A quick understanding of Charlie Munger: Why he is Warren Buffett's most admired person.

On November 29, Fintech News (edited by Zhao Hao) reported that on Tuesday (November 28) local time, Berkshire Hathaway announced that Vice Chairman Charlie Munger passed away peacefully in a hospital in California that morning.

The investment genius, who was 99 years old, passed away just one month before his 100th birthday, inevitably causing people to sigh. In the press release, Buffett wrote, “Without Charlie's inspiration, wisdom, and involvement, Berkshire Hathaway would not have developed to its current status today.”

As Warren Buffett's long-term partner known as the 'Stock God', Buffett once said he has met countless people in his life, but has never encountered anyone like Charlie Munger, 'Charlie Munger and I inspire each other, our way of thinking is the same, I think having him by my side is the most important decision in my life.'

Looking back on Munger's investment career, although both he and Buffett are based on value investing, Munger emphasizes interdisciplinary thinking, long-term perspective, independent thinking, and contrarian thinking. In contrast, the impulsive and fickle emotions have become the main characteristics of today's American investors.

Munger's Growth Experience

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 praised this central small town as a place that can make people mentally sound, without the hustle and bustle of New York City, which helps make wiser investment decisions.

Munger's father was a lawyer, which sparked his strong interest in law from a young age. During his childhood, Munger showed extraordinary intelligence, he enjoyed reading various books, especially in history and literature. The wisdom and philosophy contained in these books provided valuable insights for Munger's future investment decisions.

Munger studied mathematics at the University of Michigan for two years and also developed a strong interest in physics. After the shocking Pearl Harbor incident, Munger dropped out of school to enlist. Upon enlisting, Munger was placed in a freezing environment, but this hardship fueled his passion for changing his life. He told his friends that he wanted to have a bunch of kids, build a house filled with books, and have enough wealth to live a free life.

During his time in college and the military, Munger developed an 'important skill': playing cards. Later, he applied this skill to his business strategy. 'You must learn that when the odds are against you, you must fold early, or if you have a substantial edge, you must back it heavily because you don't get a huge edge very often.'

After leaving the military, Munger entered Harvard Law School, and after graduating in 1948, he became a lawyer but quickly shifted to the investment field. In investing, he often used card analogies to explain stock trading methods.

Munger and Berkshire Hathaway

When Munger was 34 years old, he met Buffett. Strangely, the two, who were 6 years apart, were a perfect match as partners: both grew up in a small town in Omaha, with extremely similar personalities, thoughtful, articulate, well-read, and very successful investors.

After that, Munger became famous for his close cooperation and interaction with Buffett, but between 1962 and 1975, they each ran their own investment partnerships.

In 1962, Buffett began buying a bankrupt textile mill - Berkshire Hathaway. That same year, Munger co-founded a securities firm called Wheeler & Munger, making a name for themselves in the investment field, with an average annual return of 28.3% over the next 10 years.

However, Wheeler Munger's investment performance was quite volatile. In the five years from 1970 to 1974, the company suffered losses for three years and significantly underperformed the index. Particularly during the bear market of 1973 and 1974, the company suffered heavy losses, with losses of 31.9% and 31.5% respectively, ultimately leading to the company's closure.

At the same time, Buffett's situation was not optimistic as he became a major shareholder of a declining textile mill. In order to acquire the thriving National Indemnity Company, Buffett had to withdraw funds from Berkshire Hathaway. Munger, on the other hand, used their controlled retail coupon company, Blue Chip Stamps, to invest in many profitable businesses.

Eventually, Blue Chip Stamps merged into Berkshire Hathaway, with Munger becoming the company's vice chairman. The two achieved remarkable investment results through value investing. Buffett considered Munger one of his most important partners in the investment field and one of his closest friends. It is said that during their over 40 years of working together, they never had any disputes.

Buffett's evaluation of Munger

Charlie Munger and Warren Buffett both believe in the concept of value investing. They make decisions based on in-depth analysis of the company's fundamentals and long-term outlook, rather than blindly following trends or chasing short-term profits. At Berkshire Hathaway, they have faced many challenges and difficulties together, always adhering to the faith of value investing.

Buffett has stated that the two people he admires most in his life are 'Graham and Munger.' Graham taught him the investment system of 'focusing on the liquidation value of existing assets of companies,' while Munger helped Buffett transform this system into an investment system that 'focuses on the ability of companies to create future free cash flow.'

Among many successful classic cases, there is one transaction that made Buffett and Munger abandon Graham's cigarette-style investment philosophy - Berkshire Hathaway's 'high-priced' acquisition of confectioners See's Candies, which easily yielded a return far beyond imagination at several times the net assets.

Buffett said: 'Ben Graham taught me to buy cheap goods, and Charlie pushed me in the direction of not just buying cheap goods, another investment direction. This is his greatest influence on me. To free me from Graham's limited view, it takes huge energy, that is Charlie's power. He has broadened my horizons.'

In response, Munger said, 'I think there is a lot of myth in the idea that I am Warren's great enabler. He doesn't need any enlightenment. To be honest, I feel a bit overrated.' He humbly stated, 'If there had never been a Charlie Munger in this world, Buffett's performance would still be as impressive as it is now.'

Chinese concept stocks and cryptocurrencies

Usually, Munger appears relatively low-key, but at the annual shareholders' meeting of the Daily Journal Corp, the company he manages, he can speak at length as the 'only protagonist' on hot topics. When talking about China, Munger never hesitates to praise it.

When asked about topics related to Sino-US relations, Munger said he hopes China and the United States can get along better. 'China is a modernized major country, with such a large population and a high degree of modernization.'

The latest form 13f submitted to the U.S. Securities and Exchange Commission (SEC) shows that Daily Journal Corporation holds only four symbols, which are Wells Fargo & Co., Bank of America, Alibaba, and U.S. Bancorp, with Alibaba's position exceeding 16%.

Munger said, 'Like many other smart people, Warren Buffett likes to invest in areas where he feels comfortable. For some reason, my confidence in China surpasses his.' He mentioned that every dollar invested in China has an advantage over the USA. The companies they invest in are stronger than competitors but have lower prices.

Regarding cryptocurrency, he has always maintained a strong aversion and referred to it as 'rat poison.' 'Don't get me started on bitcoin - that's the dumbest investment I've ever seen. Most of these investments will end up at zero.' Munger also expressed shame for America because so many Americans believe in cryptocurrency.

Accordingly, he admires China's move to ban private digital currency, 'China has taken a very mature stance on cryptocurrency.' Previously, he has repeatedly praised China's ban on cryptocurrency and hopes that cryptocurrency 'was never invented.'

The last defense of Buffett

Earlier this month, U.S. nonprofit investigative media ProPublica questioned 'similar time trading of the same stocks between Buffett's personal stock account and Berkshire.' Two weeks ago, the nearly 93-year-old Munger openly defended his 93-year-old friend on the show.

ProPublica's report listed three controversial trades, Buffett sold Wells Fargo & Co., Walmart, and Johnson & Johnson three times between 2009 and 2012, and when he sold, Berkshire also happened to hold these three companies. Therefore, they suspect Buffett of violating Berkshire's insider trading policy.

Munger said, 'I firmly believe there is not the slightest chance that Warren Buffett would do something so terribly bad to make money for himself. He cares more about the development of Berkshire than his own wealth. He has donated all his money, and doesn't even own it anymore.'

Munger also spoke more and more excitedly, repeatedly emphasizing that Buffett has donated all his money, he did it, and those guys still say he is using Berkshire (to make money for himself). Munger also referred to that article as "another absurd statement against Berkshire".