The Passing of Charlie Munger

Charlie Munger is best known for being Warren Buffett’s partner in managing Berkshire Hathaway to great success during the past five decades. Those in the field of law know him as the founder of the Los Angeles-based firm Munger Tolles & Olsen. Outside of business and law, Charlie had wide-ranging interests, was a devoted philanthropist, and worked tirelessly in support of those in education. Warren Buffett referred to Charlie, a devoted lifelong learner, as the person whose traits, skills, and strong ethical backbone most closely resembled those of Ben Franklin. Charlie even has a substantial following in China where millions of people consider him akin to a modern day Confucius. Five weeks shy of his 100th birthday, Charlie passed away earlier this week. 

Charlie faced difficulties when he was younger, including a divorce in his 20s, having very little money, and agonizing over the loss of his nine-year-old son. When he was 52, a routine eye surgery left him blind in one eye and fearful of becoming blind in the second. For someone who spent much of his time reading (his children refer to him as a book with two legs), he quickly learned braille and was lucky to keep one functioning eye. Over the years, Charlie would opine on the challenges of life and preach the stoic philosophy of utilizing a difficult experience as a chance to learn and grow and push through. And, whenever possible, he suggested one strive to maintain a sense of humor about things.  

Driven by a strong desire to teach and help others, Charlie was regularly an outspoken critic of much that occurs in the world of finance – particularly that which might fleece unsuspecting individuals. In recent years he viewed cryptocurrencies as something that had no fundamental underpinning of value, were peddled by bad actors, and would attract unknowing participants who were prone to speculate – and potentially lose – their money. Thus, he regularly derided cryptocurrencies and related investments, warning individuals against what he believed was “massively stupid” and “rat poison squared.” He added, “It’s like somebody else is trading turds and you decide, ‘I can’t be left out.’”

Charlie despised the egregious fees in parts of the money management industry – notably the “2 and 20” arrangement where clients pay 2% per year of what is being managed and another 20% of the profits that are generated on their investment. With those fees, for example, an 8% gross return would net 4.4% to the client and a whopping 3.6% to the investment manager. 

On one lucky occasion, our Darren Pollock had the chance to spend an evening with Charlie. They wound up so engrossed in their conversation that not even Charlie wanted it to end. (As you can imagine, Darren would have stayed all night and through the following week.) Early in the conversation, Charlie asked questions about Cheviot, from how few stocks we own (the fewer the better in Charlie’s mind) to our fees to how we engage with you, our clients. He praised our firm’s structure and investment process (he even peppered Darren for suggestions on where to find extra yield at a time when interest rates were very low). Charlie said he could instantly tell how much we care for our clients and their well-being. By the end of the evening, he told Darren that he and Warren had made the decision a few years earlier not to hire more investment managers but if they hadn’t, “we’d be looking for someone just like you.” It was an experience we cherish. 

As he did that night, Charlie always loved to share his wisdom. And, though he would like to be thought of as a teacher, he said he imagined he’d be remembered as, in his words, “a wise ass.” After all, when he was playing sidekick to Warren at the Berkshire Hathaway annual meeting, he delighted in displaying his comedic chops on various business matters. Among his many skills, Charlie also knew how to make things fun.

There are numerous tributes to Charlie online and in various media. Instead of repeating what you can find elsewhere, we thought you might enjoy a brief selection of Charlie’s wit from his time on stage with Warren: 

Five Minutes of Munger

For those of you who want to take a deeper dive into his way of thinking about business and life, we recommend this speech on the subject of human misjudgment that he gave in 1995.

Psychology of Human Misjudgment Speech

A transcript of that speech, updated by Charlie, can be viewed here: 

Psychology of Human Misjudgment Transcript

And to read more about Charlie, see: Darren Sits Down with Charlie Munger.

With warm regards,
The Cheviot Team



Darren with Charlie in 2016