meet Charlie Munger
when Warren Buffett started his investment journey he was more of a ‘cigar-butt’ kind of an investor like his guru Benjamin Graham.
“a cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the "bargain purchase" will make that puff all profit,” Buffett wrote in his 1989 letter to shareholders. similarly, a stock which is available for a very cheap price might have some occasional upswings and create profit.
but this approach didn’t make Buffett the fabled value investor that he is today.
it was the influence of his long-time friend Charlie Munger that changed his views.
like Buffett, Munger was born in Omaha, and as a teenager, he would work at a grocery store owned by Buffett’s grandfather. but the two met in 1959 through a mutual acquaintance which, in hindsight, seems fated.
when they first met, Munger was a practicing lawyer but Buffett convinced him to take a different career path alongside himself. at first Munger started his own investment firm but, in 1978, became the vice chairman of Berkshire Hathaway. a position he still holds.
as the friendship turned into a business relationship, Munger brought his own style of investing which greatly influenced Buffett.
"Charlie Munger changed my views, he refined them in a huge way, in terms of looking for the quality companies, and looking out for the ability to make an investment that will work out for five or 10 or 20 years as opposed to something where there might be one more puff left in the cigar,” Buffett once said.
Munger, who once famously said, “the big money is not in buying or selling, but in waiting.” this helped Buffett realise the short term nature of cigar butt investing.
“a great business at a fair price is superior to a fair business at a great price,” Munger says. Buffett wrote in the same 1989 letter that Charlie understood this early whereas he was a slow learner.
like Buffett, Munger is revered by the entire investing community for his wisdom and wit and had it not been for his influence, Buffett and Berkshire Hathaway might be in the position they are now.