A whole lot to learn from Munger
This week, the world lost a legend in the truest sense of the word.
Charlie Munger's death was a sadness for anyone into investing. He will be remembered as half of history’s most famous investment duo. His ability to identify great companies at fair prices is, practically, without comparison. As a consequence, Berkshire Hathaway has grown into one of the world’s largest and most revered companies.
Munger will be heralded for the profit he made for his shareholders, but also for the wisdom he shared with the world. There are countless lessons we all can learn from him and they stretch far beyond the world of investing.
A partnership formed
Munger was born just shy of 100 years ago on January 1st, 1924 in Omaha, Nebraska. His family had a history in law, and after serving in the army during WWII, Munger graduated from Harvard and worked, like his father, as a lawyer, setting up his own firm with a real estate focus.
Around this time, he met Warren Buffett, who was so impressed by his acumen that he tried to persuade Munger to join him in the world of investing, specifically value investing and the school of Benjamin Graham.
It was advice Munger took, opening an investment partnership in 1962, which he ran with great success for many years. That was until Buffett eventually got what he really wanted, and Munger joined Berkshire Hathaway as vice-chair in 1978. And the rest is history.
Sharpening the axe
Berkshire Hathaway had been successful thanks to Buffett’s philosophy of “finding cigar butt businesses” that others had tossed aside. Munger’s arrival, however, sharpened the theory, setting Berkshire on the path to becoming the greatest investment firm in history.
As Buffett describes: “The blueprint he gave me was simple: forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.” Buffett and Munger began buying great American companies, such as Coca-Cola, Goldman Sachs, Proctor & Gamble, and Kraft, and reaped five decades of market-beating returns.
Despite his vice-chair title, Munger was more than Buffett’s second. He’d drive investments, and over 70 years, proved himself to be one of history’s greatest value investors and most original minds. It’s his wisdom, and how he shared it, that sets Munger apart from other investing titans.
Wisdom and simplicity
Many of Munger’s teachings are applicable beyond the investing realm and sound advice for anyone seeking to build, well, pretty much anything. Throughout my career, I’ve always been a fan of what Munger had to teach and the Berkshire methodology is an ethos that we try to borrow from as a capital markets-focused fintech. All businesses can learn from their process.
I could eulogise about Munger’s approach for pages, but one aspect I especially admire was his scepticism toward anything that he didn’t understand or of fads that were overhyped.
For example, here’s his view on bitcoin:
"I hate the bitcoin success and I don’t welcome a currency that’s useful to kidnappers and extortionists, and so forth. Nor do I like just shuffling out a few extra billions and billions and billions of dollars to somebody who just invented a new financial product out of thin air. So, I think I should say modestly that I think the whole damn development is disgusting and contrary to the interests of civilization."
I also find his view on the merit of EBIDTA amusing:
“I think you would understand any presentation using the word EBITDA if every time you saw that word you just substituted the phrase ‘bullshit earnings”
And here’s a point he makes about the requirement for patience:
“Patience can be learned. Having a long attention span and the ability to concentrate on one thing for a long time is a huge advantage.”
Coming from an age long before memes and Tweets, Munger made good by focusing on what mattered over the long term, dismissing anything nonsensical or landing outside of his “circle of competence”. Further, none of what he said or shared was designed for virality or clicks. It was just the way his mind worked. In the truest sense, he was a man of simplicity and common sense, traits that have become increasingly rare in a world of growing disorder and complexity.
An example to follow
It was interesting this week to see my Twitter and LinkedIn overflowing with praise for someone who was, essentially, a wealthy investor from Omaha. Yet the affection proves that Munger was so much more, and a large part of that was down to the relationship he formed with Buffett.
Some of what I’ve read on Munger has tried to steer away from talking too much about Buffett, preferring to focus on Munger as an individual. But this feels remiss. His strength was the partnership. Same as Buffett. They were equals, and like all great duos, from Lennon and McCartney to Jobs and Wozniak, the strength of one matched the weakness of the other, with Munger’s mind for details filling the gaps in Buffett’s forward-thinking and idea generation.
As one of Buffett’s biographers, Larry Cunningham, describes:
“The Berkshire magic is that a trust-based culture actually delivers better performance than a control-based culture … It's contrary to conventional thinking and practice in corporate America. And that filters out into every other aspect of the business to include the shareholder relationship, the way the board operates.”
For decades, Munger and Buffett were intellectual sparring partners, trusting that the decisions they made together would beat any made alone. And so whilst one can look to Munger’s remarks for personal guidance, there’s so much for Rob and I to learn as we seek to lead Origin over the coming years, thankful for the values we share and the qualities we hold individually.
As we grow Origin, Munger’s wisdom will continue to colour how we ideate and execute. Today, I’m proud to reflect on how we seem to hold some similar ideals, such as our efforts not to get caught up in hype (our view on blockchain), our want to always keep things simple and remain focused (our design process), and how we value patience over quick wins.
Rob and I are absolutely not Charlie and Warren. And Origin is no Berkshire Hathaway. But their example is one we should all try to follow, whatever we do, whatever we’re building.