How did legendary investor Charlie Munger view cryptocurrency and AI before his death?

Munger is a legend in the financial and investing world, best known for his role as Berkshire Hathaway vice chairman and his close collaboration with Warren Buffett, who said in the statement: "Berkshire Hathaway would not have been able to reach its present position without Charlie's inspiration, wisdom and involvement."

Munger is the vice chairman of Berkshire Hathaway and one of its largest shareholders, with shares worth approximately $2.1 billion as of March 2, 2022. His total net worth is approximately $2.5 billion as of early 2023. Munger has made many critical comments about cryptocurrency and AI during his lifetime.

1. Charlie Munger

Charles Thomas Munger, nicknamed "Charlie," was born on January 1, 1924 in Omaha, Nebraska. His father, Alfred, was a lawyer, and his mother, Florence "Toody," came from a wealthy family. Like Buffett, Munger worked in Buffett's grandfather's grocery store as a young man, but the two future partners did not meet until many years later.

At 17, Munger left Omaha for the University of Michigan. Two years later, in 1943, at age 19, he left to serve in the U.S. Army during World War II, according to Janet Lowe's 2003 biography, Damn Right! After the war, Munger attended Harvard Law School, graduating with honors in 1948 and moving to Southern California, where he practiced real estate law.

The military sent him to study meteorology at the California Institute of Technology in Pasadena. In California, he fell in love with his sister's Scripps College roommate, Nancy Huggins, and married her in 1945. Although Munger never completed his undergraduate degree, he graduated with honors from Harvard Law School in 1948, and the couple moved back to California.

Munger and his wife had three children, daughters Wendy and Molly, and son Teddy, who died of leukemia at age 9. The Mungers divorced in 1953.

Two years later, he married Nancy Barry, whom he had met on a blind date at a chicken dinner restaurant. The couple had four children: Charles Jr., Emily, Barry, and Philip. He was also stepfather to her other two sons, William Harold Borthwick and David Borthwick.

He practiced real estate law in California. He founded the law firm of Munger, Tolles & Olson in 1962 and focused on managing the investments of Wheeler, Munger & Co., a hedge fund he founded that same year.

“I’m proud to be an Omaha boy,” Munger said in a 2017 interview with Scott Deru, dean of Michigan’s Ross School of Business. “I sometimes use the old saying, ‘They took the boy out of Omaha, but they never took Omaha out of the boy.’ All of these old-fashioned values ​​— family first; being able to help other people when they’re having a hard time; being prudent, being wise; the moral obligation to be rational is more important than anything else — more important than being rich, more important than being important — it’s an absolute moral obligation.”

In California, he partnered with Franklin Otis Booth, a member of the Los Angeles Times’ founding family, in real estate. One of their early developments was a lucrative apartment project on Booth’s grandfather’s property in Pasadena. (Booth, who died in 2008, was introduced to Buffett by Munger in 1963 and became one of Berkshire’s largest investors.)

“I had five real estate projects,” Munger told Drew. “I did them all at once for a few years, and within a few years I had $3 million to $4 million.”

Munger closed the hedge fund in 1975. Three years later, he became vice chairman of Berkshire Hathaway.

2. Buffett and Munger

In 1959, at the age of 35, Munger returned to Omaha to close his late father’s law firm. It was then that one of Buffett’s investor clients introduced him to Buffett, then 29. The two hit it off and stayed in touch despite being half a continent apart.

“We thought so alike it was eerie,” Buffett recalled in an interview with the Omaha World-Herald in 1977. “He was the smartest, most high-class guy I’d ever met.”

Munger officially joined Berkshire Hathaway as vice chairman in 1978, and for much of his career he was best known as Buffett's wisecracking deputy, often offering blunt advice on the stock market and the economy.

He is known for his pithy humor, which delights Berkshire Hathaway loyalists. “If people didn’t make mistakes so often, we wouldn’t be so rich,” Munger said at Berkshire Hathaway’s annual shareholder meeting in 2015.

“We’ve never had an argument in the time that we’ve known each other, which is nearly 60 years now,” Buffett told CNBC’s Becky Quick in 2018. “ Charlie has given me the ultimate gift. He’s made me a better person than anyone else would have been. … He’s given me a lot of good advice over time. … My life is better because of Charlie.”

Buffett noted in 2021 that after their first meeting, he knew "I wouldn't find anyone like him again... We hit it off right away."

The fusion of the two ideas focuses on value investing, which is choosing stocks because their prices appear to be undervalued based on the company's long-term fundamentals .

“All intelligent investing is value investing —getting more than you pay,” Charlie Munger once said. “You have to value the business before you can value the stock.”

Berkshire Hathaway Inc. CEO Warren Buffett (L) and Vice Chairman Charlie Munger attend the 2019 Annual Shareholders Meeting in Omaha, Nebraska, May 3, 2019.

But in early 2020, Berkshire suffered a massive $50 billion loss in the first quarter, and Munger and Buffett were more conservative than when they invested in the U.S. during the Great Recession. Airlines and financial institutions such as Bank of America and Goldman Sachs were hit hard by the economic downturn.

"Well, I would say we're basically like the captain of a ship when the worst typhoon that's ever happened comes," Munger told The Wall Street Journal in April 2020. " We're just trying to ride out the typhoon, and we're going to come out of it with a lot of liquidity. We're not going to play 'Oh, my goodness, my goodness, everything's going to go to hell, let's put 100% of our reserves into it' [to buy businesses]."

3. Munger’s views on cryptocurrency and AI

During his lifetime, Munger had made many critical remarks about cryptocurrencies and Bitcoin, and had also warned about the over-hype of AI.

1. Munger is not optimistic about cryptocurrencies

Munger believes that crypto assets are a destabilizing and unproductive financial invention, and compares Bitcoin to throwing a "stinky ball" into the refined formula of traditional finance. He emphasized the importance of strong currency in the transition from primitive society to advanced civilization, and pointed out that whether it is shells or gold coins, the solidity of currency is always the most important. "Don't get me started on Bitcoin, it's the stupidest investment I've ever seen. Most of these investments will go to zero."

Munger is ashamed that the US government has taken such a lax regulatory approach so far. He called for a total ban on cryptocurrencies and called those who believe in cryptocurrencies "idiots". Charlie Munger said that cryptocurrencies are very stupid and very dangerous. It is completely wrong for the US government to allow this. I will not be proud of the United States allowing cryptocurrencies. I think cryptocurrencies are 'shit'.

Charlie Munger published an article titled "Why the United States Should Ban Cryptocurrency" in the Wall Street Journal on February 1. The article stated that in recent years, privately owned companies in the United States have issued thousands of cryptocurrencies of all sizes, which can be traded publicly without prior government approval. This has also led to loopholes in the market, causing crazy speculation and huge losses. Because in some cases, a large part of the cryptocurrency was sold to the promoter at almost zero price, and then the public bought it at a higher price without full understanding. These crazy and confused capitalist behaviors are very much like what American writer Mark Twain often said, "A swindler calls a hole in the land he owns a mine."

2. AI is overhyped

Munger believes that AI is overhyped and may get more than it deserves. He pointed out that artificial intelligence has actually been around for a long time, and its roots can be traced back to the 1950s. We have always had artificial intelligence. But we are a little worried about artificial intelligence because we have no way to reverse (uninvent) it, and traditional intelligence (old-fashion intelligence) is just as effective.

3. Criticism of other fields

U.S. banks 'flooded' with bad commercial real estate loans

A storm is brewing in the US commercial real estate market, with US banks awash with what he calls bad loans as property prices fall. He told the Financial Times: "It's nowhere near as bad as 2008. But banks will have trouble, just like everywhere else. In good times you develop bad habits... and when bad times come they have too much to lose."

4. The many faces of Munger: philanthropist, architect

Munger has donated hundreds of millions of dollars to educational institutions, including the University of Michigan, Stanford University and Harvard Law School, often with the stipulation that the schools accept his architectural designs, even though he has no formal training as an architect.

Munger served on the board of directors of Harvard-Westlake Preparatory School in Los Angeles for decades, and during the construction of the science center in the 1990s, he made sure the girls' bathrooms were larger than the boys' rooms.

“Every time you go to a football game or event, there’s a line outside the women’s bathroom. Who doesn’t know that they use the bathroom differently than men?” Munger told The Wall Street Journal in 2019. “What kind of idiot would make the men’s bathroom the same size as the women’s bathroom? The answer is, an average architect!”

Munger and Nancy Barry, who were married for 54 years until his death in 2010, donated $43.5 million to Stanford to help build the Munger Graduate Residence, which will house 600 law and graduate students.

When asked about the secret to a long and happy life during an interview with CNBC’s Quick on “Squawk Box” in February 2019, Munger said the answer is “easy, because it’s so simple.”

"You don't have too much jealousy, you don't have too much resentment, you don't overspend on your income, and you remain happy despite troubles. You deal with reliable people and do what you are supposed to do. All these simple rules can effectively make your life better, " he said.

5. Industry insiders mourn Munger’s passing

“Berkshire Hathaway would not have been able to achieve its present position without Charlie’s inspiration, wisdom and involvement,” CEO Warren Buffett said in the release.

“For decades, the two of them led an investment powerhouse that significantly improved the lives of many people ... and in the process, they repeatedly demonstrated the power of collaboration, synergy, and common sense. R.I.P. Charlie,” said Mohamed El-Erian, chief economic adviser to Allianz , in an article published on the X website.

"His influence went far beyond the investment community. People discovered him and thought they were going to learn how to make money, but they got so much more," Whitney Tilson, an investor and Buffett and Munger expert, told CNN. "He said if all you have is a hammer, the world looks like a nail."

6. The end of an investment era

Munger's death marks the end of an investing era in corporate America.

Perhaps the most notable change to the public since Munger’s death is Berkshire’s annual weekend of meetings that draws tens of thousands of people to Omaha and is broadcast live around the world.

Munger will no longer share the stage with Buffett and answer dozens of shareholder questions over five hours.

“The annual meeting will never be the same without Charlie’s succinct, open and honest comments,” said Lountzis, president of Lountzis Asset Management in Wyomissing, Pa. “He is very different from Buffett, in the sense that Munger speaks his mind and doesn’t care what anyone else thinks.”

Munger, who is reportedly worth $2.7 billion, was commenting on global markets just a few weeks ago. For example, he told the Acquired podcast that Buffett's decision to invest billions of dollars in Japan was "a no-brainer."

“It was easy money,” Munger said with characteristic simplicity. “It was like God opened a box and poured money in.”