Charlie Munger dies at 99: 8 lessons from an investing legend

Charlie Munger, Warren Buffett’s friend and business partner for more than 60 years, died Tuesday at the age of 99, according to a statement from Berkshire Hathaway.

Munger was beloved by many in the investing community for his wisdom, quick wit and willingness to speak his mind on various topics, ranging from accounting and finance to psychology, marriage and more. Munger would have turned 100 on January 1, 2024.

“Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation,” Buffett said in a statement.

Munger started his career as a lawyer, but began managing investment partnerships in the 1960s after meeting Buffett through a mutual friend in Omaha, Nebraska. He would eventually join Buffett at Berkshire, serving as vice chairman until his death.

At Berkshire’s annual meeting each spring, Munger joined Buffett on stage where the two would answer shareholder questions for hours. After giving his thoughts on a question, Buffett would ask for Charlie’s response. “Nothing to add,” was the frequent reply.

Of course, Munger did have plenty to say over the years and he often did so in a colorful way. These are some of the best lessons from Charlie Munger on business, investing and life.

8 lessons from Charlie Munger

1. Be rational and objective

Munger often spoke about the importance of being rational and objective. It will help you in business and investing, but also in other areas of life. Making emotional decisions rarely leads you down the right path.

“Rationality is not just something you do so that you can make more money, it is a binding principle,” Munger said. “Rationality is a really good idea. You must avoid the nonsense that is conventional in one’s own time.”

2. Be a learning machine

Munger viewed education as a moral duty and spent most of his day reading on a variety of subjects including business, history and science. He once joked that his kids thought he was a book with a couple of legs sticking out.

“I have said that in my whole life, I’ve known no wise person over a broad subject matter area who didn’t read all the time,” Munger said, adding that reading is critical for broad subjects such as investing. “If you think you’re going to be good at it and not read all the time, you have a different idea than I do.”

3. Financial freedom is about independence

Thanks to the extreme success of Berkshire Hathaway and his other investments, Munger was among the richest Americans, with his net worth reaching about $2.6 billion this year, according to Forbes, despite already donating much of his wealth to charity.

But Munger’s desire to be rich wasn’t driven by a need for yachts or fast cars. More than anything, he wanted the independence that comes from being wealthy.

“Like Warren, I had a considerable passion to get rich,” Munger said. “Not because I wanted Ferraris – I wanted the independence. I desperately wanted it.”

4. Don’t fall for salesmanship of the investment industry

Munger was not afraid to criticize when he saw misbehavior, and he often turned his attention to the broader investment industry, which he felt didn’t deliver enough value to clients relative to what they charged. Earlier this year, Munger said he felt maybe 5 percent of fund managers could beat the performance of an index fund over time.

“Everybody else is living in the state of extreme denial,” Munger said. “They’re used to charging big fees and so forth for stuff that isn’t doing their clients any good. It’s a deep moral depravity.”

Through the years, Munger has not hesitated to call out what he views as fads or bad behavior in investing. In 2014, as activist investing was gaining popularity, Munger compared it to Oscar Wilde’s description of fox hunting: “The pursuit of the uneatable by the unspeakable.”

More recently, Munger has not held back in his disdain for cryptocurrencies.

“I think the people who are professional traders that go into trading cryptocurrencies, it’s just disgusting,” Munger said in 2018. “It’s like somebody else is trading turds and you decide, ‘I can’t be left out.’”

5. The best way to get what you want is to deserve it

A fan of simple ideas, Munger often talked about deserving what you want in life. The best way to find a good spouse is to deserve one, he often said. In business, this translates to working hard and behaving with integrity consistently over time.

“To get what you want, you have to deserve what you want,” Munger said. “The world is not yet a crazy enough place to reward a whole bunch of undeserving people.”

6. Concentrate your bets

Diversification is one of the most frequently cited investment principles and for most people is a good approach to follow. But Munger said investors who understand how to analyze and value businesses were crazy to over diversify.

“The academics have done a terrible disservice to intelligent investors by glorifying the idea of diversification,” Munger said. “I just think the whole concept is literally almost insane. It emphasizes feeling good about not having your investment results depart very much from average investment results.”

Munger said he understood that a more concentrated portfolio could lead to more volatile results, but he was confident that he could handle the inevitable bumps in the road.

“I knew from being a poker player that you have to bet heavily when you’ve got huge odds in your favor,” Munger said.

7. Avoid stupidity

Munger liked the idea of inverting tough problems to arrive at the correct conclusions. He once gave a high school commencement speech titled “Prescriptions For Guaranteed Misery In Life.”

Rather than thinking about how to succeed or be happy in life, think about what will make you fail or be miserable. It’s a simple approach, but one people don’t often think of.

“It is remarkable how much long-term advantage people like [Warren and myself] have gotten by trying to be consistently not stupid, instead of trying to be very intelligent,” Munger said.

8. Pick the right role models

Munger was a big fan of biographies and an admirer of Benjamin Franklin. He was always looking for lessons he could take from someone else’s life and how he could apply them to his own. Choosing the right role models can help set you on the path to success.

“There is no reason to look only for living models,” Munger said. “The eminent dead are, in the nature of things, some of the best models around.”