Damn Right! Behind the Scenes With Berkshire Hathaway Billionaire Charlie Munger

Munger

“Teaching people formulas that don’t really work in real life is a disaster for the world.”

“Why shouldn’t we do more of what works well for us and what’s less complicated?”

“There are huge advantages for an individual to get into a position where you make a few great investments and just sit back, you’re paying less to brokers, you’re listening to less nonsense.” – All three quotes by Charlie Munger

Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger is an excellent biography by Janet Lowe. As the title of the book state, the book is obviously about Charlie Munger and there’s also a lot on Warren Buffett since it’s hard to separate the two. Even though Charlie Munger is associated with investing, this book is not a how-to investing guide.  This is a book on Munger’s life, background, up-bringing, his misfortunes, his failures and success, his philosophy and specific episodes in his life. When we think of Munger we see success and money but there’s some pretty dark moment in his life (death of his son, lost of an eye, divorce etc…) Known for his investing success, Charlie is actually many other things. He’s a businessman, lawyer, architect, and developer among many things.

There’s no need to introduce Charlie Munger, the 92 year old Vice-Chairman of Berkshire Hathaway (BRK). When you think of Berkshire Hathaway, the first thing that comes to mind is Warren Buffett. Charlie is generally portrayed as the guy who “fine tuned” Warren Buffett’s investing strategy from cigar butt investing (deep value) to buying high-quality businesses even if they were more expensive. The early version of Buffett the investors would try to find undervalued beat-up companies that had one more puff out of them. His approach was heavily model on Ben Graham‘s value investing approach, the father of modern security analysis. After a while, especially after Warren Buffett’s portfolio grew in size, it became harder to exploit this cigar butt strategy (e.g. tripling your money on a $100 milion market cap company won’t really affect your returns if you manage $100 billion). So Charlie was one of few individuals that had an influence on Warren and made him a better investor. Without taking anything away from Buffett, I don’t think BRK would have been this investment machine it is today without Charlie. I doubt the purchase of companies like GEICO, American Express or Coca-Cola would have happened without Munger’s influence. (However Ben Graham did own GEICO and made more with it that all his other trade combined, some a even suggesting that Graham was starting to change towards the end of his career, that’s ok to pay a premium for a high-quality earning stream, but don’t quote me on it).

There’s more to Charlie Munger than a guy that tweaked Buffett’s investment approach. I think the media and the investment community in general is under-covering him. He’s the 2nd half of BRK but he gets a fraction of the attention Buffett gets. I think that’s the way he wants it. Buffett is the showman, the entertainer, the teacher and it’s my belief that Munger is perfectly fine with that. Munger isn’t the showman Buffett is, though he can be enormously entertaining. For what many considers the “brain” behind Buffett, I would study Munger just as much as Buffett if you want to become a better investor.

When I think of Charlie Munger, the following words comes to mind: genius, rational thinker, logic, no-nonsense, mental models, multi-disciplinary, life lessons, philosophy, funny, avid reader, brilliant thinker, ethics, morals, discipline, and patience.

On investing, Charlie doesn’t rely on gut feel; he uses a range of what he calls mental models to help assess the risks and opportunities. He knows a lot about a lot. When it comes making a great investment, there’s more than just having great numbers or a robust financial model, you also need to look at the proposition from many angles.

“When I urge a multidisciplinary approach- that you’ve got to have the main models from from a broad array of disciplines and you’ve got to use them all – I’m really asking you to ignore jurisdictional boundaries. If you want to be a good thinker, you must develop a mind that can jump these boundaries.

You don’t have to know it all. Just take in the best big ideas from all these disciplines. And it’s not that hard to do.”  

The book was published in 2003 and Janet Lowe approached him in 1997. I estimate that Munger was in mid to late 70s when it was written. Since a lot of time has passed since the content of the book was written, don’t let that steer you away. This book is well-researched and rich in content. It’s one those books that you highlight all over the place and that you go back to once in a while. Munger also contributed directly. He didn’t want to get involved at first and he didn’t think it would sell many copies.  The Munger family didn’t a biography of him and they didn’t want their privacy slipping away. Janet told Charlie that the book was going to happen with or without his cooperation because she had a contract to deliver the book, so he decided to contributes since the book would have been much better.

Enjoy!

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