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Charlie Munger, the sharp-witted vice-chair of Berkshire Hathaway and investment partner of Warren Buffett, died at the age of 99 on Tuesday morning at a California hospital, the US investment conglomerate said.
Munger, a trained lawyer whose name still sits atop Los Angeles law firm Munger, Tolles & Olson, was instrumental in turning Berkshire into an investment powerhouse, in part by shifting Buffett away from a strategy of buying struggling companies cheaply, regardless of their business prospects.
“Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation,” Buffett, Berkshire’s chief executive, said in a statement.
Munger’s death brings Berkshire and its hundreds of thousands of shareholders closer to an era in which an investment empire worth nearly $800bn is steered by a less familiar group of leaders.
Berkshire has spent more than a decade preparing for this moment and the day that Buffett, 93, hands over the reins. It was Munger 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.
Abel has been surrounded by a team handpicked by Munger and Buffett. It includes a number of value investors, both on the board of directors and the team that decides how Berkshire invests its $319bn stock portfolio, who share a similar approach to securities analysis with the two billionaires.
Despite the vice-chair title, Munger was far more than Buffett’s second-in-command and was often a driving force behind investments. Before sitting down for an interview with the Financial Times this year at his home in Los Angeles, he was scrutinising a potential real estate development deal.
Munger was consulted frequently on large takeovers and in some cases negotiated the details himself, according to people who sat across the table from him. His passion for engineering helped lead the company to a number of its investments, including in Chinese carmaker BYD.
Munger was born on January 1 1924 in Omaha, Nebraska. A survivor of the Great Depression, he studied meteorology while serving in the army during the second world war before graduating from Harvard Law School.
Munger met Buffett in 1959 and formed his law firm in 1962, the same year that Buffett started buying stock in the textile maker Berkshire Hathaway.
Buffett pushed Munger repeatedly to make the jump into the investment world, telling him at one point that “law was fine as a hobby, but he could do better”. Munger eventually set up his own investment partnership known as Wheeler, Munger & Company. The returns, like Buffett’s, were stellar. Munger’s partnership earned average annual returns 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.
“It took Charlie Munger to break my cigar-butt habits and set the course for building a business that could combine huge size with satisfactory profits,” Buffett wrote to shareholders in 2015. “The blueprint he gave me was simple: forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.”
The pair’s investing acumen and ability to weather market downturns drew tens of thousands of shareholders to Berkshire’s annual meeting in Omaha. Munger told attendees at this year’s meeting: “I think the best road ahead to human happiness is to expect less. I think it’s going to get tougher.”
In an address to Harvard students in 1995, he focused on 24 misjudgments that he believed affected decision makers.
“The human mind is a lot like the human egg, and the human egg has a shut-off device,” he said. “When one sperm gets in, it shuts down so the next one can’t get in. The human mind has a big tendency of the same sort. And here again, it doesn’t just catch ordinary mortals, it catches the deans of physics.”
Despite his and Berkshire’s successes, Munger — whose fortune Forbes valued at $2.6bn — was cautious about the prospects for other investors.
“We were a creature of a particular time and a perfect set of opportunities,” he told the FT this year, adding that he had lived during “a perfect period to be a common stock investor”.
“It’s the nature of things that a very intelligent man working hard maybe gets three, four, five really good long-term opportunities of buying great companies at a cheap price,” he said. “It happens rarely.”
Additional reporting by Peter Wells in New York