Legendary investor and billionaire Charlie Munger, known as Warren Buffet’s right-hand man and who helped build the investment group Berkshire Hathaway, has died at the age of 99.
Munger’s family told Berkshire “that he died peacefully this morning in a California hospital,” according to a Nov. 28 company statement.
Munger, who served as vice chairman of Buffet’s empire since 1978, amassed a net worth of $2.6 billion and was regularly praised during his tenure at Berkshire for adopting a sound investment and stock-picking philosophy.
While Bitcoin and cryptocurrencies were not favorite investments for Munger and Buffet, who once called Bitcoin (BTC) “rat poison” and “rat poison squared,” crypto traders could still benefit from Munger’s insights from his 60 years of investing experience. Here are some investing approaches Munger swore by:
Only invest in what you know
Munger said Berkshire Hathaway often places stocks into one of three baskets when evaluating a potential investment.
“We have three investment baskets: yes, no and too difficult to understand.”
The latter might explain why Munger and Buffet never invested in Bitcoin and cryptocurrencies, but the message is that they avoided investing in things they didn’t know.
Buffet has previously admitted that he and Munger – both considered technology skeptics – were “too stupid to see the potential of Amazon’s e-commerce business in the 1990s” and underestimated the company’s founder, Jeff Bezos.
Nor has Berkshire invested in Microsoft or Google. “We screwed up,” Munger once said, reflecting on the company’s decision not to invest in Google.
Still, Berkshire stuck with the sectors it knew inside and out, such as banking and food and beverage, and made huge profits from investments in Bank of America, American Express, Coca-Cola Co and later Apple after it had initially decided not to invest in it.
Charlie Munger’s formula for success is simple and perfect:
– Spend less than you earn
– Invest wisely
– Avoid toxic people and toxic activities
– Delay gratification
– Never stop learning pic.twitter.com/8IiJNngsdg
— John LeFevre (@JohnLeFevre) November 28, 2023
Munger and Buffet also mastered the art of valuation, consulting a company’s balance sheet before making an investment decision, which Munger once called the only intelligent way to invest.
“All intelligent investing is value investing […] You have to value the company to value the stock.”
While blockchains and protocols often cannot be valued via a discounted cash flow model or other traditional methods, numerous insights can be gained from on-chain data – from the number of daily active users and transaction volumes to the total value locked (relative to to market capitalization) and net inflows and outflows, to name a few.
Temperament, not IQ, contributes more to investment success
Never one to jump headfirst into a new trend, Munger preferred to stick to the more conservative side of investing.
He has previously said that many people with “high IQs” make bad investors because they have terrible temperaments. “Great investors,” on the other hand, should be careful and think things through:
“The big investors are always very cautious. They think things through carefully. They take their time. They are calm. You are in no hurry. You don’t get excited. You just investigate the facts and find out the value. And that’s exactly what we’re trying to achieve.”
“You have to keep raw irrational emotions under control,” Munger said in another comment.
Related: Bitcoin is a “disgusting” product that comes “out of nowhere,” says Charlie Munger
Munger has been in the investment field for over 60 years and says that patience is also important when building wealth.
“The big money is not in buying or selling, but in waiting.”
Build conviction and stomach volatility
Munger has seen Berkshire’s investment portfolio decline several times over the decades, such as the 1987 Black Monday crash, the 2007-2008 financial crisis and, most recently, the COVID-19 pandemic.
He once emphasized that long-term investors must learn to stand by their investments when adverse macroeconomic conditions lead to market declines:
“If you are not prepared to respond calmly to a 50% market price decline two or three times a century, you are not fit to be a common shareholder and you deserve the mediocre result you will achieve.”
“There will be times when there will be great pain and other times when there will be a boom,” Munger said in a separate comment. “You just have to learn to live through them.”
Charlie Munger has died.
RIP to a legend
— Pomp (@APompliano) November 28, 2023
Munger was born on January 1, 1924 – which means he died 34 days before his 100th birthday.
“Berkshire Hathaway could not have been built to its current status without Charlie’s inspiration, wisdom and involvement,” Buffett said in a statement.
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