Warren Buffett: I'm the "contractor" and Munger is the "architect"

It's time for Warren Buffett's annual shareholder meeting, and on May 4, 2024, Berkshire Hathaway's annual shareholder meeting will be held again in Omaha, USA.

Although Warren Buffett's position is still the focus of market attention, the story between him and his late Charlie Munger (who passed away on November 28, 2023 local time in the United States) is also talked about by many people.

Weatherman to investment guru

Charlie Munger was born on January 1, 1924, in Omaha, Nebraska, USA, just a few hundred feet from Warren Buffett's current address. As a teenager, Munger worked at Buffett's grandfather's grocery store, but they didn't know each other.

At the age of 17, Munger attended the University of Michigan to study mathematics. In his sophomore year, he joined the military a year after Pearl Harbor. During his military service, he studied meteorology at the University of New Mexico and the California Polytechnic University, but did not officially graduate. Later, he worked in Alaska, served as an army weatherman, did not really take part in combat. After the war, thanks to the help of his family, he entered Harvard Law School without completing his undergraduate degree.

In 1948, Munger graduated magna laude from Harvard Law School, became a lawyer, and began investing in securities and engaging in business with friends and clients. Later, Munger founded a small construction company that focused on bungalow construction projects and earned his first million dollars.

In 1962, Munger used the money he earned to co-found a securities company, Wheeler Munger & Company. In 1965, at the age of 41, Munger left the firm to focus on investment. Then, he partnered with Warren Buffett and gradually became a world-renowned investment master.

We met in early 1959

Although Munger worked at Buffett's grandfather's house as a teenager, he met Buffett in 1959, when Munger had left Omaha for a long time and settled in Los Angeles. According to Munger's biography "Poor Charlie's Book: Charlie Munger's Wisdom Sayings", Buffett and Munger met at a dinner party in Omaha that year and hit it off, when Munger was 35 years old and Warren Buffett was 29 years old.

After this brief meeting, although the two lived in two places, they always kept in touch with each other. According to Warren Buffett, whenever there was any major decision at that time, Munger's advice would be sought. For example, in 1972, Warren Buffett and Munger acquired the Joy Candy for $25 million, which later became a classic case and brought more than $2 billion in investment income to Berkshire. In the memories of the two and media reports, Buffett was initially a little hesitant to acquire Joy Candy, but finally changed his mind under Munger's persuasion, which also gave Buffett a new perspective on the previous investment method of "picking up cigarette butts".

Although they often communicate, for a long time after their first acquaintance, the two were at best informal partnerships, and their careers were still based on their own battles. In the 70s of the 20th century, the U.S. stock market fell into a frenzy, first in 1970-1972 in the "beautiful 50" market, then in 1973 and 1974, and then in the small ticket market led by technology stocks. Munger's company lost more than 30 percent of its profits in 1973 and 1974, losing more than half of its previous profits. Fortunately, in 1975, Munger ushered in a significant earnings rebound. After this "big upheaval", Munger decided not to go it alone, liquidated his partnership in 1975, and invested money in Warren Buffett's Berkshire Hathaway.

They officially worked together in 1978

In 1978, Munger became vice chairman of Berkshire Hathaway, and Munger and Buffett began to work together officially. Under the leadership of Warren Buffett and Charlie Munger, Berkshire Hathaway has made a big splash in the investment industry, with Coca-Cola, Freddie Mac, American Express, Procter & Gamble, Walmart, Johnson & Johnson, BYD, Apple, Bank of America, Occidental Petroleum, etc.

In the more than 40 years of formal work together, Munger and Buffett have also set the best investment record in history - the book value of Berkshire Hathaway's stock once wrote a new investment myth with an average annual compound return of 20.3%. Munger once commented on Warren Buffett, "In the past nearly 50 years of long-distance investment, he has always shown superhuman intelligence and youthful and increasing vitality." And Warren Buffett once praised Chamenger, "He is the smartest and best person I have ever met", and also said that "our ideas are so similar, it is simply creepy".

In 2018, Warren Buffett said in an interview: "We've never had a quarrel in the entire time we've known each other, and it's been almost 60 years now." "Charlie gave me the best gift a person could give to someone else. He made me a better person...... Over time, he gave me a lot of good advice...... I'm better off because of Charlie. ”

Architects and contractors

In addition to daily memories, Buffett has also talked about this old partner many times in shareholder letters over the years. For example, in the latest 2024 letter to shareholders, because of Munger's death, Buffett deliberately wrote a page of text entitled: Charlie Munger - Berkshire's architect. Buffett said Charlie was Berkshire's "architect" and I was the "general contractor," building day in and day out for his vision.

In a 1982 shareholder letter, Warren Buffett wrote, "When it comes to making business decisions, Charlie and I can substitute for each other. Distance doesn't stand in the way for us: we always think it's more efficient to make phone calls than to last half a day at a committee meeting. ”

In a 1989 shareholder letter, Warren Buffett joked about the relationship between the two as follows: "Our vice chairman, Charlie Munger, has always emphasized that mistakes should be studied more than success in other aspects of business and life. He's doing it in the spirit of, 'I just want to know where I'm going to die so I'm never going there.'" You can quickly see why we have a good team, Charlie loves to study mistakes, and I provide him with a lot of material. ”

In a 1995 shareholder letter, Buffett mentioned Munger's significant influence on the company's operational strategy: "Here at Berkshire, we all believe in Charlie's maxim of 'only tell me the bad news, because the good news will work its own.'" We also expect our managers to exhibit this behavior when conducting debriefings. ”

In 2000, Buffett wrote in a shareholder letter: "Charlie thinks better about business economics and investment matters than anyone I know, and I have learned a lot over the years by listening to him." ”

In a 2011 shareholder letter, Warren Buffett said that he often tried to see the future in 10 or 20 years when making acquisitions, but Munger was more far-sighted than himself, and sometimes did not agree with Buffett's views during the discussion of the acquisition.

In 2014, Warren Buffett wrote about how the two men handled their differences: "Charlie has a wide range of intellect, an amazing memory, and a firm point of view, and I myself am not indecisive, and we sometimes disagree. However, in 56 years of cooperation, we have never had an argument. When we have a disagreement, Charlie usually ends the conversation like, 'Warren, think about it carefully, and you'll agree with me because you're smart and I'm right.'" ’”

In the 2022 annual shareholder letter, Buffett once again went out of his way to praise his good partner: "Charlie and I basically think in a similar way. But I need to explain things in a whole page, and he can summarize them in one sentence. Moreover, his version always has clearer reasoning, and more ingenious – one might interject – expression. ”

Editor-in-charge: Wang Shidan | Review: Li Zhen | Supervisor: Wan Junwei

(Source: Oriental Fortune Network)