Charlie Munger

Template:Short description Template:Redirect Template:Infobox person Charles Thomas Munger (January 1, 1924Template:SndNovember 28, 2023) was an American businessman, investor, attorney and philanthropist. He was the vice chairman of Berkshire Hathaway, the conglomerate controlled by Warren Buffett, from 1978 until his death in 2023.<ref>Template:Cite web</ref> Buffett described Munger as his closest partner and right-hand man, and credited him with being the "architect" of modern Berkshire Hathaway's business philosophy.<ref name="2024fortunemollman" />

In addition to his role at Berkshire Hathaway, Munger was a founding partner of Munger, Tolles & Olson; chairman of Wesco Financial Corporation from 1984 through 2011; chairman of the Daily Journal Corporation, based in Los Angeles, California; and a director of Costco Wholesale Corporation.

Early life and education

Charles Thomas Munger was born on January 1, 1924, in Omaha, Nebraska, to Florence "Toody" (Russell) and Alfred Case Munger, a lawyer. As a teenager, he worked at Buffett & Son, a grocery store owned by Warren Buffett's grandfather, Ernest P. Buffett.<ref>Template:Cite web</ref><ref>Template:Cite web</ref> His grandfather, Thomas Charles Munger, was a state representative and later a U.S. district court judge appointed by Theodore Roosevelt.<ref>Template:Cite web</ref>

He enrolled in the University of Michigan, where he studied mathematics.<ref name="autogenerated222"/> During his time in college, he joined the fraternity Sigma Phi Society.<ref>Template:Cite web</ref> In early 1943, a few days after his 19th birthday, he dropped out of college to serve in the U.S. Army Air Corps, where he became a second lieutenant.<ref name="forbes"/> After receiving a high score on the Army General Classification Test, he was ordered to study meteorology at Caltech in Pasadena, California,<ref>Lemann, p. 189.</ref> the town he was to make his home.<ref name="autogenerated222"/>

Through the G.I. Bill, Munger took a number of advanced courses through several universities.<ref name="forbes"/> When he applied to his father's alma mater, Harvard Law School, the dean of admissions rejected him because Munger had not completed an undergraduate degree. However, the dean relented after a call from Roscoe Pound, the former dean of Harvard Law and a Munger family friend.<ref>Template:Cite book</ref> Munger excelled in law school,<ref>Lemann, p. 191.</ref> becoming a member of the Harvard Legal Aid Bureau and graduating in 1948 with a J.D., magna cum laude.<ref name="forbes">Template:Cite news</ref><ref>Template:Cite web</ref>

In college and the Army, he developed what he considered "an important skill": card playing. He used this in his approach to business. "What you have to learn is to fold early when the odds are against you, or if you have a big edge, back it heavily because you don't get a big edge often. Opportunity comes, but it doesn't come often, so seize it when it does come."<ref name="autogenerated222"/> He also used the card analogy to explain his approach to investing. He maintained that treating the shares of a company like baseball cards is a losing strategy because it requires one to predict the behavior of often irrational and emotional human beings.<ref>Template:Cite book</ref>

Career

Munger moved with his family to California, where he joined the law firm Wright & Garrett (later Musick, Peeler & Garrett).<ref>Template:Cite book</ref> In 1962, he founded and worked as a real estate attorney at Munger, Tolles & Olson LLP.<ref name=autogenerated222/> He then gave up the practice of law to concentrate on managing investments and later partnered with Otis Booth in real estate development. When he met Buffett over lunch at the Omaha Club, "the two began talking about investments and never stopped."<ref>Jordan, Steve and Cordes, Henry J, "Charlie Munger, Berkshire vice chairman, dies at 99" Omaha World-Herald, November 29, 2023, pA7</ref>

In 1962, Munger partnered with Jack Wheeler to form Wheeler, Munger, and Company, an investment firm with a seat on the Pacific Coast Stock Exchange. According to Buffett's essay "The Superinvestors of Graham-and-Doddsville", published in 1984, Munger's investment partnership generated compound annual returns of 19.8% during the 1962–75 period compared to a 5.0% annual appreciation rate for the Dow.<ref>Template:Cite news</ref>

In 1974, Munger bought control of Mitchum, Jones, and Templeton, a publicly traded competitor of Wheeler Munger. Mitchum Jones was led by Bill Lupien and Joe Taussig. He wound up Wheeler, Munger, and Co. in 1976, after losses of 32% in 1973 and 31% in 1974.<ref name="autogenerated222"/> However, he took Mitchum Jones private at $3 per share and liquidated it 10 years later at $180 per share (a 60x gain). Lupien and Taussig later took over and managed Instinet, the first electronic stock exchange, which is now part of NASDAQ.

Munger was previously the chairman of Wesco Financial Corporation, now a wholly owned subsidiary of Berkshire Hathaway. The acquisition of this company was controversial following accusations that Buffett's company, Blue Chip, bought Wesco shares to defeat an impending merger between Wesco and Financial Corp.<ref>Template:Cite book</ref><ref>Template:Cite news</ref> Wesco began as a savings and loan association, but eventually grew to control Precision Steel Corp., CORT Furniture Leasing, Kansas Bankers Surety Company, and other ventures. Wesco Financial also held a concentrated equity portfolio of over US$1.5 billion in companies such as Coca-Cola, Wells Fargo, Procter & Gamble, Kraft Foods, US Bancorp, and Goldman Sachs. Munger believed that holding a concentrated number of stocks that he knew extremely well would in the long term produce superior returns.<ref>Template:Cite news</ref>

Wesco is based in Pasadena, California, Munger's adopted hometown. Pasadena was also the site of the company's annual shareholders' meeting, which were typically held on the Wednesday or Thursday after the more famous Berkshire Hathaway annual meeting. Munger's meetings were nearly as legendary in the investment community as those he co-hosted with Buffett in Omaha. Such meetings were often perfunctory, but Munger interacted with the other Wesco shareholders at considerable length, sometimes speculating about what Benjamin Franklin would do in a given situation.<ref>Template:Cite web</ref> Meeting notes have been posted on the Futile Finance? website, but no updates exist beyond 2011.<ref>Template:Cite web</ref>

Munger was also the chairman of the Daily Journal Corporation. After Wesco meetings ended, the Daily Journal annual meeting grew in importance, as investors flocked to the meeting to listen to him speak at length.<ref>Template:Citation</ref>

Investment philosophy

"Elementary, worldly wisdom"

In multiple speeches, and in the 2005 book Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger, "worldly wisdom" consists of a set of mental models framed as a latticework to help solve critical business problems.<ref name="autogenerated222" />

File:Peter Hilal, Warren Buffett, Paul Hilal, Charlie Munger.jpg

Munger (far right) and Warren Buffett (second from the left) in March 1998

Munger, along with Buffett, was one of the main inspirations behind the book Seeking Wisdom: From Darwin to Munger. Author Peter Bevelin explained his key learnings from both Munger and Buffett in a 2007 interview: "How to think about businesses and investing, how to behave in life, the importance of ethics and honesty, how to approach problems but foremost how to reduce the chance of meeting problems." Bevelin stated that previously, he "was lacking the Munger ability to un-learn my own best-loved ideas".<ref name="Joe">Template:Cite web</ref>

High ethical standards were integral to Munger's philosophy. One writer described his thinking as "Good businesses are ethical businesses. A business model that relies on trickery is doomed to fail."<ref>Charlie Munger's got a billion words of wisdom, May 17, 2009, Los Angeles Times, Accessed January 3, 2010</ref> During an interview and Q&A session at Harvard-Westlake School on January 19, 2010, Munger referred to American philosopher Charles Frankel in his discussion on the 2008 financial crisis and the philosophy of responsibility. Munger explained that Frankel believed:

The system is responsible in proportion to the degree that the people who make the decisions bear the consequences. So to Charlie Frankel, you don't create a loan system where all the people who make the loans promptly dump them on somebody else through lies and twaddle, and they don't bear the responsibility when the loans are good or bad. To Frankel, that is amoral, that is an irresponsible system.<ref>Template:Cite web</ref>

As part of his philosophy Munger lived in the same relatively modest California home for 70 years. When asked about living in more luxurious homes, Munger was quoted as stating: "in practically every case, they make the person less happy, not happier.” Munger appreciated the utility of a "basic house" with few advantages over living in an ostentatious home. Munger appreciated modesty stating, "don't have a lot of envy" and "don't overspend your income". In Munger's last 2023 interview with CNBC he credited his success and longevity to a long-held sense of caution and ability "to avoid all standard ways of failing".<ref name="interview">Template:Cite news</ref>

Lollapalooza effect

Munger used the term "Lollapalooza effect" for multiple biases, tendencies or mental models acting in compound with each other at the same time in the same direction. With the Lollapalooza effect, itself a mental model, the result is often extreme, due to the confluence of the mental models, biases or tendencies acting together, greatly increasing the likelihood of acting irrationally.<ref>Munger, C. T. (2005). The psychology of human misjudgment Template:Webarchive. Poor Charlie's Almanack.</ref>

During a talk at Harvard in 1995 titled The Psychology of Human Misjudgment, Munger mentioned Tupperware parties and open outcry auctions, where he explained "three, four, five of these things work together and it turns human brains into mush,"<ref>Template:Cite web</ref> meaning that normal people will be highly likely to succumb to the multiple irrational tendencies acting in the same direction. In the Tupperware party, you have reciprocation, consistency, and commitment tendency, and social proof. (The hostess gave the party and the tendency is to reciprocate; you say you like certain products during the party so purchasing would be consistent with views you've committed to; other people are buying, which is the social proof.) In the open outcry auction, there is social proof of others bidding, reciprocation tendency, commitment to buying the item, and deprivation super-reaction syndrome, i.e. sense of loss. The latter is an individual's sense of loss of what he or she believes should be (or is) his or hers. These biases often occur at either conscious or subconscious level, and in both microeconomic and macroeconomic scale.<ref>Template:Cite book</ref><ref>Template:Cite book</ref>

Criticism of cryptocurrencies and Robinhood

Munger was critical of cryptocurrencies, referring to Bitcoin in particular as "noxious poison".<ref>Template:Cite news</ref> He also said the use of cryptocurrency should be banned and said it was "beneath contempt";<ref>Template:Cite news</ref> that bitcoin was "stupid, "immoral," and "disgusting" and that Template:"'It's like somebody else is trading turds and you decide, 'I can't be left outTemplate:'";<ref>Template:Cite web</ref> and that it was like a venereal disease,<ref>Template:Cite web</ref> among other things.<ref>Template:Cite web</ref>

Munger has compared Robinhood to gambling, saying that its success is due to "people who know how to take advantage essentially of the gambling instincts of, not only American public, worldwide public" and further explained why he thinks individual investments without commission is tantamount to gambling. "If you cater to those gambling chips, when people have money in their pocket for the first time, and you tell them they can make 30 or 40 or 50 trades a day, and you're not charging them any commission, but you're selling their order flow or whatever, I hope we don't have more of it."<ref>Template:Cite web</ref>

Wealth and philanthropy

At the time of his death, Munger had an estimated net worth of $2.6 billion and was ranked as the 1,182nd richest person in the world, according to Forbes.<ref name="Forbes profile">Template:Cite news</ref>

File:Munger Graduate Residences.jpg

Munger Graduate Residence at Stanford University

Munger was a major benefactor of the University of Michigan. In 2007, Munger made a $3 million gift to the University of Michigan Law School for lighting improvements in Hutchins Hall and the William W. Cook Legal Research Building, including the noted Reading Room. In 2011, Munger made another gift to the Law School, contributing $20 million for renovations to the Lawyers Club housing complex, which covered the majority of the $39 million cost. The renovated portion of the Lawyers Club was renamed the Charles T. Munger Residences in the Lawyers Club in his honor.<ref>"Munger: A Leading Light Template:Webarchive." University of Michigan Law School.</ref><ref>Janet Lorin, "Berkshire's Munger Gives $20 Million to Michigan Law School Template:Webarchive"(March 14, 2011). Bloomberg.</ref><ref>Kyle Feldscher, "Former Michigan student Charles Munger donates $20 million for Lawyers Club renovation project Template:Webarchive" (March 14, 2011). AnnArbor.com; accessed February 17, 2018.</ref><ref>"$20 million gift jumpstarts renovation at M Law's Lawyers Club Template:Webarchive", University of Michigan Law School website; accessed February 17, 2018.</ref>

In 1997, the Mungers donated $1.8 million to the Marlborough School in Los Angeles, of which Nancy Munger was an alumna.<ref name="autogenerated222" /> The couple also donated to the Polytechnic School in Pasadena and the Los Angeles YMCA.<ref>"Financier Munger Gives DuBridge Lecture Template:Webarchive" (January 29, 2008). California Institute of Technology.</ref>

On December 28, 2011, Munger donated 10 shares of Berkshire Hathaway Class A stock (then valued at approximately $1.2 million total) to the University of Michigan.<ref>Kevin Roose, "Munger Donates $1.2 Million to University of Michigan" Template:Webarchive, New York Times, January 10, 2011.</ref>

Munger and his late wife Nancy B. Munger were major benefactors of Stanford University. Nancy Munger was an alumna of Stanford, and Wendy Munger, Charlie Munger's daughter from a previous marriage, was also an alumna (A.B. 1972). Both Nancy and Wendy Munger served as members of the Stanford board of trustees.<ref name="2004stanford">"Mungers donate $43.5 million to help construct new graduate student residence Template:Webarchive" (August 26, 2004). Stanford University.</ref><ref>Ulysses Torassa. Stanford: $43.5 million given for more graduate student housing, San Francisco Chronicle, August 27, 2004.</ref>

In 2023, Munger made a gift of stock worth $40 million to the Henry E. Huntington Library and Art Museum in San Marino, California. He gave 77 Class A Berkshire Hathaway shares valued at more than $40.3 million to the Huntington, according to a filing with the Securities and Exchange Commission. A decade ago, he gave the institution nearly $33 million worth of Berkshire stock to help pay for a new education and visitors center.<ref>Funk, Josh, "Berkshire Hathaway's Charlie Munger gives $40 million in stock to California museum" Associated Press, October 6, 2023</ref>

Munger did not sign The Giving Pledge that was started by his partner Warren Buffett and co-director, Bill Gates,<ref>Template:Cite web</ref> explaining that he "[could]n't do it" because "[he had] already transferred so much to [his] children that [he had] already violated it."<ref>Template:Cite web</ref>

Architectural activities

Though Munger had no formal architectural training, he contributed heavily to numerous building designs, including dormitories at Stanford University and the University of Michigan, as well as his final home.<ref name=":0">Template:Cite web</ref><ref>Template:Cite web</ref> He donated to universities on the precondition that the universities follow his architectural blueprints exactly.<ref name=":0" /> In multiple cases, Munger promoted key architectural concepts of his own liking,<ref>Template:Cite web</ref> and ceded professional architectural responsibility to a licensed architect of record, e.g., Hartman-Cox Architects in the case of the dormitory at Michigan,<ref>Template:Cite web</ref> and the firm of VTBS for the U.C. Santa Barbara residence hall.<ref>Template:Cite web</ref>

In 2004, the Mungers donated 500 shares of Berkshire Hathaway Class A stock, then valued at $43.5 million, to Stanford to build a graduate student housing complex.<ref name="2004stanford"/> The Munger Graduate Residence at Stanford University, funded and designed by Munger himself, opened in late 2009 and now houses 600 law and graduate students.<ref>Kathleen J. Sullivan, "Memorial to be held in March for former trustee Nancy Barry Munger Template:Webarchive", Stanford University website, February 23, 2010.</ref> The Munger family gave a major gift to Stanford's Green Library to fund the restoration of the Bing Wing as well as the construction of a rotunda on the library's second floor, and endowed the Munger Chair in Nancy and Charles Munger Professorship of Business at Stanford Law School.<ref name="autogenerated222">Janet Lowe. Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger (2000). John Wiley and Sons.</ref><ref>"Farewells Template:Webarchive" (May/June 2011). Stanford Magazine.</ref>

Munger was a trustee of the Harvard-Westlake School in Los Angeles for more than 40 years, and previously served as chair of the board of trustees. His five sons and stepsons as well as at least one grandson graduated from the prep school. In 2006, Munger donated 100 shares of Berkshire Hathaway Class A stock, then valued at $9.2 million, to the school toward a building campaign at Harvard-Westlake's middle school campus. The Mungers had previously made a gift to build the $13 million Munger Science Center at the high school campus, a two-story classroom and laboratory building which opened in 1995 and has been described as "a science teacher's dream".<ref>Steve Jordon, "Munger Gives 100 Shares of Berkshire to Prep SchoolTemplate:Dead link" (June 22, 2006). Omaha World-Herald.</ref><ref>Beth Schuster, "A Science Teacher's Dream in Studio City: New $13-million center gives students at Harvard-Westlake School top-notch, hands-on lessons " (December 24, 1995). Los Angeles Times.</ref> The design of the Science Center was substantially influenced by Munger.<ref name="autogenerated222" /> In 2009, Munger donated eight shares of Berkshire Hathaway Class A stock, worth nearly $800,000, to Harvard-Westlake.<ref name="autogenerated222" /><ref>Jamie Kim, "Munger donates $800,000 of stock to school Template:Webarchive" (February 11, 2010). Harvard-Westlake Chronicle.</ref>

On April 18, 2013, the University of Michigan announced the single largest gift in its history: a $110 million gift from Munger to fund a new "state of the art" residence designed to foster a community of scholars, where graduate students from multiple disciplines can live and exchange ideas.<ref>Template:Cite web</ref> The gift included $10 million for graduate student fellowships.<ref name="AP">Template:Cite web</ref> Munger designed the residence, which houses 600 single bedrooms, most of which are windowless in order to accommodate a greater number of single-occupant bedrooms.<ref>Template:Cite web</ref> Munger Graduate Residences at the University of Michigan opened in 2015.<ref>Template:Cite news</ref>

In October 2014, Munger announced that he would donate $65 million to the Kavli Institute for Theoretical Physics at the University of California, Santa Barbara. This is the largest gift in the history of the school. The donation went toward construction of a residence building designed by Munger for visitors of the Kavli Institute in an effort to bring together physicists to exchange ideas as Munger stated, "to talk to one another, create new stuff, cross-fertilize ideas".<ref name="New York Times">Template:Cite web</ref>

In March 2016, Munger announced a further $200 million gift to UC Santa Barbara, conditioned on the university's commitment to spend it on the construction of Munger Hall, an undergraduate dormitory of Munger's own unconventional design preferences, notably windowless bedrooms and common areas, while tripling the record gift he gave for the Kavli Institute for Theoretical Physics.<ref>Template:Cite news</ref><ref>Template:Cite news</ref> In October 2021, Munger's insistence that the university follow his design compelled architect Dennis McFadden, who had served the university for two decades, to resign from the university's Design Review Committee. McFadden stated that the windowless, 1.68-million-square-foot dormitory would be

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Personal life

In 1945, while studying at Caltech, Munger married Nancy Huggins (Template:Circa 1926 – 2002). She was a Pasadena native who had been Munger's sister's roommate at Scripps College.<ref>Lemann, p. 190.</ref><ref name="legacy_huggins">Template:Cite web</ref> They had three children, Wendy Munger (a former corporate lawyer, trustee of Stanford University, and trustee of The Huntington Library<ref>Template:Cite news</ref><ref>Template:Cite web</ref>), Molly Munger (a civil rights attorney and funder of a ballot initiative to raise California taxes for public education<ref>Template:Cite news</ref>), and Teddy Munger (deceased, leukemia, age 9). Munger and Huggins divorced in 1953.<ref>Template:Cite web</ref>

Munger married Nancy Barry within a few years of his divorce from Huggins.<ref>Lemann, p. 192.</ref> Munger and Barry had four children:<ref name="legacy_barry">Template:Cite web</ref> physicist and political donor Charles T. Munger Jr., Emilie Munger Ogden, Barry A. Munger, and Philip R. Munger. Munger also had two stepchildren from his second marriage: William Harold Borthwick and David Borthwick.<ref>Template:Cite web</ref>

On February 6, 2010, Munger's second wife, Nancy Barry Munger, died at home at age 86.<ref name="legacy_barry"/><ref>Template:Cite web</ref>

Munger was a Republican and provided his opinions on a number of political topics including the policies of the Trump administration.<ref>Template:Cite web</ref> Munger stated he was "not a normal Republican", for example advocating "Medicare for all" as a fix to the U.S. healthcare system, saying "I think we should have single-payer medicine eventually".<ref>Template:Cite web</ref><ref>Template:Cite web</ref> Munger repeated his sentiments in another interview, praising Singapore's single-payer system in contrast to the U.S. "insane" system which is a "national disgrace".<ref>Template:Cite web</ref><ref>Template:Cite web</ref>

In his 50s, after a failed eye cataract surgery that rendered his left eye blind, Munger had his left eye removed due to severe pain. When doctors told him he had developed sympathetic ophthalmia, which could lead to blindness in his remaining eye, Munger started taking braille lessons. The eye condition eventually receded and he kept eyesight in his right eye for the rest of his life.<ref>Template:Cite web</ref>

Death

Munger died at a Santa Barbara, California hospital on November 28, 2023, at the age of 99, 34 days shy of what would have been his 100th birthday.<ref>Template:Cite news</ref><ref>Template:Cite news</ref> In the statement announcing his death, Warren Buffett said, "Berkshire Hathaway could not have been built to its present status without Charlie's inspiration, wisdom and participation."<ref>Template:Cite web</ref> Other prominent figures in the American business community who issued statements in Munger's memory include Microsoft founder Bill Gates, Apple CEO Tim Cook, Chairman and CEO of JP Morgan Chase Jamie Dimon, Bank of America CEO Brian Moynihan and hedge fund manager Ray Dalio.<ref>Template:Cite web</ref><ref>Template:Cite tweet</ref>

In the first annual letter to Berkshire Hathaway's shareholders written after Munger's death, Buffett gave a fuller account of his partner:<ref name="2024fortunemollman">Template:Cite news</ref>

Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades. In a way his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered he never – never – reminded me of my mistake.

In the physical world, great buildings are linked to their architect while those who had poured the concrete or installed the windows are soon forgotten. Berkshire has become a great company. Though I have long been in charge of the construction crew; Charlie should forever be credited with being the architect.

General and cited sources

• Bevelin, Peter (2007). Seeking Wisdom: From Darwin to Munger (Template:ISBN)
• Griffin, Tren (2015). Charlie Munger: The Complete Investor. (Template:ISBN)
• Kaufman, Peter (2005, 2006 [2nd ed.], 2008 [3rd ed.]). Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger
• Labitan, Bud (2008). The Four Filters Invention of Warren Buffett and Charlie Munger, Acalmix (Template:ISBN)
• Template:Cite book
• Lowe, Janet (2000). Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger, John Wiley & Sons (Template:ISBN)

Further reading

• Template:Cite journal

External links

• Charlie Munger Link CollectionTemplate:Webarchive