Charlie Munger
Charlie Munger (conceived 1924) is the Vice Chair and second-in-order to Warren Buffett, the celebrated investor who chairs Berkshire Hathaway, a $354.6-billion diversified conglomerate situated in Omaha, Neb.
As Buffett's closest business partner and "right-hand man" for north of forty years, Munger has been instrumental in the growth of Berkshire into a goliath diversified holding company with a market capitalization of more than $700 billion (as of February 2022) and auxiliaries operating in insurance, freight rail transportation, energy age/dispersion, manufacturing, and retail.
As well as filling in as Independent Director of Costco Wholesale Corporation, Munger is Chair of the Board of Daily Journal Corporation, a Los Angeles-based legal distributer with a software business in the automated court reporting market. From 1984 through 2011, he filled in as Chair and CEO of Wesco Financial Corporation, a subsidiary of Berkshire Hathaway.
Education and Early Career
Brought into the world in Omaha in 1924, as a young person, Munger worked at Buffett and Son, a supermarket owned by Warren Buffett's grandfather.
During World War II, he enrolled in the University of Michigan to study science yet exited a couple of days after his nineteenth birthday celebration in 1943 to serve in the U.S. Armed force Air Corps, where he was prepared as a meteorologist and elevated to second lieutenant. He later proceeded with his studies in meteorology at Caltech in Pasadena, Calif., the town that turned into his lifelong home.
In the wake of entering Harvard Law School — without an undergraduate degree — he graduated magna cum laude with a J.D. in 1948. As a real estate attorney in those early years, he established Munger, Tolles and Olson, a renowned California law firm.
Transition From Law to Finance
In the wake of meeting at a supper in Omaha in 1959, Munger and Buffet kept in contact over the course of the years as Buffett kept building his investment firm and Munger kept working as a real estate attorney.
On Buffett's advice, Munger abandoned the practice of law during the 1960s to concentrate on overseeing investments, incorporating a partnership with the billionaire paper executive, Franklin Otis Booth, on real estate development.
Prior to joining Berkshire, Munger ran his own investment firm, which — as his friend Buffett called attention to in his 1984 article, "The Superinvestors of Graham-and-Doddsville" — generated compound annual returns of 19.8% somewhere in the range of 1962 and 1975, much better than the 5% annual appreciation rate for the Dow during that time span.
In 1962, Buffett started to buy shares of Berkshire Hathaway; by 1965, he had assumed command over the company as Chair and CEO; in 1978, Munger became Vice Chair of Berkshire Hathaway.
From "Stogie Butt" to Buffet-Munger Value Investing
Buffett has forever been a value investor — effectively seeking and dissecting stocks trading for not exactly their true value — a strategy he learned from his guide, Benjamin Graham.
Nonetheless, in his 1989 letter to shareholders, Buffett acknowledged Munger for setting him straight on the way that Berkshire shouldn't seek after the "stogie butt" rendition of value investing — a term to portray investors who buy a dying business at present worth $1 for $0.75 just "to get the $0.25 of free puff" that is left in the business.
As Buffett makes sense of it, he started his own career as that sort of stogie butt investor — and it was Munger who understood the stupidity of that approach long before he did: "Charlie understood this early; I was a slow learner."
Working with Munger, what he at long last learned was that the bargain price for a troubled business with different flaws too frequently ended up being a false discount eventually, and any immediate gain would before long be dissolved by low returns. All things considered, Munger and Buffett would prefer to buy "a great business for $1.25, when it is as of now worth $1 however is certainly going to be worth $15 in 10 years."
All in all, the Berkshire rendition of value investing turned out to find success by following Munger's mantra: "Fail to remember what you realize about buying fair businesses at great prices; all things being equal, buy brilliant businesses at fair prices."
Munger Investment Philosophy
- A core driver of their fabulously effective business partnership has been that Munger and Buffett are totally adjusted on keeping up with industry-leading standards for ethical business practices.
- Munger has frequently stated that high ethical standards are indispensable to his way of thinking — and to his prosperity.
- One of his most often quoted adages is: "Great businesses are ethical businesses. A business model that depends on duplicity is ill-fated to fail."
- A devoted reader of great thinkers and clear communicators like Ben Franklin and Samuel Johnson, Munger presented the concept of "rudimentary, worldly insight" in the business and finance sector in numerous talks and in his book Poor Charlie's Almanack.
Berkshire Hathaway's "Four Giants"
As Vice Chair, Munger is additionally second-in-charge, everything being equal, including what Buffett calls Berkshire's "Four Giants" — the four investments that account for the bulk of Berkshire's value.
Insurance Float: Heading the rundown in 2021 is a cluster of entirely owned subsidiary insurance companies that have made Berkshire the world leader in [insurance float](/normal daily-float) — an investment term for all the money from insurance premiums that Berkshire can hold for quite a long time and invest for their own benefit before paying it back on claims. During Munger's tenure, Berkshire's insurance float has developed from $19 million to $147 billion, starting around 2022. Even with periodic underwriting losses from catastrophic events (for instance, the psychological oppressor assaults on September 11, 2001), colossal, long-term value creation is the explanation insurance float heads the rundown of Berkshire's four goliaths.
Apple, Inc: A close sprinter up to insurance float is Berkshire's investment in Apple, Inc. Not at all like the company's completely owned investments, Berkshire possesses just 5.55% of Apple as of year-end 2021, which makes it an abnormal holding for the company. Nonetheless, Apple meets the exceptionally high Munger-Buffett investment bar for the simple explanation that their 5.55% ownership stake increased from 5.39% the previous year due exclusively to Apple's repurchase of their own stock. Given Apple's monstrous value, each 0.1% of the increase from 5.39% to 5.55% ownership earned Berkshire $100 million — with no Berkshire funds spent.
BNSF (Burlington Northern Santa Fe Corporation): Berkshire's third goliath, BNSF, operates one of the largest freight railroad networks in North America, with 8,000 trains and 32,500 miles of rail across the western 66% of the U.S. This investment is a classic illustration of the Munger-Buffet preference for investing in companies with a economic moat — an underlying competitive advantage that safeguards long-term profits and market share from contenders. On account of railways, the tremendous amount of start-up capital required to lay railroad tracks across the U.S. shields railways from rivals, just like a moat around a middle age palace. In 2021, Berkshire had record earnings of $6 billion from BNSF.
BHE (Berkshire Hathaway Energy): The fourth monster, BHE, a portfolio of privately managed businesses in the utility sector, is one more classic illustration of the Munger-Buffet preference for companies with an economic moat — the huge capital required to lay power lines across the U.S. safeguards BHE from contenders. Under Munger's leadership, in addition to the fact that BHE earned a record $4 billion of every 2021 (up from $122 million out of 2000, when Berkshire previously purchased a stake), yet it has likewise developed from zero renewable energy capacity into a leading player in wind, sun oriented, and hydro transmission all through the U.S. In 2021, Berkshire owned 91.1% of BHE.
The Bottom Line
As Buffett's "correct hand man," Munger has been instrumental in the growth of Berkshire into a monster holding company with a market capitalization of $700 billion.
As Vice Chair, Munger is likewise second-in-charge, all things considered, including what Buffett calls Berkshire's "four monsters" — 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 acknowledged Munger for guaranteeing that Berkshire value investing stuck to Munger's mantra: "Fail to remember what you realize about buying fair businesses at brilliant prices; all things considered, buy superb businesses at fair prices."
Munger has frequently stated that high ethical standards are fundamental to his way of thinking — and to his prosperity.
Highlights
- In spite of the fact that he never earned an undergraduate degree, he graduated magna cum laude from Harvard Law School with a J.D. in 1948.
- He exited the University of Michigan in 1943 to serve in the U.S. Armed force Air Corps, where he was prepared as a meteorologist.
- As Buffett's "correct hand man," Munger has been instrumental in the growth of Berkshire into a monster holding company with a market capitalization of $700 billion.
- As Vice Chair of the $355-billion conglomerate, Berkshire Hathaway, Charlie Munger has been second-in-order to renowned investor Warren Buffett starting around 1978.
- Starting around 2022, Munger has a net worth of $2.5 billion, as per Forbes.
FAQ
What Are Charlie Munger's Charitable Causes?
Munger's philanthropy is centered around education, including large donations to the University of Michigan Law School ($3 million for lighting improvements in 2007 and $20 million for housing renovations in 2011). He has likewise given to Stanford University ($43.5 million in Berkshire Hathaway stock to build a graduate student housing complex in 2004) and the University of California, Santa Barbara ($200 million for cutting edge student housing in 2016).
For what reason Does Charlie Munger Hate Bitcoin?
Munger is as renowned for his unequivocal quality as he is for his investment virtuoso. At the point when Buffett carefully evaded inquiries regarding cryptocurrency during a Q&A session at a 2021 shareholder meeting, Munger said gruffly that bitcoin was "made out of nowhere" and is a "go-to payment method for lawbreakers." He was frightened that billions of dollars were being shipped off "someone who just designed another financial product out of nowhere." He has likewise commended China's ban on cryptocurrency and scrutinized heavy U.S. heavy contribution in the currency.
What Is Charlie Munger's Net Worth?
As 2022, Munger has a net worth of $2.5 billion, as per Forbes.
