How Warren Buffett’s Right-Hand Man, Charlie Munger, Shaped Berkshire Hathaway

Charlie Munger, who passed away in late 2023 at age 99, left an indelible mark on one of the world’s best-known firms, Berkshire Hathaway Inc. (BRK.A). As Warren Buffett’s trusted partner for over 60 years, Munger helped transform Berkshire from a struggling textile manufacturer into a global powerhouse worth hundreds of billions of dollars. His intellectual rigor and particular approach to decision-making fundamentally shaped the company’s investment philosophy and corporate culture.

Below, we dig into the mark he left on Berkshire Hathaway in particular, and the larger corporate world in general.

Who Was Charlie Munger?

Born in Omaha, Nebraska, in 1924, Munger was a self-made man well before partnering with Buffett. Though raised in Omaha, just two miles apart, both men had never crossed paths in their earlier years. (Incidentally, Munger had worked as a teenager at Buffett & Son, a grocery owned by Buffett’s grandfather.)

After serving in World War II, Munger put himself through Harvard Law School and established a successful law practice.

How did Munger and Buffett Meet?

Munger and Buffett first met in 1959 when a mutual friend arranged a dinner in their hometown. At the time, Munger was 35 years old. Despite their seven-year age difference, they discovered their shared intellectual interests and similar approaches to business analysis. They became fast friends.

This initial connection would prove transformative for both. By 1962, Munger had left the law to go into money management, forming Wheeler, Munger, and Company, an investment partnership that averaged about 20% in returns from 1962 to 1975.

In 1965, Buffet reports, he told Buffett something that few would dare to say: His purchase of Berkshire Hathaway had been “dumb.” However, Munger continued by offering constructive guidance on how to correct this mistake—even as he had no role at Berkshire at the time. This is what Buffett recounts him saying:

Now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale.

It took another 13 years before Munger was named Berkshire’s vice chair, essentially becoming Buffett’s right-hand man. Once at Berkshire, his influence extended far beyond his official title. Buffett called him the “architect” of Berkshire, modestly suggesting he was merely the “general contractor.”

Charlie Munger’s Influence

Transformative Investment Philosophy

Munger convinced Buffett to evolve beyond Benjamin Graham’s strict value investing approach, which focused on buying troubled companies at deep discounts. Instead, he advocated paying fair prices for exceptional businesses with strong competitive advantages.

This shift led to investments in companies like Coca-Cola Co. (KO) and American Express Company (AXP), which became cornerstones of Berkshire’s portfolio.

Mental Models

Munger brought multidisciplinarity to decision-making, drawing from psychology, physics, and beyond to create a “latticework of mental models.” As noted in his memoirs, he believed thinking critically was crucial: “to the man with only a hammer, every problem looks like a nail.”

Corporate Culture and Ethics

Perhaps Munger’s most lasting influence was his insistence on exceptional corporate governance and long-term thinking. We got into better and better companies,” Munger told CNBC in his final interview in 2023.

Concentrated Investments

Munger also advocated concentrating investments in well-understood businesses rather than broad diversification. “The big money is not in the buying and selling, but in the waiting,” he said. This led to some of Berkshire’s most successful investments, including GEICO and Burlington Northern Santa Fe Railway Corp. (BNI).

The Bottom Line

Charlie Munger’s partnership with Warren Buffett helped transform Berkshire Hathaway into one of the world’s most respected investment firms. His emphasis on rational thinking, ethical behavior, and quality over price continues to guide Berkshire’s operations today.