ALMOST everyone who is interested in money — and who also understands that the often-maligned economic system we call capitalism is hands down the best comprehensive framework for creating wealth through a combination of hard work and sound capital allocation — will know of Warren Buffett.
Far fewer people, though, know the name of his best friend and primary business partner of over 60 years: Charlie Munger.
For deep insights into life, money management, and comprehensive investing, I recommend Munger's large, heavy, and insightful book Poor Charlie's Almanack.
Munger just passed away in California on Nov 28, slightly more than a month before what would have been his 100th birthday bash on New Year's Day 2024.
He's commonly referred to as Charlie by serious investors and enthusiastic fans. About a year and a half ago, I was interviewed on radio on Charlie's life and lessons up to that point. More recently, I was honoured to share my thoughts on air on Charlie's legacy again — after his sad passing.
FATHER FIGURE
In my opinion, Buffett, Munger, and the "Father of Security Analysis" Benjamin Graham formed the value-investing triumvirate that taught all the world's serious value investors how to peer underneath the hood (or bonnet, if you prefer) of the engine of our interlinked global economy to identify superlative investments.
Buffett looked to Graham as a father figure who first taught him the linked nuances of security analysis and value investing at Columbia University in New York City in the early 1950s.
A central tenet of Graham's approach was to identify battered down companies that might have a smidgeon of unrecognised value left in them. Buffett referred to this approach as "cigar-butt" investing.
Yet when the younger — arguably more driven — Buffett met Munger in 1959 at a dinner party in Omaha, Nebraska, their common hometown, they hit it off. Although Munger was then a successful lawyer who had graduated near the top of his class at Harvard Law School in 1948, Warren eventually persuaded Munger to close his law practice and become a full-time investor.
Munger amassed sizeable wealth throughout his life, and died with a net worth in excess of US$2 billion, which is a lot even if it is overshadowed by Warren's current pile of US$120 billion.
Multiple interviews over the past several decades suggest Munger was far more motivated by the freedom a nine-digit net worth grants its possessor than in joining a frenetic race to the "top of the mountain" for the figurative crown of being the wealthiest person in the United States or, more ambitiously, all the world.
(Note: Both accolades, by the way, were held by Buffett in the past, and are now accorded to Elon Musk.)
POWER DUO
In an excellent CNBC online article entitled Why Warren Buffett wouldn't have become the greatest investor ever without Charlie Munger, it was stated that Munger convinced Buffett that buying a wonderful business at a fair price was wiser than spending much less money on a merely fair (read "mediocre") business. As Buffett once explained in writing:
"It took Charlie Munger to break my cigar-butt habits and set the course for building a business that could combine huge size with satisfactory profits." Make that much-more-than-satisfactory.
Buffett and Munger nurtured their investment holding company Berkshire Hathaway over the last 59 years to become the largest and most successful conglomerate on Earth.
As CNBC reported: "…Berkshire managed to grow into an empire consisting of first-class businesses in insurance, railroad, retail, energy and manufacturing".
Charlie's intellectual interests were much broader than Buffett's laser-focus on business and investing. Among Munger's disparate interests was a passion for logic, mathematics, philosophy, physics, engineering and architecture.
However, as Buffett wrote in their company's 50-year anniversary letter in 2014: "Charlie's most important architectural feat was the design of today's Berkshire."
So, what's all this got to do with regular Malaysians dealing with our various unique problems, challenges, and woes?
VALUE INVESTING
I think there are two specifics we should pay attention to:
1. Berkshire Hathaway owns whole businesses as well as fractional stakes through listed securities around the world; and
2. Berkshire now sits on a pile of cash — mainly in US Treasuries — worth more than US$150 billion.
Scaling down from mighty Berkshire to the microscopic granular level of solo consumers and individual households, we would all do well to follow suit:
1. Invest domestically and internationally; and
2. Always accumulate and then maintain large cushions of cash for stability, safety and to be able to take advantage of sudden valuable buying opportunities.
So, in closing, I hope you choose to embark upon your own journey to learn more about value investing and to thus profitably apply its dictates. As you do so for your family's benefit, I recommend you heed Munger's erudite personal finance advice:
"Live within your income and save so that you can invest. Learn what you need to learn."
RIP: Charlie Munger (1924-2023).
© 2023 Rajen Devadason
Rajen Devadason, CFP, is a securities commission-licensed Financial Planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at www.linkedin.com/in/rajendevadason, or via rajen@RajenDevadason.com. You may also follow him on Twitter @Rajen Devadason and on YouTube (Rajen Devadason).