Warren Buffett and Charlie Munger’s surprise No. 1 investment
Good relationships can pay dividends for life
Charlie Munger lovingly remembered for his 'joy and wisdom'
'The Warren Buffett Shareholder' author Lawrence Cunningham reflects on life and legacy of the Berkshire Hathaway vice chairman on 'The Claman Countdown.'
The dynamic investing duo of Warren Buffett and Charlie Munger made a slew of successful investments through the years. From GEICO to See’s Candies, their acumen of identifying and partnering with outstanding companies and management teams led them to amassing incredible personal fortunes and drove significant wealth creation for their shareholders as well.
But there’s one investment that they made that not only stands out among the others, it enabled their other successes: investing in their friendship.
Having keen insight on with whom to partner professionally led the two men to come together decades ago.
Charlie Munger Warren Buffett (Johannes Eisele/AFP via / Getty Images)
The story has it that Buffett and Munger met at a dinner party in Omaha, Nebraska, in 1959. They shared a common vision and perspective on a variety of topics.
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Buffett said in an interview, " I knew when I met Charlie, after a few minutes in the restaurant, that this guy was going to be in my life forever. We were gonna have fun together. We were gonna make money together. We were gonna get ideas from each other. We were gonna both behave better than if we didn't know each other."
Staying in touch over the years, Buffett encouraged Munger to give up his law practice and focus on finance and investing. Munger did that and started his own investing firm. In 1978, after much prodding by Buffett, Munger joined Buffett as vice chairman of Berkshire Hathaway.
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The rest is for the history books.
Buffett credits Munger with shifting his investing thesis and focus from struggling, cheap companies to focusing on outstanding companies with strong management teams.
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Over the years, they found their complementary skill sets and like-mindedness a competitive advantage. They kept investing in their relationship as business partners alongside their financial investments and partnerships with other leaders who ran the businesses that they purchased for the Berkshire Hathaway portfolio.
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At the 2014 Berkshire Hathaway shareholder’s meeting, Buffett shared that the pair never fought. He said, "Charlie and I have never had an argument. We’ve disagreed on a lot of things. And it’s just never led, and never will, lead to an argument. We argue with other people."
Munger himself shared three rules that made him successful in a piece written just a short time before his death. They included, "Don’t sell anything you wouldn’t buy yourself," "Don’t work for anyone you don’t respect and admire," and "Work only with people you enjoy." He further said, "I have been incredibly fortunate in my life when it comes to these basic rules. With Warren Buffett, I had all three."
The feeling was mutual. Buffet had said about Munger, "He makes me better than I would otherwise be and I don’t want to disappoint him."
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In addition to keeping things civil and having mutual admiration, knowledge was key to their friendship (and, obviously, their business successes). Warren Buffett had said in an interview that he always learned something when he spent time with his friend and business partner. He echoed these sentiments in his 2022 Berkshire Hathaway shareholders letter, saying, "I never have a phone call with Charlie without learning something. And, while he makes me think, he also makes me laugh."
As Berkshire Hathaway grew in size and scope, another aspect of their friendship surfaced. Successful people often find themselves surrounded by "yes men." For Buffett and Munger, having a friendship that allowed them to challenge each other’s ideas proved invaluable.
Charlie Munger (Patrick T. Fallon/Bloomberg via / Getty Images)
Ultimately, these "investments" led to a friendship and business partnership that endured for more than 60 years. It has created value that will endure and has given not only the two of them rich lives (no pun intended), but provided wisdom that we can all learn from for generations.
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As for their other investment advice, you can learn from Munger’s advice to Buffett, which the latter shared in a shareholder letter: "It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
Obviously, investing in quality was at the heart of the Buffett-Munger friendship and investing thesis. While being able to make your money work for you is nice, good relationships can pay dividends for life. Strong relationships are something we can all invest in, no matter how much money we have.
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