Charlie Munger

He didn’t merely teach us how to invest, he showed us how to think.

I am not qualified to write about Charlie Munger, let alone do justice to who he was. Like many, I have been his correspondence-course student for decades, virtually seated by his feet, listening to every word and trying unsuccessfully to apply his wisdom to my life and job. While I can’t find words to describe the loss I feel at his passing, I attempt a few disjointed words on what he meant to me.

Charlie Munger epitomized three traits – rationality, judgment, bluntness. He saw the world as it actually was, not as he wished it to be. He saw through the world, to distil its essence. He said it as he saw it. In doing so, he didn’t merely teach us how to invest, he showed us how to think.

My favourite illustration is Valeant. He saw it for what it actually was – an acquisitive orgy fuelled by debt and propped up by fraud. Unlike other credible investors, he wasn’t blinded by what it was portrayed as. He focused on what Valeant did, not what Pearson said. He dismissed Ackman’s request to meet Pearson as pointless. He laid bare the essence – this movie will end badly, as it always has. He said so as irreverently as possible, comparing Valeant to a sewer while apologizing to sewers. For investors whose main goal isn’t to get suckered, there’s no better case study than how Munger looked at Valeant.

Munger’s way of thinking went way beyond illustrations. At sixty seconds a pop, he laid bare entire domains for what they actually were. The absurdity of finance theory, especially in viewing risk via squiggly lines and Greek letters. The inability of social science academia to be grounded in reality. The futility of forecasts (“I’ve never seen Warren do a DCF”). The perversion of Wall Street and its incentives. His influence wasn’t merely Via Negativa, that of spotting chicanery. The greatest positive influence on Berkshire Hathaway (and on investing in general) was Munger’s nudge away from cigar-butts towards wonderful businesses, held for long. Once exposed to Munger’s way of thinking, the world never seemed the same again.

The last attribute – bluntness – is all the more valuable in a world plagued by political correctness. In a context where we walk on eggshells to choose the right word and cancel others for using the wrong one, having someone as blunt as Munger is cathartic. Yes, crypto is poison, stockmarket is a casino and a transaction tax could well save millions of day-traders from penury. Having someone as credible as Munger call out all that’s stupid and evil about our world is priceless.

In closing, my favourite bit from Berkshire Hathaway’s annual meeting isn’t Munger saying “I have nothing to add”. It is Buffett saying “Is there anyone we haven’t offended yet” after Munger has had something to add. Truth hurts but needs to be said. There has never been a greater truth-teller than Charlie Munger. He may no longer be with us, but “What would Munger say” will stay with us forever as the best way to think through any situation.