Who is Charlie Munger?
Many people have heard of Warren Buffett although his business partner (the lesser known Charlie Munger) should be equally as famous. Charlie is an American Investor and billionaire largely known for his role as vice chairman in Berkshire Hathaway although he’s also been involved in law, real estate, mathematics, the military and much more. Charlie Munger has had a huge influence on Warren Buffett and taught him to go from buying ‘cigar butts’ originally put forward by Benjamin Graham to invest in good companies at reasonable prices as opposed to reasonable companies at good prices. Even Warren Buffett’s son Howard said his dad is the second smartest man he knows after Charlie Munger.
Interestingly, Charlie grew up in Omaha and worked in Warren Buffett’s grandfathers grocery store although they didn’t know each other at the time (Munger is 97 and Buffett is a spring chicken at 90). Charlie studied mathematics are the University of Michigan but then dropped out to serve in the military in 1943, after becoming an officer he studied meteorology at Caltech in California. Munger went on to study law school at Harvard graduating magna cum laude. Munger was involved in law and real estate and didn’t join Berkshire until 1978 aged 54.
Charlie Mungers Net Worth vs Warren Buffett
At the time of writing Charlie Munger is believed to be worth about $2.2 billion US dollars (I know what a peasant). Warren Buffett’s net worth is around $100 billion US dollars so comparisons are often made and the question is often raised as to why Warren Buffett’s right hand man is so far behind. After some digging there appears to be numerous factors at play here.
A Later Start in Life
As previously mentioned Munger didn’t join with Buffett until he was 54 years old. He was still wealthy prior to this having made money in law and real estate, Munger has previously mentioned he acquired a $1.5 million fortune from a real estate framework that took place in 1967 at aged 43. Certainly not too shabby although it still lags behind Buffett who was worth $1 million when he was just 30, this is around $10 million today adjusted for inflation.
Kids and Divorce
Munger was married in 1945 and divorced in 1953. Munger also has seven kids compared to Buffetts 3 so we can assume this ate into his finances substantially more than Buffetts.
Whilst Warren Buffett does certainly donate money to charities it seems that the bulk of his estate will be given away after his death. Charlie Munger has donated many shares of his Berkshire stock over the years and also made the largest donation ever to the University of Michigan (an impressive $110 million dollars).
The company was already formed years prior when Munger joined as vice chairman and he had significantly less stock than Buffett from the get go. Berkshire has returned an average of 19% per year since 1965 so those extra stocks definitely make a difference when you factor in compound interest.
Investments Outside of Berkshire Hathaway
Buffetts personal portfolio is rumoured to be worth around $2 billion alone although it’s hard to find specifically what he’s been investing in. Munger seems to have a personal portfolio of around $200 million and appears to be a very passive investor, even compared to Warren Buffett. You may have heard recently he invested in the company Alibaba, this was considered big news as he rarely buys new stocks having the same 4 to 5 investments for years.
Charlie Mungers Tips for Getting Rich
Whilst Munger doesn’t have as much money as Buffett he’s still one of the best investors on the planet and when he talks you should listen. During an interview, Munger provided ideas that have helped him become successful as he believes these could help most people to some extent. Munger’s first idea was in order to get what you want you need to deserve what you want, in other words you need to deliver a product or service so good that you would want to buy it yourself. Mungers second idea was that you should always take the high road, he uses the example of his fathers clients (his dad was a lawyer) and how those who treat their employees right and walk away from bad situations don’t get into trouble. Mungers third idea was that you have to seize the few important opportunities you’ll get in life, he compares this to a big investment firm who invests in hundreds of different companies. Munger promotes investing in a few good opportunities. Mungers next thought was that those who were patient and rational and saw an opportunity were the ones who became successful in his generation and believes the same to be true for the future. The next point Munger makes is that you shouldn’t listen to ‘fake gurus’, pretty self explanatory this one and we have to say we agree with him! Munger next tip is that he suggests keeping things simple and sometimes ‘less is more’. He uses the analogy that if he asked everyone for their single best idea and put it into a formula then he could easily outperform the market but questions why big companies don’t do this. Munger’s final point is that you should follow a 4 step checklist if you want to invest in a company which involves; only deal in things you understand, the business must have a competitive advantage, the management must have integrity and you have to be able to pay a price below its intrinsic value.
Charlie Munger is still extremely successful and wealthy compared to you or I although it’s interesting to see that he has lagged behind Warren Buffett quite a bit. Munger seems to be more of a ‘jack of all trades’ compared to Warren Buffett and perhaps many interests outside of financial success has led to him allocating more time elsewhere compared to Buffett. Other reasons mentioned above also come into play although I still wouldn’t feel too sorry for him! I’ll leave you with my favourite Charlie Munger quote ‘People are trying to be smart – all I am doing is trying not to be idiotic, but it’s harder than most people think’. You can read more about Charlie Munger in Tren Griffin’s book ‘Charlie Munger: The Complete Investor’.
The views expressed in this post are the authors and should not be construed as financial advice
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