If you're waiting for Charles Thomas Munger to apologize for insulting the tens of thousands of financial professionals and business school professors who preach modern portfolio theory, you will be waiting a long time. Munger, who passed away on November 28, 2023, never changed his mind about what he termed 'di-worsification.' This quote sums up why.

Do drivers switch among different cars during a car race to obtain an average top speed? Of course not. They choose the fastest car they can get their hands on and ride it for all it's worth. Munger believed investing works the same. Invest heavily in your best ideas.

Munger did encourage "di-worsifying" in one situation, and that is when you don't know which of your ideas are the good ones. As Buffett once said, "Diversification is a protection against ignorance, a confession that you do not know the businesses you own."

There is no shame in admitting you're not sure which companies are the best investments. After all, Buffett himself insstructed that his family estate be put into Vanguard index funds after he dies.

Nor did Munger have patience for the overconfident. About people who think they're smarter than they are, he said, "What they are is dangerous."

The Life of Charlie Munger

Munger was born in Omaha, Nebraska, in 1924. Remember, that's before the Great Depression. Young Munger raised hamsters to trade with other kids. As a teenager, he worked at the Buffett & Son grocery store owned by Warren Buffett's grandfather, earning $2 for each 12-hour day.

At 19, in 1943, Munger dropped out of the University of Michigan to serve his country, as a U.S. Army Air Corps meteorologist during World War II. Even though he never earned an undergraduate degree, in 1948 he graduated magna cum laude from Harvard Law School. That's a rare feat.

Despite their shared home-town roots, Munger and Warren Buffett only met years later, at a dinner party in 1959. Buffett was instrumental in persuading Munger to leave his law practice and begin investing. In return, Munger persuaded Buffett to move away from buying underpriced but bad businesses and towards buying great businesses at fair prices. Buffett said that the two never had any disagreements.

Their first investment together was Blue Chip Stamps, a physical precursor to today's digital store loyalty programs. But Blue Chip Stamps was also an investment fund. Blue Chip held a large float of money between the time retailers bought stamps to give to their customers and when customers later redeemed those stamps for prizes.

The float tended to grow over time. Just as half of Americans today have at least one unused gift card, gift voucher, or store credit in their possession, not all customers redeemed their stamps.

At its peak, Blue Chip had nearly $100 million in float. Buffett and Munger gradually acquired the entire business, using that money to buy several businesses, including See’s Candies in 1972 and a large stake in the Washington Post.

Munger died a very rich man, with a net worth of about $2.6 billion. But why did he have so much less than his long-time partner Buffett, who is worth $155 billion? (8 April 2025)

The answer is probably time in the market. Buffett's earlier start in investing gave him a lead over Munger, who initially worked in law, which compounded over time.

Recommended Reading

The time-honored way to learn more about Munger is Poor Charlie’s Almanack: The Essential Wit and Wisdom of Charles T. Munger. A long-time friend of Munger, Peter D. Kaufman, put the book together to showcase Munger’s encyclopedic knowledge of business, finance, history, philosophy, and more. The book also introduces the mental models that underpin Munger's rational and rigorous approach to life, learning, and decision-making.

A lighter way to approach the Munger corpus is through Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway's Vice Chairman, by David Clark.

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