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Behind Berkshire Hathaway, one of the largest companies in the world by market value, there is the greatest investment duo: Warren Buffett and his ‘silent’ right hand, Charlie Munger. They’ve been friends and business partners for 60 years. Together they run the Omaha, Nebraska-based holding company, that works as an “umbrella” for other smaller companies and is publicly traded.
Munger grew up during the ‘30s Great Depression, when he helped his family by working to earn his own money. During the Second World War, he started to major in mathematics but, as there was a high demand for military service, enlisted in the Army Air Corps during his second college year. He was sent to study general science and engineering, and afterwards trained to become a meteorologist – then essential to flyers. After being discharged from the Army Air Corps at the end of the war, he graduated from Harvard Law School with magna cum laude.
He started practicing law at a firm in Southern California, while turning to outside ventures and investing. In 1962, Munger established a new law firm together with four colleagues and, over the years, it became one of the nation’s leading business law firms. Charlie left the firm as an active partner a few years later, to focus on investment partnerships.
He met Warren Buffett in 1959, at a homecoming dinner held by a family friend, and they’ve kept up through frequent telephone conversations and letters. In time, their independent portfolios started to have overlapping investments. They both invested in a company that was acquired by Berkshire Hathaway, and their shares were converted into Berkshire Hathaway stock – that’s when they decided they no longer want to manage funds directly for investors and started to build equity through stock ownership in the holding company.
Munger has a unique worldview, a self-developed ‘Multiple Mental Models’ approach that borrows big ideas from a variety of disciplines and serves as his framework for gathering, processing and acting on information. He’s self-taught and considers that the patient, organized and focused approach to life helped him become a successful investor.
He’s also eager to identify and acknowledge his own mistakes and learn from them, as he once said: “If Berkshire has made a modest progress, a good deal of it is because Warren and I are very good at destroying our own best-loved ideas. Any year that you don’t destroy one of your best-loved ideas is probably a wasted year.”
Munger spends most of his days reading, learning and thinking, rather than doing – he doesn’t make a lot of investments. He attributes a great deal of his success to reading and said that:
“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time. You’d be amazed how much Warren reads – and how much I read. My children laugh at me. They say I’m a book with a couple of legs sticking out.”
Charlie is also a philanthropist and frequently donates millions of dollars to educational and research institutions.
If you want to learn more about Charlie Munger, his approach to learning, decision making, mental models, investing and more, the best read is “Charlie’s Almanack”, a book edited by Peter Kaufman and with a foreword by Warren Buffett. The proceeds from the sales are donated to the Munger Research Center of the Huntington Library.
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