Good day everyone,
I hope you are all well and had an excellent week, welcome to CryptoGod-1’s blog on all things crypto. Today I will be looking at the accomplishments during the esteemed life of Charlie Munger, who died on Tuesday the 28th of November 2023. While not always considered a welcome figure in the cryptocurrency space, he is still a man we can all learn from.
Charlie Munger
The long-time business partner of Warren Buffett and sharp-witted vice chairman of multinational holding company Berkshire Hathaway, Charlie Munger, has passed away on the 28th of November 2023 at 99 years of age. He was Warren Buffett's most trusted confidante and leaves a void at Berkshire Hathaway which, according to investors, will be impossible to fill despite the conglomerate's well-established succession plan. Munger is said to have died peacefully at a hospital in California where he lived and no cause of death was given, although one must assume old age played its part considering Munger would have turned 100 in January 2024.
Charlie Munger was born on the 1st of January 1924 in Omaha, Nebraska, and studied meteorology while serving in the army during the second world war. After that he graduated from Harvard Law School and went on to train as a lawyer whose name still sits atop Los Angeles law firm Munger, Tolles & Olson. He met Warren Buffet in 1959, and Munger formed his own Law firm in 1962. In the same year Buffett started buying stock in the textile maker Berkshire Hathaway and began to push Munger into making the leap into the investment world. Once Munger set up his own investment partnership known as Wheeler, Munger & Company, his returns were phenomenal with an average annual return of 24.3 per cent between 1962 and 1975, compared with a 6.4 per cent return for the Dow Jones Industrial Average.
Munger ultimately joined Berkshire Hathaway’s board in 1978 and was considered a key figure in turning Berkshire into an investment powerhouse, and this was in part achieved by convincing Buffett to move away from his strategy of buying struggling companies cheaply, regardless of their business prospects. Warren Buffett, Berkshire’s chief executive, said in a statement:
"Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation.”
Both Buffett and Munger were respected and adored by investors around the world, with many of them flocking to Berkshire's annual shareholder weekends in Omaha, Nebraska, to hear the duo’s folksy wisdom on investing and life in general. Munger's proclamations, which were often much like those of Buffett's, were generally quotable takedowns of bad investments and there was one asset in particular which caused ire for Munger - Bitcoin.
Munger famously stated in 2013 that "I think it's rat poison" when Bitcoin was priced at around $150. Five years later when asked to revisit his comments, when Bitcoin was trading at around $9,000, he noted "So it's more expensive rat poison."
This was Mungers investing strategy in general, in which he was known for steering Buffett away from purchasing what Buffett called "cigar butts" - mediocre companies that had a puff of smoke left in them and were available for purchase at very cheap prices - and instead favoured quality. When assessing Bitcoin, Munger noted that while some Bitcoin investors had made large returns, he called them "idiot booms" that harm the United States.
Back in 2018 Munger was noted as commenting on Bitcoin with the same ire he had previously, stating:
"In my life, I try and avoid things that are stupid, and evil, and maybe look bad in comparison with somebody else. Bitcoin does all three. It's stupid because it's very likely to go to zero; it's evil because it undermines the Federal Reserve system... and third, it makes us look foolish compared to the communist leader in China. Xi Jinping was smart enough to ban Bitcoin in China... we are a lot dumber."
Although Bitcoin went on to hit new all time highs of around $65,000 in November 2021, Munger maintained his stance and disdain of cryptocurrencies. In early 2022 he noted that he felt crypto was comparable to a venereal disease and deemed it beneath contempt when he stated:
"I just think the whole damn development is disgusting and contrary to the interests of civilization."
Even once Munger reached 99 years of age his view on cryptocurrency did not waver, garnering more condemnation at the Daily Journal Corporation annual meeting earlier in 2023:
"Sometimes I call it crypto crapple and sometimes I call it, well, crypto shit. It's ridiculous that anybody would buy this stuff. It's asinine, it's not slightly stupid it's massively stupid, and it's very dangerous. The governments were totally wrong to permit it. I'm not proud of my country for allowing this crypto shit, it's worthless, it's no good, it's crazy, it'll do nothing but harm."
As expect these comments from Munger antagonised the cryptocurrency community but many forget that his candor was long part of Berkshire's folksy public image. He portrayed himself offering investment wisdom almost as quotable as the "Oracle of Omaha" (Buffett) while not being afraid to call out what he considered bad or unwise investments.
Warren Buffett and Charlie Munger
Berkshire Hathaway's Future
Following Munger’s death Berkshire and its hundreds of thousands of shareholders have moved closer to the dreaded era in which an investment empire worth nearly $800bn is steered by a less familiar group of leaders. While the business has spent more than a decade preparing for the moment that Munger and Buffett moved on and handed over the reins, it is still with a heavy heart that they have witnessed Munger passing and know Buffett will be leaving eventually.
Munger was the one who accidentally revealed that Greg Abel, who had risen through Berkshire’s energy business and is now vice-chair of its sprawling non-insurance unit, would one day succeed the pair. Berkshire has installed managers it could trust to keep the company going, which has included Abel being surrounded by a team handpicked by Munger and Buffett. Within the team are a number of value investors, both on the board of directors and the team that decides how Berkshire invests its $319bn stock portfolio. These are the people who will not only ensure the future of the business, but also share a similar approach to securities analysis as the two billionaires. Currently both Greg Abel and Ajit Jain, have day-to-day oversight of Berkshire's non-insurance and insurance businesses while working as two other vice chairmen in the company.
According to Thomas Russo, a partner at Gardner Russo & Quinn in Lancaster, Pennsylvania, and long-time Berkshire shareholder:
"It's a shock. It will leave a big void for investors who have modelled their thoughts, words and activities around Munger and his insights."
During his time as the vice-chairman, Munger was consulted frequently on large takeovers. In some cases he even negotiated the details himself, according to people who sat across the table from him. His long held passion for engineering helped lead the company to a number of its investments, including in Chinese carmaker BYD, means he was far more than Buffett’s second-in-command and was often a driving force behind investments. Replicating both Mungers and Buffett's success will be the most difficult task for Abel and the team going forward. With Abel set to become chief executive once Buffett is no longer in charge, it will be Buffett's son Howard who will step into a non-executive chairman role while one or two portfolio managers would take over investments.
Berkshire Hathaway Inc.
Lessons to be Learnt
While Munger often disassociated himself with the crypto community by brandishing the digital asset as "rat poison," he is also a man who spent over 60 years investing and has plenty of knowledgeable experience to learn from, especially for cryptocurrency traders. Munger had some trusted rules he swore by, which included:
Only Invest in what you Know
Munger noted the importance of Berkshire Hathaway categorising stocks into one of three groups when evaluating a potential investment. These were:
- Yes
- No
- Too Tough to Understand
Berkshire stuck to the sectors it knew inside out, such as the banking and food and beverage sectors, making huge profits from investments in Bank of America, American Express, and Coca-Cola. Both Buffett and Munger were always considered as tech sceptics, and they admitted as much when they passed on the opportunity to invest in the potential of Amazon’s e-commerce business in the 1990s. Berkshire didn’t invest in Microsoft or Google either. but they did later invest in Apple after initially deciding not to invest in it.
Another key aspect of understand what you're investing in would require mastering the art of valuation. Berkshire did this by interrogating a firm’s balance sheet before making an investment decision, which Munger once said is the only intelligent way to invest.
Given their lack of tech knowledge mixed with the difficulty in valuing a blockchain or protocol with a discounted cash flow model or other traditional methods, it is clear to see why they were so against cryptocurrencies. However, the key message is avoiding investing in what one does not know or understand.
Temperament, not IQ, is the Biggest Contributor to Investment Success
Munger noted in the past how many “high IQ” people are terrible investors because they have terrible temperaments. He noted how great investors are those who tread with caution and think things through. Munger would be the first to point out how he never dove headfirst into a new trend and would always remain on the more conservative side of investing. Munger says patience is also of great importance when accumulating wealth. Some of his key quotes on the topic include:
“The great investors are always very careful. They think things through. They take their time. They’re calm. They’re not in a hurry. They don’t get excited. They just go after the facts, and they figure out the value. And that’s what we try to do. You need to keep raw irrational emotion under control. The big money is not in the buying or the selling, but in the waiting.”
Build Conviction and Stomach Volatility
Munger had been around and seen a lot, more than most of us. Over the years he developed a skill that he stressed for long term investors to learn. Investors must stand by their investments when unfavourable macroeconomic conditions trigger market downfalls. This is from a man who witnessed Berkshire’s investment portfolio dip several times over the decades, including during the Black Monday crash in 1987, the financial crisis from 2007 to 2008 and most recently, the COVID-19 pandemic which began in 2020. He noted as saying:
“If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century, you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get. There are going to be periods when there’s a lot of agony and other periods when there’s a boom. You just have to learn to live through them.”
Rest in Peace Charlie Munger.
Have a great day,
Peace. CryptoGod-1.
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