Dear Fellow Investors and Friends

If you’re new here, welcome! And welcome to everyone else, of course. I really appreciate you taking the time to read this.

Today is Thursday, the 30th of November, the 334th day of the year; 31 days remain until the end of the year. And only 32 days until Charlie Munger, the longtime vice chairman and second-in-command to Warren Buffett at Berkshire Hathaway, would have turned 100. Sadly, he passed away on Tuesday.

On his passing, Warren Buffett said “Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation.”

This is the understatement of the year.

Charlie Munger probably had one of the greatest investment minds in the history of the world. Before Charlie got involved, Warren Buffett was a dyed in the wool Graham-and-Dodd Value investor, buying shares in any business if they were cheap. Mr. Munger persuaded him to rather focus on buying shares in great businesses, at fair prices. This process began as early as 1971, when Mr. Munger got Mr. Buffett to acquire See’s Candies. One could argue that almost all of the outsize return that Berkshire Hathaway has generated over the decades since then was due to his influence.

To put this influence into perspective, since 1965 when Mr. Buffett acquired the textile producer Berkshire Hathaway, its NAV per share has compounded by 19,8% p.a. compared to the 9,9% p.a. of the S&P500 index. That annual outperformance increment of 9,9% means that $100 invested with Berkshire in 1965 is now worth $3,5mn – while $100 invested in the S&P500 is worth a mere $23,480 today.  It boggles the mind. It’s no surprise Einstein regarded compounding as the 8th wonder of the world.

But to be a great investor, you also must have more than a passing knowledge of many other disciplines, principally among them human psychology. As his writings and talks show, Munger was a master at this.

I am fortunate enough to have one thing in common with Warren Buffett – Charlie Munger played a massive role in the development of my thinking, not only as an investor, but also as a person. He was far less successful in my case than he was with Mr. Buffett, but had an impact, nevertheless. As a result, I’m going to depart from the normal format of this letter, to dedicate it to the memory of Charles T. Munger.

Quotes of the day

Today’s quotes are some of my favourites from him:

Show me the incentives and I will show you the outcome.”

“There are two things in life you should never do:

  1. Never, ever feel sorry for yourself
  2. Never have envy”

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero… You’d be amazed at how much Warren reads — at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”

“Acquire worldly wisdom and adjust your behavior accordingly. If your new behavior gives you a little temporary unpopularity with your peer group… then to hell with them.”

“Never, ever tell anyone about your problems, 90% of the people really don’t care… The other 10% are glad you have them.”

“I’m right, and you’re smart, and sooner or later you’ll see I’m right.” (This, he apparently once said to Warren Buffett)

“Let me use a little inversion now. What will really fail in life? What do we want to avoid? Some answers are easy. For example, sloth and unreliability will fail. If you’re unreliable it doesn’t matter what your virtues are, you’re going to crater immediately. So, faithfully doing what you’ve engaged to do should be an automatic part of your conduct.”

My friend Dean Gouws, who is the CIO at Credo in London, posted this picture on X yesterday:

Piet in Omaha

This was taken in Omaha, May 2004, if I’m not mistaken. Deon is the young man second from the left. Also, there was Thys Visser far left (the then CEO of Remgro and now departed), Laurie Dippenaar, founder of RMB (fourth from right) and quite a few other South African investment luminaries. I’m also in the picture, after mistakenly joining this group instead of the one I was going to meet at the bar. I’m quite proud of the moment, though.

Charlie Munger is the friendly-looking guy front right.

Yesterday, the wall Street Journal posted this well-written obituary.

It gives a great insight into the man and his influence on Warren Buffett (who called hm the “abominable no man”) and Berkshire Hathaway. Saying no is a superpower, and Charlie Munger had that in spades.

Shane Parrish of the Farnam Street blog has collected almost everything you would ever want to know about who Charlie Munger is. You’ll find it here.

Some good advice from Mr. Munger, as quoted in the blog:

“Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Systematically you get ahead, but not necessarily in fast spurts. Nevertheless, you build discipline by preparing for fast spurts. Slug it out one inch at a time, day by day. At the end of the day – if you live long enough – most people get what they deserve.”

And this is a very, very comprehensive overview of his best writing. But be warned: it is 349 pages of speeches, essays, and Wesco annual meeting notes (Wesco being a company he chaired, until it was taken over by Berkshire Hathaway). Sidenote: I was fortunate enough to attend one of the last shareholder meetings of Wesco, held in Los Angeles. One of the questions at the meeting was a very long-winded off-topic self-promotional diatribe, to which Charlie answered: “That is a stupid question, sit down. Next question, please.”

If you don’t have time to read all 349 pages, I highly recommend you at least read this speech, called “The psychology of human misjudgment”

Jason Zweig had a frank interview with Charlie in 2014, available here.

For those who still like to read books, here are two that I would highly recommend:

  1. Damn Right! Behind the scenes with Berkshire Hathaway billionaire Charlie Munger by Janet Lowe. This is still the only biography of Charlie Munger.
  2. Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, compiled by Peter D. Kaufman.

Of course, no letter is complete without some video, so here is an interview with Mr. Munger, on his partnership with Warren Buffett:

I am lucky enough to have a long-standing business partnership that shares many traits with what Mr. Munger describes here. One of my partners is also affectionately known as “The No Man”. And he has kept me out of more trouble that I care to remember.

And here is Mr. Munger – this year – speaking for two and a half hours at the Daily Journal shareholders meeting, where he covers a lot of ground which he (and Mr. Buffett) also covered at the Berkshire Hathaway shareholders meeting in Omaha:

I was fortunate enough to take my son and stepson to this meeting. Here they are, in front of the famous Geico gecko:

Sons gecko

And, to show what rockstars two sensible and wise (and very, very rich) men in their 90s can be, here is the stadium at the shareholders meeting:

Berkshire Hathaway meeting

I’m going to end off with a chart showing the Berkshire Hathaway share price since 1985 – in other words, excluding the very profitable first 20 years. Both the Merchant West Worldwide Flexible fund (the cockroach) and the Merchant West Global Value fund have been fortunate enough to be long-term owners of Berkshire Hathaway.

The chart is a thing of beauty, and an appropriate eulogy to one of the greatest investors that ever lived.

Berkshire Hathaway share price

Rest in peace, Mr. Charles T. Munger. Your legacy of wisdom will endure, guiding us through the complexities of life and finance.

Now, more than ever, we need to be careful out there.

Piet Viljoen