Charlie Munger

Legendary investor Charlie Munger, who Warren Buffett credits with teaching him ‘all he knows,’ is an emblem for investors and entrepreneurs worldwide.

Hailed as “the architect” of Berkshire Hathaway, Munger was known for his reliance on mental models, a tool he taught Buffett.

Born to a long line of Nabraskan lawyers, young Munger was instilled with a Midwestern work ethic that served him well throughout his life. Little is known about his childhood, but one fact remains clear—Munger was no stranger to hard work.

Despite relative affluence, Munger’s first job was at Buffett & Son, a grocery store Warren Buffet’s grandfather owned. He worked there until enrolling at the University of Michigan, where he studied mathematics.

Growing up during the Great Depression transformed Munger’s investment philosophy: buy “wonderful companies at fair prices.” Fair is up for interpretation, but frugality learned during the 1930s greatly shaped Munger.

World War II proved a powerful turning point in Munger’s life: He dropped out of school in 1943, eager to prove himself in the U.S. Army Air Corps. The military proved well-suited for Munger, and his intellect and strategic mind distinguished him from his peers.

Munger says, “You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long time.” He rose to second lieutenant throughout the war and earned a high Army General Classification Test score.

During that time, the military ordered him to study meteorology at Caltech where Munger developed his card-playing skills. Card playing taught him an approach to investing. He says, “What you must learn is to fold early when the odds are against you…Opportunity comes, but it doesn't come often, so seize it when it does come.”

While unrelated to his later work, meteorology and cards taught Munger the value of strategy—a key skill he’d later harness.

Following the war, Munger leveraged the G.I. Bill’s benefits and set off to learn as much as he could, wherever possible. He enrolled in advanced mathematics and statistics classes through various universities.

Munger, eager to please his parents, decided to become a lawyer. Despite having no bachelor’s degree, Munger applied to Harvard Law School. Munger said, “To get what you want, you have to deserve what you want,” and though he was initially rejected, he leveraged his family’s network. After a few calls, he was admitted. Deserve, he did—Munger graduated magna cum laude in 1948.

Munger moved back to California after graduation and began practicing real estate law. He quickly became bored, thought back to his card-playing days, and decided to develop his investment skills. After a few years, he opened an investment firm, Wheeler, Munger, and Company.

Relationships are another theme throughout Munger’s life. During this time, he met Warren Buffett on a trip back home. The two bonded over investments and their mutual time working at Buffett’s family grocery store. Buffett thought, “I’m not going to find another guy like this …. We just hit it off.”

Unfortunately, following a few years of losses, Munger closed his business in 1976. Eager to leverage his close friendship with fellow investor Warren Buffett, Munger asked him for a job. In 1978, Munger became the Vice chairman of Berkshire Hathaway, Buffett’s investment firm.

Buffett and Munger’s partnership is legend: The two got along famously, playing to one another’s strengths. When Munger joined Berkshire, he taught Buffett the value of mental models and strong habits, which “jerked [Buffett] back to sanity.”

Buffett says, “[Munger] continued in this role, and together we, along with those who early on invested with us, ended up far better off than Charlie and I had ever dreamed possible.”

Over the years, Munger convinced Buffett to invest in strong companies at fair prices, transforming the investment firm into what Forbes calls the “Mona Lisa of corporate conglomerates.”

Using what he called “a latticework of mental models,” Munger championed key investment decisions, like purchasing See’s Candies for $25 million. The candy company has generated over $2 billion since then. He also pioneered the decision to invest in Japan.

Unfortunately, Munger passed away at 99 years old last year.

Today, Munger is remembered as the Oracle of Pasadena, one of the greatest minds in modern finance. Along with Buffett, he grew Berkshire Hathaway from $5 billion to $868 billion.

At his death, Munger was worth $2.6 billion and had given over $500 million to charity.

Here’s what we can learn from Munger about mental models, deserved trust, and patience.

Lessons

Use mental models to make stronger decisions. Munger said, “You’ve got to have models in your head.” Throughout his life, Munger used what he called “a latticework of models” to solve difficult or complicated problems personally and professionally. Inversion was one of his favorites: The concept asks users to invert traditional problem-solving tools and examine the desired outcome to avoid missteps. His famous quote, “I wish I knew where I was going to die, and then I’d never go there,” exemplifies the tool in practice. Mental models rely on humility: The user must accept that they’re human and, therefore, inherently fallable. Learned from his time playing cards, mental models helped Munger maintain reason amid potentially emotional decisions, like selecting companies to invest in. He said, “Being rational is a moral imperative. You should never be stupider than you need to be.” Maintaining a rational perspective is imperative, especially in situations with prominent bias and emotional input. Mental models help users overcome human error and maintain reliability—a key component of trust in professional settings.

Cultivate a life of deserved trust. Munger believed that the most intelligent people and the strongest businesses operate within a web of deserved trust. He said, “By and large, the people with this ethos win in life, and they don’t win just money, just honors and emoluments. They win the respect, the deserved trust, of the people they deal with, and there is huge pleasure in life to be obtained from getting deserved trust.” Deserved trust is built on the backs of “reliable people correctly trusting one another. That’s the way an operating room works at the Mayo Clinic.” Cultivating deserved trust requires that a person first be trusting; trust can’t be built overnight. Trust is earned. Munger offered trust to others through vulnerability and a strong history of excellence. He was humble in his offerings but understood when to rest on his laurels. Others looking to leverage Munger’s notion of deserved trust should consider their credits and humility. In other words, trust can’t be built on a shaky foundation. Instead, trust is the product of continuous consistency and strong moral character.

Humility and high ethical standards enhance likeability and trust. When discussing Munger, his close friend, and confidant Warren Buffett said, “Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades….Even when he knew he was right, he gave me the reins, and when I blundered, he never—never—reminded me of my mistake.” Munger was notably humble, a fact recognized by all who came into contact with him. For Munger, humility and high ethical standards weren’t character traits but tools. Throughout his life, Munger relied on a web of deserved trust and relationships, both enhanced by likability. In other words, humility and high ethical standards breed likability and trust, cultivating solid relationships. Author Peter Brevelin said, “how to behave in life, the importance of ethics and honesty, how to approach problems but foremost how to reduce the chance of meeting problems” were the most important things he learned from Munger. Furthermore, humility and high ethical standards are bolstered by Munger’s reliance on mental models: Munger had a developed sense of his own skills and competencies, honed in through humility and self-reflection, allowing him to use mental models to unlock insights he couldn’t glean alone. He used these insights and his own high ethical standards to choose which companies to invest in. He said, “Good businesses are ethical businesses. A business model that relies on trickery is doomed to fail.”

Patience (and a long-term mindset) is one of the most powerful skills you can harness. Munger said, “The big money is not in the buying or the selling but in the waiting.” Investing is an inherently patient practice, but it was even more so for Munger. Munger invested in high-quality companies and believed in paying a premium for those who fit the bill. Those companies with durable competitive advantages are likely to turn to high returns on capital. Therefore, if the company grows steadily, the market will reward investors for creating and compounding value. Munger favored developed, strategic decisions over impulsivity, which he deemed fruitless in business. As a result, Munger selected very long holding periods to allow value to compound, which was an integral component of his business strategy. He wasn’t interested in impulsive, get-rich-quick investments, instead opting for those with long-term value and strong returns. Other companies and individuals looking to Munger can harness this value-creating tool: A long-term mindset breeds greater returns than a short-term one, and creates consistency, boosting trust and insight.

Read constantly. Munger said, “In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time—none, zero. You'd be amazed at how much Warren reads—and at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out.” Munger was an avid reader throughout his life and believed no smart person who didn’t do the same existed. Like Naval Ravikant and Taylor Swift, reading allowed Munger to continue learning constantly and cultivated his curiosity—these skills lent well to his work in investing. Additionally, those who read engage with different perspectives, fostering a growth mindset. In Munger’s opinion, the best investors should read 100 biographies instead of 100 books on investing. He believed that the best insights are cross-disciplinary and that this practice cultivates well-rounded understanding and perspective. His favorite books were The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success, Titan: The Life of John D. Rockefeller, Sr., and The Autobiography of Benjamin Franklin (check out this list of some of Munger’s other favorites). He said, “Develop into a lifelong self-learner through voracious reading; cultivate curiosity and strive to become a little wiser every day.”

Charlie Munger Quotes

On mental models: “It never ceases to amaze me to see how much territory can be grasped if one merely masters and consistently uses all the obvious and easily learned principles.”

On character: “Remember that reputation and integrity are your most valuable assets, and can be lost in a heartbeat.”

On the importance of reading: “There is no better teacher than history in determining the future... There are answers worth billions of dollars in 30$ history book.”

On maintaining a rational perspective: “Being rational is a moral imperative. You should never be stupider than you need to be.”

On seizing opportunity: “It takes character to sit there with all that cash and do nothing. I didn't get to where I am by going after mediocre opportunities.”

On self-reflection: “Knowing what you don't know is more useful than being brilliant.”

On philanthropy: “Those of us who have been very fortunate have a duty to give back. Whether one gives a lot as one goes along as I do, or a little and then a lot as Warren [plans to], is a matter of personal preference.”

On failure: “There's no way that you can live an adequate life without making many mistakes.”

Speeches

• LIVE: Charlie Munger Speaks at Daily Journal Annual Meeting -- Feb. 14, 2019— Long speech to Berkshire Hathaway shareholders.
• Munger Talk at Harvard-Westlake—Transcript of one of Munger’s key speeches.
• Charlie Munger Commencement Address - USC—Munger’s landmark commencement address at USC.
• CHARLIE MUNGER—Key links and speeches.
• Charlie Munger's advice on investing and life choices that make a person wealthy—Munger’s wealth accumulation advice.
• A Conversation with Charlie Munger and Michigan Ross - 2017—Munger speaks on investing and life.
• Charlie munger - Caltech 2008 DuBridge Distinguished Lecture in Beckman Auditorium—An extensive speech.
• “A Lesson on Elementary, Worldly Wisdom As It Relates to Investment Management & Business.” —Munger’s advice and investment philosophy.
• Charlie Munger on Mistakes To Avoid In Life | One of the Greatest Speeches Ever—Munger’s key advice.
• Charlie Munger's Full 1995 Speech at Harvard on the Psychology of Human Misjudgment—Munger’s address to Harvard students.
• Charlie Munger in final CNBC interview: You've got to learn how to recognize rare opportunities—Interview with CNBC.

Videos

• Charlie Munger – The Man Who Built Berkshire Hathaway | A Documentary—Key Munger documentary.
• From College Dropout to $750 Billion Conglomerate | Charlie Munger Biography—An animated documentary.
• Looking back at the life and legacy of investing legend Charlie Munger—CNBC examines Munger’s life.
• The Berkshire Empire: Hidden Truth of Buffett and Munger's Success | 2023 Documentary—Munger’s success.
• How Charlie Munger Made His First $1,000,000—Munger’s early career.
• Lasting Lessons From Charlie Munger | Highlights 1924-2023–Key lessons and moments.
• How Buffett Did It: Building Berkshire Hathaway—Munger and Buffett.
• Remembering Charlie Munger: Timeless Lessons from A Legendary Investor—Podcasters reflect on Munger’s influence.

Book Recommendations

• Damn Right!: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger—A look into Munger’s career.
• The Psychology of Human Misjudgement—Munger’s self-written long-form article covering philosophy and key insights.
• Seeking Wisdom: From Darwin to Munger, 3rd Edition–Munger’s wisdom.
• The Four Filters Invention of Warren Buffett and Charlie Munger—Munger’s approach to investments.
• Poor Charlie’s Almanack: The Essential Wit and Wisdom of Charles T. Munger—A collection of Munger’s speeches.
• Charlie Munger: The Complete Investor—A comprehensive biography.

Further Readings

• Charlie Munger’s got a billion words of wisdom—Munger’s wisdom, influence, and advice.
• Charlie Munger: Seven Sage Lessons on Investing and Life—LinkedIn user’s lessons from Munger.
• Full Transcript: Billionaire Investor Warren Buffett Speaks with CNBC’s Becky Quick on “Squawk Box”---Buffet speaks on Munger.
• ‘Part older brother, part loving father’: Warren Buffett insists his departed vice chair, Charlie Munger, was the ‘architect’ of Berkshire Hathaway all along–Fortune looks into Munger’s career.
• Charlie Munger lived in the same home for 70 years: Rich people who build ‘really fancy houses’ become ‘less happy’---Overview of Munger’s philosophy.
• The Amazing Life Story of Charlie Munger—An extensive personal profile.
• Charlie Munger, friend and business partner of Warren Buffett, dies—Munger’s CNN obituary.
• The Profile Dossier: Charlie Munger, the Master of Mental Models—An in-depth profile.
• Charlie Munger was a lot more than Warren Buffett’s sidekick—The Economist examines Munger’s influence.
• Charlie Munger Resource Page—A comprehensive profile.
• Charlie Munger Fast Facts—A brief timeline of Munger’s career.
• Interview with Peter Bevelin, author of Seeking Wisdom - from Darwin to Munger—Thoughts on Munger’s influence.
• Charlie Munger says cryptocurrencies should have been banned earlier—Munger’s crypto philosophy.
• Lessons on Adversity from Charlie Munger: Be a Survivor, Not a Victim—Munger’s key advice.
• The Day Charlie Munger Was Introduced To The World—Munger’s early history.
• Lessons to Learn from Legendary Investor Charlie Munger–Key lessons.
• The Untold Biography of Charlie Munger: A Mastermind Behind Berkshire—An extensive personal and professional profile.