Charlie Munger, Warren Buffett’s vice chair at Berkshire Hathaway passed away at 99 last week of November 2023. He was the close ally and partner of Buffett who provided the wisdom, inspiration, check and balance that helped the world’s greatest investor reach unprecedented heights.
Munger met Buffett when the former was 35, and Buffett, 29. That translates to six decades of friendship and partnership that beat all types of relationships one can ever imagine.
Munger is reported to have steered Buffett into broadening his investment strategy from “cigar-butt” companies to higher quality but underpriced companies. Buffett said that Munger “weaned me away from the idea of buying very so-so companies at very cheap prices, knowing that there was some small profit in it, and looking for some really wonderful businesses that we could buy in fair prices.” Munger helped Berkshire move to investments in companies like insurance giant Geico, See’s Candies, Apple and American Express.
Buffett acknowledges that Munger “made me a better person that I would have otherwise been. I’ve lived a better life because of Charlie.” Buffett views Berkshire as a partnership among him, Munger and other shareholders. “Although our form is corporate, our attitude is partnership. Charlie Munger and I think of our shareholders as owner-partners, and of ourselves as managing partners.” In Buffett’s annual letters to Berkshire shareholders, he always says “Charlie and I.”
Munger is a believer in the difficulty of beating market averages and although he is a dyed-in-the-wool value investor, he acknowledges the practice to be getting tougher. The competition sorting through those opportunities is more intelligent and more aggressive and more numerous.
An interview by CNBC sometime in 2019 with Munger reveals some of the inner workings of his mind. I’d like to share with the readers some key thoughts in his response to the questions of CNBC’s Becky Quick:
1. “I don’t think the right way to handle every tough guy that’s fighting against you is with unlimited hostility. There are times when they ought to be killed with kindness. Even if they’re wrong.” This was a response to a question about the relationship of the US with Russia.
2. “I think the behavior of the mortgage and banking industry in the delusional prosperity that preceded the great real estate bust was obscene. And I think the people who got into a lot of trouble richly deserved it.” The question asked about his comments on some of the worst behavior in business today.
3. On the economics profession. “The great philosopher who said, ‘a man never steps into the same river twice,’ you know, ‘The man is different and so is the river, when he goes in the second time.’ That’s the trouble with economics. The same damn recipe done a different time gets a different result.”
4. What is the secret to a long and happy life? “You don’t have a lot of envy, you don’t have a lot of resentment, you don’t overspend your income, you stay cheerful in spite of your troubles. You deal with reliable people and you do what you’re supposed to do. All these simple rules work so well to make your life better. And they’re so trite… Is that so hard? And can you be cheerful when you’re absolutely mired in deep hatred and resentment? Of course, you can’t. So why would you take it on?”
5. On parenting. “It’s simply amazing to me as a parent to note how much is sort of pre-ordained. The shy baby is the shy adult. The booming, obnoxious, domineering baby is the booming, domineering, obnoxious adult. I’ve never found a way to fix that. I can be cheerful about it, but I can’t fix it. I can change my reaction. But I can’t change the outcome.”
Many will laud the genius thinking of Munger for his many insights on investment and business that fueled the glory of Berkshire Hathaway. But to this writer, what makes a lot of headway are his thoughts on kindness, the secrets to a happy life and parenting. It is his sense of equanimity that gave him a meaningful life of 99 years. He was super rich yet lived a modest life and he practiced the power of giving back to society through his philanthropy.
Here are two final gems of quotes from him on the importance of introspection and balance.
“Confucius said that real knowledge is knowing the extent of one’s ignorance… Knowing what you don’t know is more useful than being brilliant.”
“You have to strike the right balance between competency or knowledge on the one hand and gumption on the other. Too much competency and no gumption are no good. And if you don’t know your circle of competence, then too much gumption will get you killed. But the more you know the limits to your knowledge, the more valuable gumption is.”
The views expressed herein are his own and do not necessarily reflect the opinion of his office as well as FINEX.
Benel Dela Paz Lagua was previously EVP and chief development officer at the Development Bank of the Philippines. He is an active FINEX member and an advocate of risk-based lending for SMEs. Today, he is independent director in progressive banks and in some NGOs.