learned that for a struggling company that failed repeatedly, cheap prices often turned out to be false discounts, and any immediate gains were quickly eroded by poor returns. Instead, Munger and Buffett would rather “buy a great company that is worth $1 now for $1.25, but will definitely be worth $15 10 years from now.”

In other words, Berkshire’s version of value investing has been astonishingly successful by following Munger’s mantra: “Forget the knowledge of buying fair companies at good prices; instead, buy good companies at fair prices.”

Munger Investment Philosophy

  • A key reason for their successful business partnership is that Munger and Buffett are fully committed to upholding industry-leading standards of ethical business practices.

  • Munger has often stated that high ethical standards are an integral part of his philosophy and his success.

  • One of his most quoted adages is: “Good business is ethical business. A business model that relies on skill is doomed to fail.”

  • An avid reader of great thinkers and clear communicators such as Ben Franklin and Samuel Johnson, Munger introduced the concept of “basic worldly wisdom” in business and finance in several speeches and in his book “Poor Charlie’s Almanac”.

Berkshire Hathaway’s “Big Four”

As vice chairman, Munger also represents all assets, including what Buffett calls Berkshire’s “Big Four” — the four investments that make up the bulk of Berkshire’s value. 11

Insurance float: Topping the list in 2021 is a group of wholly-owned insurance companies that make Berkshire the world’s leading provider of insurance float—all Berkshire has held for years The investment period of the premium funds. Investing in yourself can benefit before you pay off your claim. During Munger’s tenure, Berkshire’s outstanding shares have grown from $19 million to $147 billion by 2022. Even with periodic underwriting losses due to catastrophic events (such as the terrorist attacks of September 11, 2001), long-term value creation is enormous, which is why insurance liquidity ranks among the top four of Berkshire’s Big Four .

Apple, Inc: and Floating Insurance Following Berkshire’s investment in Apple, Inc. Contrary to a wholly-owned investment in the company, Berkshire will only hold a 5.55% stake in Apple at the end of 2021, making it an important part of the company’s manufacturing company. However, Apple does encounter a very high Munger-Buffett investment barrier for the simple reason that its 5.55% ownership interest has increased from 5.39% last year as Apple repurchased its own stock. Given Apple’s enormous value, Berkshire Hathaway brought in $100 million for every 0.1% increase, from 5.39% to 5.55% — excluding Berkshire Hathaway’s expenses.

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BNSF (Burlington North Santa Fe Company): Berkshire Hathaway’s third-largest BNSF operates one of the largest rail freight networks in North America, with 8,000 locomotives and 32,500 miles of track. The investment is a prime example of Munger-Buffer’s preference for investing in companies with an economic moat — a built-in competitive advantage that protects competitors’ long-term profits and market share. In the case of railroads, the massive seed capital required to lay railroad tracks in the United States protects railroads from competitors, like a moat around a medieval castle. In 2021, Berkshire received a record $6 billion in revenue from BNSF.

BHE (Berkshire Hathaway Energy): The fourth giant, BHE, a portfolio of locally owned utilities, is another prime example of Munger-Buffet’s preference for companies with economic moats — needed to run power lines Huge sums of money to embarrass the U.S. to protect BHE from competitors. Under Munger’s leadership, BHE will not only achieve record sales of $4 billion in 2021 (up from $122 million when Berkshire first took a stake in 2000), but also has a strong presence in wind, solar and hydropower. Zero renewable energy capacity spreads across the United States. Berkshire owns 91.1% of BHE as of 2021.

What is Charlie Munger Net Worth?

Munger has a net worth of $2.5 billion as of 2022, according to Forbes.

Why does Charlie Munger hate Bitcoin?

Munger is known for his bluntness and investment genius. When Buffett deftly sidestepped questions about cryptocurrencies during a question-and-answer session at the 2021 shareholder meeting, Munger bluntly stated that Bitcoin is “created out of thin air” and is “criminals’ favorite payment method.” He was appalled that billions of dollars were being sent to “a guy who just invented a new financial product out of thin air.” He also praised China’s cryptocurrency ban and criticized the U.S. for its heavy involvement in cryptocurrencies.

What are Charlie Munger’s charities?
Munger’s philanthropy focuses on education, including large donations to the University of Michigan Law School ($3 million for lighting improvements in 2007 and $20 million for home improvements in 2011). 1314 He also donated to Stanford University ($43.5 million in Berkshire Hathaway stock. 2004 to build graduate housing) and UC Santa Barbara ($200 million in 2016 for state-of-the-art student housing).

Final result

As Buffett’s “right-hand man,” Munger was instrumental in growing Berkshire Hathaway into a $700 billion holding company.

As vice chairman, Munger is also deputy head of all assets, including what Buffett calls Berkshire’s “Big Four” — the four investments that make up most of Berkshire’s value: 1) Insurance subsidiary “insurance funds” 2) Apple; 3) BNSF (Burlington North Santa Fe); 4) BHE (Berkshire Hathaway Energy).

Buffett applauds Munger for ensuring Berkshire Value Investing follows Munger’s mantra: “Forget the knowledge of buying fair companies at good prices; instead, buy good companies at fair prices.”

Munger has often stated that high ethical standards are an integral part of his philosophy and his success.

As Vice Chair, Munger is also second-in-command of all assets, including what Buffett calls Berkshire’s “four giants”—the four investments that account for the bulk of Berkshire’s value: 1) “insurance float” from subsidiary insurance companies; 2) Apple, Inc; 3) BNSF (Burlington Northern Santa Fe Corporation); 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 often stated that high ethical standards are integral to his philosophy—and to his success.

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