Article Supported from Delong Yang, chief economist of Qianhai Kaiyuan Fund,
I woke up this morning to the sad news of the passing of investment guru Charlie Munger. Over the past 8 years, I have attended the $Berkshire Hathaway(BRK.A)$ $Berkshire Hathaway(BRK.B)$ ‘s Annual Shareholders Meeting in Omaha five times. Buffett and Munger, two of the best investment partners, have achieved unprecedented returns over their nearly 60-year investment careers. At the same time, they have selflessly shared their value investing philosophy with investors worldwide, making them truly remarkable. Attending the Berkshire Hathaway Annual Shareholders Meeting and listening to Buffett and Munger speak so eloquently and insightfully left a deep impression on me. It played a crucial role in shaping my mature value investing philosophy and promoting value investing to domestic investors. Being there, I could really feel the charm of value investing. Over 40,000 investors from different countries gathered together, filling the entire Omaha arena to capacity - that's the power of value investing.
As Buffett's right-hand man, Munger played a vital role in shaping Buffett's value investing philosophy. Buffett learned from the father of value investing, Benjamin Graham, who advocated for low valuations and buying cheap companies regardless of their fundamentals. Buffett called this the "cigar butt" approach and had some early success with it, but he owed his ultimate transformation to Munger.
Charles T. Munger, Much More Than Warren Buffett's No. 2, Dies at 99 - The New York Times
In the 1970s, Buffett invited Munger to join Berkshire Hathaway and partner with him in investing. Munger even gave up his law firm to focus exclusively on investing. Munger told Buffett, "If you only buy cheap companies, you may achieve some success, but to really make it big, you must buy great companies." His exact words were, "You're better off buying a great company at a fair price than a fair company at a great price." This transformed Buffett's entire investment philosophy. Since then, Buffett has purchased a series of great companies, sometimes not at bargain prices, but that's what made his miracle possible. Buffett once said, "Since meeting Charlie, I have truly evolved from an ape to a man."
After Munger's passing, Buffett was deeply grieved, quickly responding, "Without Charlie's inspiration, wisdom and involvement, Berkshire Hathaway wouldn't be where it is today." This sums up Munger's contributions. At the meetings, Buffett and Munger would answer investor questions together. Buffett would usually speak first, then ask, "Charlie, do you have anything to add?" Most times, Munger would say, "I don't have much to add." But when Munger did speak, the entire room would hold their breath and fall silent, afraid to miss a single word. Almost everything Munger said was golden advice, profound wisdom - all the attending investors felt his intelligence.
In "Poor Charlie's Almanack," there's a story about a reporter asking Buffett's son, "Is your dad smarter or is Charlie smarter?" His son replied, "That's a tough question for me. He's my dad, so I can't say he's not smart, but in reality, Charlie is indeed smarter." Munger was indeed a very wise man. He proposed the Latticework of Mental Models, advocating for multidisciplinary perspectives rather than just one, for more comprehensive analysis. That's why Buffett called Munger the "say no" man - many times, Munger would reject some of Buffett's major investments. Buffett said that it was precisely because Munger rejected 90% of his investments that he succeeded and avoided many pitfalls. Rejecting those 90% didn't affect his investment returns because the remaining 10% were truly great businesses, great companies.
It was someone like Munger, with critical thinking and comprehensive knowledge, who enabled Buffett to achieve such great success. Together, Buffett and Munger form arguably the most successful partnership and CP in the investment world. Admirably, despite working together on investments and building Berkshire Hathaway, while Buffett's wealth stands at over $100 billion, Munger had only $2.5 billion at the time of his passing - partially because he donated 75% of his shares. In reality, Munger's true net worth should have been $10 billion, still only a tenth of Buffett's. At one shareholders' meeting, an investor asked the pointed question to Munger: "Why, doing similar value investments and working on Berkshire Hathaway together, is your net worth only a fraction of Buffett's?" Munger humorously responded, "From what I know, others in the boardroom are poorer than me." They have a tenfold difference in net worth, but they were able to grow their business together with great integrity. I believe this is an exceptionally rare quality. Other partners would have likely split up or called it quits due to such disparities in wealth and shareholding. Indeed, their wealth gap is reflected in their shareholding differences. This aspect alone showcases Munger's expansive character and makes him someone we should admire.
Like Buffett, he donated most of his wealth to charity. Buffett said he would donate 99% after death, which would be carried out by his three children, while Munger had donated 75% before his death. Munger had a great sense of humor. "I have deliberately reduced my net worth, and my idea is that I am not immortal and I don't need it where I go," he said. " This also shows us Munger's wisdom, that is, to look down on life and death, to see through the nature of wealth, to let money do our efforts, not our efforts to make money, to treat wealth correctly, to let wealth benefit society. This point is also worthy of deep consideration by all entrepreneurs and everyone. I believe the best way to honor Munger is by emulating him and practicing the value investing philosophy.
Munger played a pivotal role in shaping Buffett's investment philosophy, and his advice was invaluable in Buffett's daily investment decisions. Therefore, Munger's passing must be deeply painful for Buffett, who lost both a cherished friend and his most trusted advisor. This will undoubtedly have some impact on Buffett's future investments. At 93, Buffett has chosen his successor, but investing remains a highly subjective matter. With Munger's passing, there are concerns about the future of Berkshire Hathaway's investment and operations, especially if Buffett were to leave us one day. Fortunately, Buffett is still in good health and can continue investing, but the loss of Munger's support will undoubtedly affect him and might worry some investors. However, value investing is a relatively long-term strategy, not short-term trading, and typically involves holding stocks for extended periods. So, while Munger's passing might not have an immediate impact on Berkshire Hathaway's operations, it does have some profound implications in the long run.
Following Munger's death, we should pay closer attention to Buffett's investment directions and philosophies. Each quarter, Berkshire Hathaway's reports are widely anticipated and studied, especially the annual letter to shareholders disclosed in February, which investors treat as an investment bible. Buffett has indicated that the annual shareholders' meeting will continue next May. This year, at the shareholders' meeting, Munger mentioned that he would be turning 100 next year, and his health was declining, so he wouldn't be attending next year's meeting. Sadly, his words have come true. I still plan to join other entrepreneurs at the Berkshire Hathaway annual meeting in Omaha next year, though it might just be Buffett and the other two investment managers on stage. Despite losing Munger, I believe Buffett will continue championing value investing, being a shareholder of great companies, and leading the global value investing trend without any alterations. With his wisdom, I'm confident he will overcome his grief quickly, turn it into strength, and carry on investing. As one of the world's largest companies by market capitalization and the only person to become the world's richest through stock investment, Buffett is a testament to the power of value investing. I believe the appeal of value investing will only grow stronger despite Munger's passing, but will shine through history, which will make us more determined to believe in value investment and learn value investment.
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