Short read: Charlie Munger – He didn’t merely teach us how to invest, he showed us how to think

Charlie Munger, the vice chairman and lesser known partner at Warren Buffett’s Berkshire Hathway, passed away earlier this week, just short of his 100^th birthday. Investors who have aspired to follow on the footsteps of Berkshire have benefited from Munger’s nuggets of wisdom not just in investing but on life in general – much of it documented in his must-read biography – Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger. As one would expect, there are plenty of endearing eulogies written by several who learnt not just to invest but to think and live from the great man, such as this one from Jason Zweig in the WSJ or this from Richard Hughes Jones on how Munger thought about complexity in the real world and markets. But what stood out in terms of bringing out the essence of Munger was this short piece by Anand Sridharan.

“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.”

He illustrates this using Munger’s take on Valeant, the pharma company whose strategy of acquiring life saving drugs and hiking prices Munger called ‘deeply immoral’.

Anand captures Munger’s thinking in this paragraph: “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.”

And on bluntness: “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.”

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