Charlie Munger, who died at age 99 last week, attributed his success and longevity at least partially to a single piece of advice: “Avoid crazy at all costs.”
That’s what he told CNBC’s Becky Quick last month, in an interview meant to air on his 100th birthday in January.
Munger was known as the longtime business partner and friend of fellow billionaire Warren Buffett, whom he worked with for nearly 45 years. The partnership proved successful for both: Munger’s net worth was most recently estimated at $2.3 billion, according to Forbes. The 93-year-old Buffett boasts an estimated net worth of $120 billion, making him the seventh-wealthiest person in the world.
When pressed for his keys to a long and successful life, Munger at first demurred, saying “I don’t know the secret.” Then, he added that he’d avoided major catastrophes in his life because he was “so cautious,” always avoiding obvious risks in his personal life and career.
“Crazy is way more common than you think,” said Munger. “It’s easy to slip into crazy. Just avoid it, avoid it, avoid it.”
What exactly constituted “crazy,” in Munger’s estimation? “My partner Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage,” Buffett told CNBC’s “Squawk Box” in 2018.
By leverage, Buffett was referring to the strategy of borrowing money to invest in stocks or buy another business. Berkshire Hathaway — Buffett’s investment holding company, where Munger served for decades as vice chairman — would “easily be worth twice what it is now” if the pair had used the strategy, rather than simply reinvesting its past earnings, Munger told Quick.
But it would have been risky — and while Munger and Buffett could absorb significant losses without a sweat, Berkshire’s smaller shareholders weren’t so lucky, said Munger. The duo intentionally decided to protect their cohorts by running Berkshire in a “very cautious” fashion, favoring long-term investments over short-term gambles, he added.
As…
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