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FRIDAY, DECEMBER 1, 2023
Charlie Munger: Curmudgeon, Sage and Investing Legend
Billionaire investor Charlie Munger died Tuesday, just weeks short of his 100th birthday. Munger was vice-chairman of Berkshire Hathaway, and he was best known for his close partnership with CEO Warren Buffett. As WSJ’s Jason Zweig explains, Munger often played Buffett’s sidekick, but his investing expertise made him a celebrity in his own right.
Further Reading:
- Charlie Munger’s Life Was About Way More Than Money
- The Secrets to Charlie Munger’s Success
- Charlie Munger, Warren Buffett’s Partner and ‘Abominable No-Man,’ Dies at 99
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FULL TRANSCRIPT
This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Ryan Knutson: This week Charlie Munger died. He was a legendary investor and vice chairman of Berkshire Hathaway, one of the most valuable companies in the world. He was just a few weeks shy of his 100th birthday. What did you think when you heard that Charlie Munger had died?
Jason Zweig: I said, "Really?" Because I thought, I actually sincerely thought he was going to live to, I don't know, 120 or something like that.
Ryan Knutson: Forever maybe.
Jason Zweig: Yeah.
Ryan Knutson: Our colleague, Jason Zweig wide covers investing and he says not only did Munger live to 99, he also worked at an intense pace until the very end.
Jason Zweig: Charlie Munger was probably busier than a lot of people in their 30s and 40s. And when my colleague Nicole Friedman and I did a dinner interview with him in 2019, we got there at about six o'clock and six hours later at midnight, he was still going. We were exhausted.
Ryan Knutson: Munger was best known for his partnership with the billionaire investor, Warren Buffett. Together Buffett and Munger became one of the most iconic duos in the world of business. And their annual shareholder meetings became a must-see event.
Jason Zweig: Tens of thousands of people would come from all over the world to hear these two men just take questions from basically an open mic for hours on end. But most of it wasn't about finance at all. It was about how to think and how to live, and that's what I think people really admired about Charlie Munger.
Ryan Knutson: Welcome to The Journal, our show about money, business, and power. I'm Ryan Knutson. It's Friday, December 1st. Coming up on the show, why so many people wanted to hear what Charlie Munger had to say. The story of Charlie Munger's rise to fame begins when he met Warren Buffett.
Jason Zweig: They first met in 1959 and it was like best buddies at first sight. They met at a dinner and it was arranged by mutual friends. Buffett's wife, his first wife later said, "I think when they first met Charlie thought Warren was the smartest person he'd ever met and I think Warren thought Charlie was the smartest person he'd ever met."
Ryan Knutson: At the time Munger was working as a lawyer, and Buffett wasn't the famous billionaire he is today. Back then he was just an investor. His strategy was to buy up the cheapest businesses he could find, even if that meant they were nearly dead.
Jason Zweig: Buffett had been obsessed with what he called cigar butt companies, and he used that term because he said it's like a cigar butt that you pick up off the curb of the street and you light it with your match and you get one more puff out of it, and then you throw it in the sewer. And that was what Buffett did in the '50s and '60s. And Munger said, "Why are you bothering with this? Buy great companies when they're reasonably priced and you'll end up doing much better and you won't have to sell them. You just keep them and you hold them forever." His theory was if you bought a great business at a good price, it would end up growing so much in the future that the fact that you didn't buy it at a bargain price would just fall away because the future earnings would be so great.
Ryan Knutson: And he had this saying, "Forget what you know about buying fair businesses at wonderful prices. Instead, buy wonderful businesses at fair prices."
Jason Zweig: Yep. And that really sums it up.
Ryan Knutson: Buffett took Munger's advice and the two became close friends.
Jason Zweig: They started investing together in the '60s, and it was Buffett who said to Munger, "You should quit your day job and you should just become a full-time investor," which Munger did and then eventually he joined Berkshire.
Ryan Knutson: Berkshire Hathaway, it started out as one of those cigar butt companies. It was a declining textile business when Buffett bought it, but he transformed it into a massive conglomerate. Munger became vice chairman of the company in 1978. What did Berkshire Hathaway do and what made it so legendary?
Jason Zweig: Berkshire Hathaway is not a mutual fund. It's not a hedge fund. It's not an investment partnership. It's a giant holding company so it can invest in individual stocks, which it does, but it can also buy other companies outright and it can buy anything else that Buffett and Munger think is worth owning. At one point, they were one of the world's largest owners of silver. They've owned tons of treasury bonds. That flexibility has really been the key to their success.
Ryan Knutson: After they joined forces, Buffett gave Munger a nickname, the abominable no-man.
Jason Zweig: Because every time Buffett had some bright, shiny new idea for something to invest in, Munger would shoot it down. Munger would say, "I don't know, Warren, that doesn't sound like a good idea to me." And they would debate it back and forth. And one of Munger's famous lines was, "If you think about it, Warren, you'll end up agreeing with me because you're smart and I'm right."
Ryan Knutson: Buffett and Munger built Berkshire Hathaway into one of the 10 most valuable companies in the world. It's currently worth about $780 billion. And over the years, their annual shareholder meetings became known as Woodstock for capitalists.
Speaker 3: Well, if nearly every hotel room in the metro was booked and reservations at downtown restaurants are full, it could only mean one thing. It's Berkshire Hathaway weekend. Shareholders from-
Jason Zweig: They developed this extraordinary ritual of answering questions from anybody who wanted to ask a question. You had to be a Berkshire shareholder, but if you were, you could ask any question you wanted and they would take them. And people didn't just ask about the business. They also asked about life. How can I become a smarter person? What should I look for in a spouse?
Speaker 4: How do you make lots of friends and get people to like you and work with you?
Speaker 5: Could you please expand on how do you maintain your good mental and physical health?
Speaker 6: Everyone has personal dreams and at different age maybe dreams will come differently. And what's your dream now?
Ryan Knutson: And what kind of answers would Charlie Munger give?
Jason Zweig: So he would say things like, "Always do the right thing, and if your friends don't like it, to hell with them, get new friends." And he had hundreds of these one-liners that he would uncork for people about how to be ambitious to live a fuller life.
Charlie Munger: The toxic people who are trying to fool you or lie to you, who aren't reliable meeting their commitments, a great lesson of life is get them the hell out of your life and do it fast. Do it fast. If all you succeed in doing in your life is to get early rich from passing and holding of little bits of paper and you get better and better at only that for all your life, it's a failed life.
Ryan Knutson: And what was the dynamic like between Buffett and Munger up on the stage?
Jason Zweig: On the Berkshire Hathaway stage, they played really distinct roles. So Buffett definitely was the lead actor. Munger was definitely the supporting actor. It was an act. They totally were equals in private life and in their business practice, but on stage those were the roles they played. And the other aspect of those roles is Buffett was the one who would sort of deliver these long stem winder answers that would go on for five or 10 minutes, and then he would turn to Munger and he would say, "Charlie, do you have anything to add?" And half the time Munger would say ...
Charlie Munger: I've got nothing to add. Nothing.
Jason Zweig: And the other half Munger would come out with some zinger, some incredible one-liner that would just completely burst the bubble of like a million people working in an entire industry.
Charlie Munger: Well, I would rather throw a viper down my shirt front than hire a compensation consultant. If you mix raisins with turds, they're still turds. I can be optimistic when I'm nearly dead. Surely the rest of you can handle a little inflation. Warren, if people weren't so often wrong, we wouldn't be so rich.
Jason Zweig: The audience just loved this stuff and they would howl with laughter, and as soon as Buffett would finish, people would know he was about to turn to Munger, and then the whole crowd would fall silent because they wouldn't want to miss one of the seven words Munger was about to speak.
Ryan Knutson: Munger developed a cult following of his own and an anthology of his speeches and one-liners called Poor Charlie's Almanack became an international bestseller. A lot of people sort of seemed to think that Munger was Warren Buffett's sidekick, but is that fair?
Jason Zweig: I don't think so. I think he was Warren Buffett's equal partner. He didn't have the same extent of equity ownership in Berkshire Hathaway, so he never became as rich as Buffett did. But Buffett himself has said repeatedly that without Charlie Munger, Berkshire Hathaway today would be a shadow of what it is now.
Ryan Knutson: But Munger's life was much more than just Berkshire Hathaway. That's after the break. Charlie Munger grew up in Nebraska. He was married twice, and he experienced his fair share of tragedy. In 1955, shortly after his first marriage ended in divorce, Munger's son Teddy died of leukemia. He was just nine years old. And in 1978, Munger lost his sight in one eye and had to have it removed after a failed eye surgery.
Jason Zweig: And all these things, I think they taught him that life is frail and the difference between success and failure is a very fine line.
Ryan Knutson: He also talked about never feeling sorry for yourself.
Jason Zweig: Yeah. So he had this wonderful expression. He said, if you feel sorry for yourself, you just add another obstacle to your ability to get over it. And when he lost the vision in his eye and then lost the eye, he started teaching himself braille. And then eventually he figured out that he could see well enough to get by, and ultimately he ended up even seeing well enough to drive, although I'm told passengers in his car were never too sure about that. But it's kind of an amazing thing because I once asked him did he blame the eye surgeon who tried to fix the vision in his bad eye and ended up bungling the surgery so that Munger lost his eye? And he said, "No, because 5% of those surgeries fail on average. And I just happened to be one of the 5%." And he had no ranker about it at all. He just got on with it.
Ryan Knutson: How do you think those experiences affected how he did business?
Jason Zweig: I have to say of the many business people I've met over the decades, I've been a financial journalist, I think Charlie Munger is probably the wisest I've ever met. He understood how life and systems work and he tried to make it through life without making enemies. And in all the business dealings that he had, everybody who I could find ever who dealt with him always felt that they had gotten the better half of the deal. A lot of people think of capitalism as a dog-eat-dog system, and that's not the way he thought of it, and it's not the way he practiced it. That's really extraordinary. And I think it comes from his background. Where else could it come from?
Ryan Knutson: Is there any one piece of advice from Charlie Munger that sticks with you?
Jason Zweig: He had an expression that I came to call SOYA because we could print that if we had to, but it was actually sit on your ass and I abbreviated that as SOYA because it was more polite. But what he meant was that most of the time the stock market is more or less going to give you the correct price for what things are worth. But every once in a while things go haywire, like the financial crisis of 2008, 2009, and obviously COVID in 2020. And then you don't sit on your ass. Then you grab with both hands and you buy all the cheap stocks you can lay your hands on, and then you go back and you sit on your ass again until it happens again and you let all that time go by and you just sit on your ass. And that was what made Munger his money.
Ryan Knutson: Investing has changed so much during Charlie Munger's lifetime. There's now all these day traders on Robinhood and there's meme stocks. How did he feel about that?
Jason Zweig: Well, he hated it. During the sort of the meme stock boom, meme stock mania of 2021, Munger was really disturbed at the extent to which a bunch of the online brokerage firms and trading apps seemed to be encouraging novice traders to trade furiously, introducing them to options trading, sending out alerts, trying to get people to trade even more. And his concern was that people were losing the vital distinction between investing and gambling. And Munger felt a lot of people were taking their gambling urge and reapplying that Jones to the stock market and it just doesn't belong there.
Ryan Knutson: Munger was also a major critic of crypto, which he often called crypto crapo. In a Wall Street Journal Op-Ed earlier this year he called on the US government to ban it.
Charlie Munger: I don't think there are good arguments against my position. I think the people that oppose my position are idiots.
Ryan Knutson: That's Munger in an interview with CNBC earlier this year.
Charlie Munger: It's just ridiculous that anybody would buy this stuff.
Ryan Knutson: Does Munger's traditional approach to investing sort of long-term value investing still hold up in today's world?
Jason Zweig: Well, it does. It's not for everybody. The great thing, and both Munger and Buffett have advocated this for a long time. The great thing is if you want to just put your money in a stock index fund and own the entire market with no effort, you can do that. It costs almost nothing. You don't have to worry that you picked the wrong stock or the wrong time to buy it. You might have to wait a long time to recover from a stock market crash, but you're not going to end up owning something that misses out. And the strategy that Munger and Buffett follow, value investing, over longer periods I think will do fine.
Ryan Knutson: Just a few weeks ago in one of Jason's last conversations with Munger, he asked him how he'd like to be remembered after he died and what he'd like written for his epitaph.
Jason Zweig: I asked him that twice. I asked him once in 2019 and he gave me a long Buffett like answer that probably went on for 200 words. But this time he said, "I tried to be useful." And he said it several times. And what I found fascinating about that was he didn't say I was useful. He said I tried to be useful because I think that he was sure of.
Ryan Knutson: That he tried.
Jason Zweig: That he tried. Yeah. And it would be up to other people to determine whether he actually was useful.
Ryan Knutson: That's all for today, Friday, December 1st. The Journal is a co-production of Spotify and the Wall Street Journal. Additional reporting in this episode by Justin Baer and Nicole Friedman. The show's made by Annie Baxter, Kylin Burtz, Katherine Brewer, Maria Byrne, Victoria Dominguez, Pia Gadkari, Rachel Humphreys, Matt Kwong, Kate Linebaugh, Jessica Mendoza, Annie Minoff, Laura Morris, Enrique Perez de la Rosa, Sarah Platt, Alan Rodriguez Espinoza, Heather Rogers, Jonathan Sanders, Pierce Singgih, Jeevika Verma, Lisa Wang, Catherine Whelan, Tatiana Zameis, and me, Ryan Knutson. Our engineers are Griffin Tanner, Nathan Singapok and Peter Leonard, with help this week from Sam Bayer. Our theme music is by So Wylie. Additional music this week from Catherine Anderson, Peter Leonard, Bobby Lord, Emma Munger, and Blue Dot Sessions. Fact checking by Kate Gallagher, Sophie Hurwitz, and Adam Shabu. And before we go, I have some really exciting news. We now have some pretty incredible Journal swag for sale. I've been wearing it around for months now, and I have to say it's pretty great. There's a link to where you can buy it in our show notes. Thanks for listening. See you Monday.
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