Learn about Charlie Munger in one article: Why he is Buffett's most admired person

Financial News Agency, November 29 (Editor Zhao Hao) On Tuesday (November 28) local time, Berkshire Hathaway issued a statement saying that Charlie Munger (Charlie Munger), vice chairman of the board of directors, passed away peacefully in a California hospital that morning.

This prodigy in the investment industry died at the age of 99. It was only a month until his 100th birthday, which made people sigh. In a press release, Buffett wrote, “Berkshire Hathaway could not have grown to where it is today without Charlie's inspiration, wisdom, and participation.”

As a long-term partner of a “stock god,” Buffett once said that he has met countless people in his life and has never met anyone like Munger. “Charlie Munger and I inspire each other. We think the way we think is the same. I think having him by my side is the most important decision in my life.”

Looking back at Munger's investment career, although both he and Buffett were based on value investing, Munger emphasized interdisciplinary thinking, long-term perspective, independent thinking, and reverse thinking. In contrast, impetuous and volatile sentiments have become the main characteristic of American investors today.

Munger's upbringing

Nearly 100 years ago, Munger was born into an ordinary family in Omaha, Nebraska, USA. Six years later, Warren Buffett was born in the same city. Buffett once commented on this small central town this way: it is a more sane place. It lacks the hustle and bustle of New York, which helps make smarter investment decisions.

Munger's father was a lawyer, which made him take a keen interest in the law from an early age. As a child, Munger showed extraordinary ingenuity. He loved to read all kinds of books, especially historical and literary works. The wisdom and philosophy contained in these books provided valuable inspiration for Munger's future investment decisions.

Munger studied mathematics at the University of Michigan for two years and also developed a keen interest in physics. Munger dropped out of school to join the military after the Pearl Harbor incident that shocked the world broke out. When he first enlisted in the military, Munger was placed in an environment of ice and snow, but this difficult environment made Munger passionate about changing his life. He told his friends that he wanted to have a bunch of children, build a house with lots of books, and enough wealth to live a free life.

While in college and the military, Munger developed “one important skill”: playing cards. He then applied this to his business strategy. “What you have to learn is to fold early when the opportunity is against you, or to strongly support it if you have a big advantage because you don't always get a big advantage.”

After leaving the military, Munger was admitted to Harvard Law School. After graduating in 1948, he became a lawyer but soon switched to the field of investment. In investing, he also uses a card analogy to explain stock trading methods.

Munger and Berkshire

When Munger was 34, he met Buffett. Strangely enough, the two, who are 6 years apart, are simply a pair of partners made in heaven: they both grew up in a small town in Omaha, and have extremely similar personalities. They are thoughtful, well-argued, read a lot, and are also very successful investors.

Since then, Mangoin and Buffett have been famous for their close cooperation and dealings, but between 1962 and 1975, the two of them each managed their own investment partnership.

In 1962, Buffett began buying Berkshire Hathaway, a textile mill that was on the verge of bankruptcy. In the same year, Munger co-founded a securities company called Wheeler and Munger, which rose to prominence in the investment field. Over the next 10 years, the company's average annual yield reached 28.3%.

However, Wheeler Munger's investment performance has fluctuated greatly. In the five years from 1970 to 1974, the company lost its performance for three years and fell far short of the index. In particular, in the big bear market of 1973 and 1974, the company suffered a heavy blow. The losses for the two years were 31.9% and 31.5%, respectively, which eventually led to the company's closure.

At the same time, Buffett's situation is not optimistic; he has become a major shareholder in a textile factory that is going downhill. Buffett had to withdraw funds from Berkshire in order to acquire the booming National Insurance Company. Munger, on the other hand, used a retail coupon company they control, a blue-chip printing company, to invest in many profitable businesses.

Eventually, the blue chip printing company was merged into Berkshire Hathaway, and Munger became the company's vice chairman. Through value investment, the two have achieved investment results that have attracted worldwide attention. Buffett believes Munger is one of his most important partners in the field of investment and one of his closest friends. Allegedly, during the more than 40 years they have worked together, they have never had any disputes.

What Buffett said about Munger

Munger and Buffett both believe in value investing. They make decisions by thoroughly analyzing the company's fundamentals and long-term prospects, rather than blindly following suit or chasing short-term profits. At Berkshire, they have experienced many challenges and difficulties together, and have always adhered to the belief in value investment.

Buffett once said that the two most admired people in his life were “Graham and Munger.” Graham taught him an investment system that “focuses on the liquidation value of a company's existing assets,” while Munger asked Buffett to transform this system into an investment system that “focuses on the company's ability to create free cash in the future.”

Among the many successful classic cases, there is a deal that caused Buffett and Munger to abandon Graham's cigarette investment philosophy — Berkshire bought the candy company Heishi at a “high price” of several times its net worth, and easily obtained higher returns than imagined.

Buffett said, “Ben Graham taught me to buy bargains, and Charlie pushed me to invest in a different direction rather than just buying bargains. It was his biggest influence on me. It takes a great deal of energy to free me from Graham's limited views, and that is the power of Charlie. He broadened my horizons.”

Munger responded, “I think there are many mythical elements in the idea that I am Warren's great enlightener. He doesn't need any enlightenment. Frankly speaking, I don't think I live up to my name.” He modestly stated, “If there were no Charlie Munger in the world, Buffett's performance would still be as beautiful as it is now. ”

China Securities and Cryptocurrency

Normally, Munger has a low profile, but at the annual shareholders' meeting of the Daily Journal Corp (Daily Journal Corp) he manages, he can talk a lot about hot topics as the “sole protagonist.” When it comes to China, Munger never skimps on his extravagant remarks.

When asked about topics related to Sino-US relations, Munger said he hoped China and the US would get along better. “China is a large modern country with such a huge population and a high degree of modernization.”

According to the latest 13F form submitted to the US Securities and Exchange Commission (SEC), Daily Journal holds only four targets, namely Wells Fargo, Bank of America, Alibaba, and Bank of the United States of America. Among them, Ali's share of the holdings exceeds 16%.

Munger said, “Just like many other smart people, Warren (Buffett) likes to invest in fields he feels comfortable in. For some reason, my level of confidence in China is greater than that of him.” He said that every dollar invested in China has an advantage over the US. The companies they invest in are stronger than their competitors, but the prices are lower.

He has always been fiercely resistant to cryptocurrencies and has called them “rat poison.” “Don't let me start talking about Bitcoin — it's the stupidest investment I've ever seen. Most of these investments will go to zero.” Munger also said that he is ashamed of the US because so many Americans believe in cryptocurrencies.

Accordingly, he admired China's move to ban private digital currencies. “China has taken a very mature stance on cryptocurrencies.” Previously, he has repeatedly praised China's actions to ban cryptocurrencies and hoped that cryptocurrencies “have never been invented.”

Last time to maintain Buffett

Earlier this month, an American non-profit research media, ProPublica, published an article questioning “the situation where Buffett's personal stock account and Berkshire traded the same stock for a similar period of time.” Two weeks ago, Munger, who had recently enjoyed his life, publicly defended his 93-year-old friend on the program.

The ProPublica report listed three disputed deals. Buffett sold Wells Fargo, Walmart, and Johnson & Johnson three times between 2009 and 2012. Berkshire also happened to own these three companies at the time of sale, so it is suspected that Buffett violated Berkshire's insider trading policy.

Munger said, “I am convinced that there is no slightest possibility that Warren Buffett would do such an extremely bad thing to make money for himself. He is more concerned about Berkshire's development than his own wealth. He has donated all his money and doesn't even own it anymore.”

Munger was also more excited as he spoke, repeatedly stressing that Buffett had donated all his money. He did it all, and the gang also said that he used Berkshire (for himself) to make money. Munger also called the article “yet another ridiculous statement against Berkshire.”