Charlie Munger: From the Streets of Omaha to the Summit of Global Finance

Charlie Munger, who passed away on November 28, 2023, at the age of 99, was one of the giants of modern finance. Best known as Warren Buffett's right-hand man and vice chairman of Berkshire Hathaway, Munger embodied an investment approach based on wisdom, discipline, and a multidisciplinary outlook on life. His story is a blend of humble beginnings, hard blows of fate, spectacular recoveries, and a legendary partnership that redefined the world of investing. In this article, we explore his biography, his "collapses", his failures and crises,his great recoveries, and how he became a giant in the global financial landscape.

Origins and Education: From Omaha to World War II

Charles Thomas Munger was born on January 1, 1924, in Omaha, Nebraska, into a family of lawyers and judges. His grandfather, Thomas Charles Munger, had been a state representative and a federal judge appointed by Theodore Roosevelt. As a teenager, Munger worked at the Buffett & Son grocery store, owned by Warren Buffett's grandfather,a chance encounter with the Buffett world that would shape his future.

He enrolled at the University of Michigan to study mathematics, but dropped out in 1943 to enlist in the United States Army Air Corps during World War II. He served as a lieutenant and studied meteorology at the California Institute of Technology (Caltech) in Pasadena, which became his adopted hometown. After the war, thanks to the G.I. Bill, he took advanced courses at several universities. Initially rejected by Harvard Law School for lacking a bachelor's degree, he was admitted thanks to the intervention of a family friend, former dean Roscoe Pound. He graduated magna cum laude in 1948, excelling in the Harvard Legal Aid Bureau.

During his college and military years, Munger honed his card-playing skills, which he applied to business: "You have to learn to fold early when the odds are against you, or if you have a big advantage, bet big because it doesn't come often. Opportunity comes, but not often, so take it when it comes."

Early Career: From Law to Investments

After graduation, Munger moved to California and began working as an attorney at Wright & Garrett (later Musick, Peeler & Garrett). In 1962, he founded his own firm, Munger, Tolles & Olson LLP, specializing in real estate law. However, he soon shifted to real estate investments and development, partnering with Otis Booth.

In 1962, with Jack Wheeler, he formed the partnership Wheeler, Munger and Company, which operated on the Pacific Coast Stock Exchange. Between 1962 and 1975, it generated a compound annual return of 19.8%, compared to 5% for the Dow Jones Industrial Average. Munger acquired control of Mitchum, Jones & Templeton, taking it private at $3 per share and liquidating it after 10 years at $180, a gain of 60 times the initial investment.

He became chairman of Wesco Financial Corporation from 1984 to 2011, transforming it from a savings and loan company into a behemoth with a $1.5 billion stock portfolio in companies such as Coca-Cola and Wells Fargo. He also served as a director of Costco and chairman of the Daily Journal Corporation.

Collapses: Personal and Professional Failures

Munger's life was not without its challenges. On the personal front, his first marriage to Nancy Huggins, which began in 1945, ended in divorce in 1953. The couple had three children: Wendy, Molly, and Teddy. Teddy died tragically at the age of 9 from leukemia, an event that profoundly affected Munger. In the 1950s, a failed cataract surgery left him blind in his left eye; an ophthalmic sympathy also threatened his right, prompting him to learn Braille, though the problem eventually resolved itself.

On the professional front, the most obvious "collapses" came during the stock market crash of 1973-1974. His Wheeler, Munger partnership suffered losses of 32% in 1973 and 31% in 1974, leading to the firm's closure in 1976. Munger himself admitted to having made "stupid mistakes" in the past, emphasizing the importance of reviewing them to learn from them: "Review your past stupidities to learn from failure," he said in an interview. These periods of financial crisis coincided with a turbulent global economic environment, but they demonstrated Munger's resilience.

The Great Rebounds: From the Abyss to Success

Munger never gave up in the face of failure. After his divorce, he remarried Nancy Barry in the 1950s (she died in 2010), with whom he had four children and two stepchildren. Professionally, the losses of 1973-1974 were followed by spectacular recoveries. The liquidation of Mitchum, Jones at a multiple of 60 times the initial investment represented a triumphant recovery. Wesco Financial grew exponentially under his leadership, and Munger transformed the lessons he learned into an investment philosophy based on "elementary worldly wisdom": a network of mental models from different disciplines to solve complex problems.

His ability to bounce back stemmed from iron discipline and avoiding common mistakes. As he said in a 2023 interview, "My success is due to being cautious and avoiding standard failures." Munger emphasized ethics: "Good businesses are ethical businesses. A business model based on deception is doomed to fail." His humility,he lived in the same California home for 70 years and rejection of envy and waste helped him rebuild and prosper.

Warren Buffett's Right-Hand Man: A Legendary Partnership

Munger met Warren Buffett in 1959 through mutual friends in Omaha. At the time, Buffett ran investment partnerships inspired by Benjamin Graham, focusing on "waste cigars",undervalued companies. Munger, with his broader vision, influenced Buffett to shift toward buying "wonderful businesses at fair prices" instead of "mediocre businesses at low prices."

In 1978, Munger joined Berkshire Hathaway as vice chairman, a role he held until his death. Buffett described him as the "architect" of Berkshire's philosophy: "Charlie never tried to take credit for his role as creator, but he let me take the applause. Berkshire has become a great company. Even though I headed the construction team, Charlie should forever be credited as the architect."

Together, they transformed Berkshire from a textile company into a multibillion-dollar conglomerate, with investments in giants like Apple and Coca-Cola. Berkshire's annual meetings became cult events, where Munger dispensed wisdom with his sharp wit.

A Colossus of the Financial Collective: Munger's Legacy

Munger became a financial giant thanks to his impact on Berkshire, valued at over $800 billion at the time of his death, and his intellectual influence. His book Poor Charlie's Almanack (2005) and speeches, such as the 1995 Harvard address on the "Lollapalooza effect",where cognitive biases combine explosively,inspired generations of investors.

A fierce critic of cryptocurrencies ("harmful poison") and speculative trading, Munger promoted an ethical and rational approach. His philanthropy,donating hundreds of millions to universities like Michigan and Stanford,reflected his commitment to education. At the time of his death, his net worth was $2.6 billion.

Charlie Munger wasn't just an investor: he was a financial philosopher, a master of resilience. His life teaches that collapses are inevitable, but recoveries depend on wisdom and perseverance. As Buffett said, "Charlie was the closest partner and big brother anyone could ask for." His legacy continues to illuminate the world of investing.