Charles Thomas Munger, co-founder of Berkshire Hathaway with Warren Buffett, has built his own following among investors.
The late billionaire left behind a treasure trove of proven and proven investment advice over the years, and even Buffett, 95, known as the ‘Oracle of Omaha’ for his flawless investment decisions over the years, credits Munger with a key principle for avoiding big mistakes: “Really good investment opportunities won’t come around very often and they won’t last very long, so you have to be ready to act and you have to be prepared.”
After Munger’s death in November 2023, Bloomberg noted in an obituary his importance as a “straight man and scoundrel of corporate excess” who provided a reality check and balance against Buffett’s fame and fortune.
Quote of the day by Charlie Munger
“I’m a big believer in solving hard problems with a checklist.
What does Charlie Munger’s quote mean?
In an interview with the BBC a few years ago, the late billionaire investor outlined the four main principles of the checklist he used before betting on investments: Understanding what you’re investing in, identifying the intrinsic value of the business, investigating the company’s management and making an offer at the right price.
Read also | Quote of the Day by Charlie Munger: “Big money not for buying and selling, but…”
First, “we have to deal with the things that we are able to understand, and after we get past that filter, we have to have a business with some intrinsic properties that give it a sustainable competitive advantage,” he explained.
According to Munger, you cannot successfully invest in a business and get good returns without understanding what the business does, how it plans to make money, or what market opportunities exist for the business. You must also be aware of its USP in case of high competition.
Regarding the important third and fourth checklists, Munger noted that we (he and partner Warren Buffett) “would very much prefer a management position with a lot of integrity and talent; and finally, no matter how wonderful it is…it (the investment) is not worth an infinite price. So we have to have a price that makes sense and provides some degree of security with respect to the natural business of life.”
Read also | Quote of the Day by Charlie Munger: “You have to be ready to act on opportunities”
Buffett has also repeatedly emphasized the importance of working with people he can trust. In an interview with an interviewer in 2014, he explained that even though times have changed, he still prefers one-page offers. “I would still go to a one-page contract. I like to deal with people where I feel like a one-page contract will do the job. If I have to have 50 pages there to protect me from the person I’m dealing with, I’m always going to question whether I needed 51.”
Munger further noted that it is a “very simple set of ideas” that do not spread faster because “they are too simple”. He quipped, “Specialist classes can’t justify their existence if that’s all I have to say. It’s all so obvious and so simple, what are they supposed to do with the rest of the semester?”
Master Joke: Who is Charlie Munger?
Munger, known for his sharp wit, brutal honesty and no-nonsense thinking, was one of the architects of Berkshire Hathaway Inc.’s success alongside Buffett’s best friend and business partner. For nearly 60 years, the duo transformed the company from a failing textile manufacturer to an empire worth billions.
Read also | Warren Buffett Quote of the Day: “Until you can control your emotions, you won’t…”
A lawyer by training, Munger helped Buffett, who was seven years his junior, develop a philosophy of investing in companies for the long term. Buffett credited him with shaping Berkshire Hathaway’s investment style and shifting the “Oracle of Omaha” from cheap butt stocks to high-quality businesses at fair prices.
Under their leadership, Berkshire averaged 20% annual returns from 1965 to 2022, roughly double the pace of the S&P 500. Decades of compounding returns have made the pair of billionaires and folk heroes idolized by investors.
Munger was vice president of Berkshire from 1978 until the day he died in 2023 at the age of 99. He was also among the company’s largest shareholders, with shares worth about $2.2 billion. His total net worth was about $2.6 billion, according to Forbes.
