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Charlie Munger: the partner who taught Buffett to wait

In 1973 and 1974, Charlie Munger's investment fund fell by about a third each year. He didn't panic or change his method. He became the quiet partner behind one of the most famous companies in investing.

Story · 7-minute read · Updated 2026-10-21

Who they were

Charles Thomas Munger was born in Omaha, Nebraska, on 1 January 1924. That's the same city as Warren Buffett, though the two didn't meet until 1959.

As a boy, Munger worked at a grocery store owned by Buffett's grandfather. He served in the Army Air Corps in World War II, then went to Harvard Law School and graduated in 1948.

He became a lawyer in Los Angeles. Law paid the bills. Investing was what he really wanted to do.

What happened

1959. Munger met Buffett at a dinner in Omaha. By most accounts, they talked for hours and stayed in touch from then on.

1962. He started an investment partnership, Wheeler, Munger & Co. He soon left law to run money full time.

1972. Munger and Buffett bought See's Candies, a California chocolate maker, for $25 million. Buffett has written that this deal changed how he thought. Before, he hunted for cheap, so-so companies. After, he looked for great companies at fair prices. He credits Munger for the shift.

1973–1974. A harsh bear market hit. Munger's partnership fell about 32% in 1973 and about 31% in 1974. Those are the figures in Buffett's 1984 essay "The Superinvestors of Graham-and-Doddsville."

1975. He wound down the partnership. Over its life, from 1962 to 1975, Buffett's essay puts its yearly return at about 19.8% on average, against about 5% for the Dow. Read that as history, with the two ugly years baked in.

1978. Munger became vice chairman of Berkshire Hathaway. He held that role for 45 years.

2023. He died on 28 November 2023, a few weeks before his 100th birthday.

The moment everyone remembers

Most people remember Munger for his one-liners at Berkshire's yearly meetings. He sat next to Buffett, ate candy, and often said only "I have nothing to add."

But the moment worth remembering is quieter. It's 1974. His fund has dropped by more than half from its high, after two bad years in a row. He's a professional with clients watching.

He didn't throw out his method to chase what was working that month. He kept to the same patient approach. Later, he said that anyone who can't calmly handle a 50% drop a few times in a lifetime shouldn't own stocks at all.

His favourite thinking tool was simple. He liked to quote the mathematician Carl Jacobi:

He meant: turn the problem upside down. Don't only ask "how do I win?" Ask "what would make me lose?" and then avoid that.

What it teaches

1. Ask "how could this go wrong?" first

Inverting is the most useful trading habit you can borrow from Munger. Before every trade, ask what would prove you wrong. Then put your exit there.

That's what a Stop loss is: the answer to "where am I wrong?" written down before you enter. See how to set a stop-loss and the pre-trade checklist.

2. Bad stretches are part of any method

Munger's fund lost about a third of its value in back-to-back years. A Drawdown (a drop from your high point) comes with every approach. What matters is that it can't knock you out.

That's why size matters more than any single idea. If each trade risks about 1% of your account, a run of losses is painful, not fatal. Try the loss recovery calculator to see why: a 50% drop needs a 100% gain just to get back to even. A math example, not a promise.

3. Waiting is a real skill

Munger often said the money in investing came from sitting on your hands. He made very few big decisions in his life, and he waited years for some of them.

Traders face the same test on a smaller scale. Fewer, clearer trades are easier to plan and review. See patience in trading and how to stop overtrading.

4. Stay inside what you understand

Munger called this your "circle of competence." Know where the edge of your knowledge is, and stay inside it.

For a beginner, that might mean one or two markets you've practised on past charts, not ten you've just heard about. See how to build a watchlist.

What it doesn't mean

It doesn't mean you can copy Munger's results. He was a long-term business investor. He bought whole companies or big stakes and held for decades. That's a very different game from short-term trading.

It doesn't mean a big drop is always followed by recovery. Munger's fund came back. Plenty of funds that fell a third in 1974 never did. That's survivorship bias: we study the ones who lasted.

And it doesn't mean his famous lines are rules for every situation. They were how one very unusual person thought. The useful part is the habit underneath: think about the downside first, and wait for the clear chance.

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