The end of a dynamic duo: How Charlie Munger shaped Warren Buffett’s success

In the history of great business marriages, nothing came close to the partnership of Charlie Munger and Warren Buffett, who together built the $1.2 trillion investment behemoth Berkshire Hathaway.

And in the history of pithy one-liners, there is probably none greater than Munger’s piece of investment advice during the dotcom boom: “If you mix raisins with turds, they’re still turds.”

Warren Buffett and business partner Charlie Munger (right).Credit: AP

For 60 years, the two billionaires behind this conglomerate powerhouse were arguably the fathers of modern-day value investing. They spawned not just an investment philosophy but a religion, with a legion of disciples from around the world that made an annual pilgrimage to hear their sermons at the company’s annual meetings in Omaha, Nebraska.

While the more loquacious Buffett had greater fame and a greater share of microphone, behind the scenes the communion was long considered an equal one, in which each sought ideas and advice from the other.

Paying tribute to Munger, who died on Tuesday at a California hospital, Buffett summed it up: “Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation.”

But more than that, Munger is often privately credited with being Buffett’s foil - the person who curbed his enthusiasm and kept him in check. They were mutual sounding boards.

‘If you mix raisins with turds, they’re still turds.’

Charlie Munger

Tellingly, Buffett referred at times to Munger as the ‘abominable no man’.

It was Munger who is credited with convincing Buffet that a ‘great business at a fair price is superior to a fair business at a great price’.

Publicly, it wasn’t so much that Buffett stole the limelight, but that Munger avoided it.

The Warren and Charlie show was typically as amusing as it was insightful, with fulsome speeches and answers from the more gregarious Buffett countered by the unwillingness from Munger to produce more than a dry or acerbic one-liner.

Perhaps Munger’s most infamous line was “I have nothing to add” after Buffett had waxed lyrical on whether to buy a particular cable company. But it was the simplicity of the investment philosophy that they fashioned in the 1960s to take big stakes in good but undervalued companies as long-term investments that elevated their stock-picking strategy to a religious status.

A hallmark of Munger and Buffett’s thinking was their success in drowning out the relentless noise from the market that overpriced voguish industries or companies, or ignored solid but unfashionable businesses.

On Bitcoin, Munger could not have been clearer, predicting that “most of those investments are going to zero”. He once labelled Bitcoin “rat poison” and compared other cryptocurrencies to a “venereal disease.” “I wish they’d never been invented,” he said a few years back.

Neither did Munger have patience for the GameStop meme frenzy of 2021 that pushed the share prices of unloved stocks into the stratosphere. “It’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack betters,” he said.

Buffett and Munger’s reluctance to embrace technology stocks early has been seen as their poorest investment decision - that said, when they finally did acquire a big stake in Apple it became one of Berkshire Hathaway’s greatest successes.

But Munger never claimed that he or Buffett were the smartest people in the room.

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be intelligent,” was one of Munger’s many memorable lines.

You don’t have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time.

Indeed, Munger told an Australian audience at the Sohn Hearts and Minds conference in 2021 that he didn’t think he and Buffett were that smart or diligent, but were better than most at knowing what we know or can’t know.

“We have three baskets for investing: yes, no, and too tough to understand,” was another piece of Munger’s homespun wisdom.

Trust and greed also featured in Munger’s broader view of the corporate world - views that should resonate among the boards of Australia’s largest companies.

“No man is fit to hold office who isn’t perfectly willing to leave it at any time,” said Munger, who also had strong views on the excesses of executive remuneration.

“People should take away less than they’re worth when they are favoured by life... I would argue that when you rise high enough in American business you’ve got a moral duty to be underpaid.”

Munger consistently said “we [he and Buffett] have a passion for keeping things simple”, which they combined with a hunger for learning and knowledge.

Looking back on his life and career a few years ago, when he was in his early 90s, Munger remarked that “somebody my age has lived through the best and easiest period that ever happened in the history of the world — the lowest death rates, the highest investment production, the biggest increases in most people’s standards of living.

“If you’re unhappy with what you’ve had over the last 50 years, you have an unfortunate misappraisal of life.”

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