Charlie Munger: Life, Berkshire Hathaway and Investing Legacy

Search Fintrev

Search our guides, reviews and glossary.

Charlie Munger (Charles Thomas Munger, 1924 to 2023) was Warren Buffett’s business partner and the longtime vice chair of Berkshire Hathaway. He was a Harvard-trained lawyer who turned to investing in his late thirties. His main contribution to Berkshire was a change in how it applied value investing: buy wonderful businesses at fair prices instead of mediocre businesses at bargain prices. Munger died on November 28, 2023, at age 99, about a month before his 100th birthday.

Early Life and Education

Munger was born in Omaha, Nebraska, on January 1, 1924. As a teenager, he worked at Buffett & Son, a grocery store owned by Warren Buffett’s grandfather. Buffett, about seven years younger, later worked at the same store, but the two did not get to know each other then.

Munger enrolled at the University of Michigan to study mathematics. In 1943, a few days after turning 19, he left school to join the U.S. Army Air Corps. The military trained him as a meteorologist and promoted him to second lieutenant. As part of that training he studied meteorology at Caltech in Pasadena, California. Pasadena became his permanent home.

He never completed an undergraduate degree. Harvard Law School admitted him anyway, and he graduated magna cum laude with a J.D. in 1948. He then moved back to California to practice law.

His personal life in these years included hardship. His first marriage, to Nancy Huggins, ended in divorce, and their son Teddy died of leukemia as a young child in the mid-1950s. In 1956 Munger married Nancy Barry Borthwick, and the couple raised a large blended family.

From Law to Investing

Munger built his early career as a real estate attorney in Los Angeles. He was a founding partner of Munger, Tolles & Olson, which became one of the best-known law firms in California. Legal work paid well, but he saw that owning businesses and property compounded wealth faster than billing hours.

In 1959 Munger met Buffett at a dinner in Omaha. The two hit it off quickly and stayed in close contact. Buffett was then building his investment partnerships, and he encouraged Munger to put his energy into investing. In the 1960s Munger stepped back from law to manage money full time. Among his ventures was a real estate development partnership with Franklin Otis Booth, a newspaper executive from the family behind the Los Angeles Times.

Before formally joining Berkshire, Munger ran his own investment partnership. Buffett highlighted its record in his 1984 essay “The Superinvestors of Graham-and-Doddsville.” Munger’s partnership compounded at 19.8% a year between 1962 and 1975, while the Dow Jones Industrial Average appreciated about 5% a year over the same span. Buffett used the result as evidence that investors trained to buy assets below their worth could outperform the market over long periods, not just by luck.

Career at Berkshire Hathaway

How the partnership formed

Buffett began buying shares of Berkshire Hathaway, then a struggling New England textile company, in 1962. By 1965 he controlled it as chair and CEO. Over the following decade Berkshire’s capital moved away from textiles into insurance and other businesses.

Munger’s involvement grew through overlapping holdings. Buffett and Munger both owned stakes in Blue Chip Stamps, a California trading-stamp company. Blue Chip in turn became the vehicle for some of their most influential purchases, including See’s Candies in 1972. The cross-holdings were eventually merged into Berkshire, and in 1978 Munger became vice chair of Berkshire Hathaway. He held the post until his death, a partnership of roughly 45 years.

Key work

As vice chair, Munger was Buffett’s second-in-command across Berkshire’s holdings. Buffett made the final calls on capital allocation, and Munger acted as his sounding board and frequent dissenter. Buffett often said Munger’s role was to talk him out of bad ideas. At Berkshire’s annual meetings in Omaha, Munger sat beside Buffett for hours of shareholder questions. His short, dry answers, frequently “I have nothing to add,” became part of the event’s appeal.

Munger also held several roles of his own:

• Wesco Financial Corporation: chair and CEO from 1984 through 2011. Wesco was a Pasadena-based Berkshire subsidiary with insurance and industrial businesses, and Berkshire bought out its minority shareholders in 2011.
• Daily Journal Corporation: chair of the board of this Los Angeles legal publisher. Munger’s annual Daily Journal meetings became a second stage for his views on investing and markets.
• Costco Wholesale Corporation: independent director. Munger joined the board in 1997 and praised Costco’s low-price, high-volume model for decades.

Munger’s Investment Philosophy

From cigar butts to wonderful businesses

Buffett learned value investing from Benjamin Graham: buy stocks priced well below a conservative estimate of their worth. Early in his career Buffett applied this as “cigar-butt” investing. The idea was to buy a declining business currently worth $1 for 75 cents and collect the last 25 cents of value, like taking one free puff from a discarded cigar butt.

In his 1989 shareholder letter, Buffett credited Munger with pointing out the flaw in that approach. A cheap price on a weak business often turns out to be a false discount. Low returns on capital, management problems and continued decline wear away the initial gain. Buffett wrote that Munger “understood this early; I was a slow learner.”

The alternative was to pay a fair, even full, price for a business with strong economics that would keep growing its value for years. Buffett later summed it up as buying a great business for $1.25 when it is worth $1 today but will be worth far more in a decade. In the 2014 letter, he stated Munger’s instruction directly: forget buying fair businesses at wonderful prices, and buy wonderful businesses at fair prices instead.

See’s Candies is the case most often used to illustrate the shift. Blue Chip Stamps paid about $25 million for the chocolate maker in 1972. That was well above what a strict Graham-style investor would have paid for its assets. The brand let See’s raise prices year after year without losing customers, and it generated cash that Berkshire redeployed elsewhere for decades.

Economic moats

Munger and Buffett looked for businesses with an “economic moat.” A moat is a durable advantage, such as a brand, a cost edge, regulatory protection or enormous required capital, that keeps competitors away from a company’s profits. A business with a wide moat can earn high returns on capital for a long time.

Worldly wisdom and mental models

Munger argued that investors make better decisions when they draw on the key ideas of many disciplines, not just finance. He called this “elementary, worldly wisdom” and described it as a latticework of mental models taken from psychology, economics, mathematics, physics, biology and history. He developed the idea in speeches and in Poor Charlie’s Almanack, a collection of his talks and writings edited by Peter Kaufman.

Several themes recur in that body of work:

• Inversion: to solve a problem, think about how to cause the opposite outcome and avoid it. Munger often quoted the mathematician Carl Jacobi’s advice, “invert, always invert.”
• Human misjudgment: in his talk “The Psychology of Human Misjudgment,” Munger catalogued the biases that distort decisions. Examples include incentive-caused bias, social proof and the tendency to deny painful facts.
• Circle of competence: stay within areas you genuinely understand, and be honest about where the boundary lies.
• Patience and concentration: make few decisions, wait for obvious opportunities and commit heavily when they appear, rather than diversifying into many average ideas.

Ethics

Munger treated ethics as part of business economics, not as a separate subject. One of his most quoted lines holds that good businesses are ethical businesses and that a business model relying on trickery is doomed to fail. He and Buffett were aligned on this, and both described trust and reputation as central to how Berkshire bought and managed companies. Berkshire typically left acquired businesses in the hands of the managers who built them.

Berkshire’s “Four Giants”

In his 2021 shareholder letter, Buffett named four holdings that together accounted for a large share of Berkshire’s value. He called them the “Four Giants.” As vice chair, Munger was involved in overseeing all of them.

Insurance and float. Berkshire’s insurance subsidiaries collect premiums upfront and pay claims later, often years later. The money held in the meantime is called float, and Berkshire invests it for its own benefit. Float stood at $19 million when Berkshire entered insurance in 1967 and had grown to about $164 billion by 2023. Underwriting losses still occur in catastrophe years such as 2001, the year of the September 11 attacks. Float that costs little or nothing to hold over long periods is the main reason insurance ranks first among the giants.

Apple. Apple was unusual for Berkshire because it was a minority stock position, not a wholly owned business. Berkshire’s stake reached about 5.8% in 2023, partly because Apple’s own share repurchases raised Berkshire’s percentage ownership without additional buying.

BNSF. Burlington Northern Santa Fe runs one of North America’s largest freight rail networks, with about 32,500 miles of track and around 8,000 locomotives across the western two-thirds of the United States. It is a textbook moat: building a competing continental rail network would require enormous capital and land rights.

Berkshire Hathaway Energy (BHE). BHE is a group of locally managed utility and energy businesses that Berkshire first invested in around 2000. Its moat logic mirrors the railroad’s: power lines, pipelines and generation assets are capital-intensive and regulated, which limits competition. BHE also became a major U.S. developer of wind, solar and transmission capacity.

Views on Bitcoin and Cryptocurrency

Munger’s directness was most visible on cryptocurrency. At Berkshire’s 2021 annual meeting, after Buffett sidestepped a question about bitcoin, Munger said it was “created out of thin air” and called it a go-to payment method for criminals. He also praised China’s ban on cryptocurrency and criticized American enthusiasm for it.

His objection followed from his broader philosophy. Bitcoin produces no earnings or cash flow, so it has no business value to estimate. Munger also viewed its appeal as a product of the speculation and social-proof effects he warned about in his talks on human misjudgment.

Philanthropy

Munger’s giving focused on education, especially student housing. He was closely involved in designing many of the buildings he funded. Major gifts included:

• Stanford University: $43.5 million in Berkshire Hathaway stock in 2004 toward a graduate student residence complex.
• University of Michigan Law School: $3 million in 2007 for lighting improvements and $20 million in 2011 for renovating the Lawyers Club housing.
• University of California, Santa Barbara: $200 million in 2016 for a large new student residence. The building drew wide debate because Munger’s plan placed most bedrooms without windows.

Death and Legacy

Berkshire Hathaway announced that Munger died peacefully on the morning of November 28, 2023, at a California hospital. He was 99. Buffett said that Berkshire could not have been built to its present status without Charlie’s inspiration, wisdom and participation. At the time of his death, Berkshire had a market capitalization above $780 billion and owned businesses in insurance, rail, energy, manufacturing and retail.

The Bottom Line

Munger matters most to investors who want a durable approach to picking stocks. His record and Berkshire's results support paying a fair price for businesses with wide moats and strong economics, staying within a circle of competence, and waiting patiently for clear opportunities. His warnings about bias, speculation and assets without earnings, such as bitcoin, remain a useful check on costly decisions.