UPDATE 5.7.24: Warren Buffett recently held his first Berkshire Hathaway annual meeting since the passing of Charlie Munger. A boy in the meeting asked Buffett what he would do with Charlie if he had one more day with him. Watch Buffett’s answer below:
Originally posted November 30, 2023.
You may have read that Charlie Munger, the vice chairman of Berkshire Hathaway, has passed away. Munger was a legend in the world of investing, and was known, as Jason Zweig of The Wall Street Journal explains, “for his straightforward advice to business leaders.” Zweig writes:
Business and financial leaders made frequent pilgrimages to Los Angeles to hear Charlie Munger’s thoughts as he held court while peering through thick eyeglasses over high, rosy cheekbones.
Among the attendees at his weekly “Friday lunch club” and periodic dinners were John and Patrick Collison, founders of the online payment firm Stripe; Bobby Kotick, chief executive of videogame company Activision Blizzard; Pradeep Khosla, chancellor of the University of California, San Diego; Maria Pope, chief executive of Portland General Electric, Oregon’s largest utility; and Howard Marks, co-founder of investment firm Oaktree Capital Management.
Munger died Tuesday at the age of 99. His weekly lunch guests came largely to hearhim him talk about the “latticework” of “mental models” that he said helped explain his success and that of Berkshire Hathaway, where he was vice chair:
‘Invert, always invert’
As a military meteorologist during World War II, Munger didn’t ask what would keep pilots safe. Instead, he pondered what could kill them, then focused all his effort on trying to predict snow, ice or fog—and ignored everything else.
Know your circle of competence
Munger often said he and Buffett were quick to throw potential investments into a “too-hard” pile. If they couldn’t understand it, they just moved on.
Keep a list of ‘asininities’ and avoid them
Munger wrote a long essay, “The Psychology of Human Misjudgment,” summarizing 25 types of cognitive errors.
Think in multiple dimensions
Munger told how, as a lawyer, he more than doubled the appraised value of a client’s property by realizing that it wasn’t just the acreage, but also its changes in altitude, that made it desirable.
‘Over, under and kapow!’
In artillery training, Munger noted, recruits learn to bracket the target by overshooting, undershooting and then hitting it. He estimated investment values the same way, deliberately oversizing, undersizing, then landing in the middle.
Action Line: Your Survival Guy hears a lot of the same sorts of common sense knowledge espoused by Charlie Munger from the small business owners and hard-working professionals I work with as clients each day. People who work hard tend to come to the same conclusions about life. Simple never goes out of style.
RIP Charlie Munger.
