Question 1

Did Charlie Munger lose money on Alibaba?

Accepted Answer

Yes — Charlie Munger had the Daily Journal buy Alibaba in 2021 and doubled down as it fell, then cut the position roughly in half in early 2022 for a large paper loss, and he later called it “one of the worst mistakes I ever made.” Munger, as chairman of the Daily Journal Corporation, ran its securities portfolio. The Daily Journal first bought Alibaba (BABA) in the first quarter of 2021 — 165,320 shares, its first brand-new position in years. As the stock cratered during China's tech-regulatory crackdown, Munger didn't retreat; he added. The stake grew to 302,060 shares by the end of Q3 2021 and to 602,060 by year-end — nearly quadrupling the original position, partly on margin. Then, in the first quarter of 2022, the Daily Journal sold 302,060 shares, halving the position to 300,000. The company's fiscal 2022 swung to a net loss of about $75.6 million, driven by roughly $229.9 million of increased unrealized losses on its marketable securities, of which Alibaba was the swing factor. The admission came at the Daily Journal's annual meeting in February 2023 — a genuine change of mind, since a year earlier he had still been defending the position, saying he was “more comfortable with the Chinese” than Buffett was. Understanding a company's position in a foreign market doesn't exempt it from the brutal economics of its actual business — stay inside your circle of competence, and when you're clearly wrong, fix it fast.

Question 2

What did Charlie Munger say his biggest investing mistake was?

Accepted Answer

Charlie Munger said his and Berkshire's most costly mistakes were errors of omission — businesses like Belridge Oil, Walmart, and Google that he understood and could have bought but didn't — which he estimated had cost billions and which never appeared anywhere in the figures. This was the mistake Munger returned to most, and the one he thought most expensive. At the 2001 Berkshire meeting he put it flatly: the most extreme mistakes in Berkshire's history were mistakes of omission — things they saw, understood, and failed to act on. Because a business you don't buy never lands on your balance sheet, these errors are invisible in the accounts and surface only as opportunity cost. His sharpest personal example was Belridge Oil. Offered 300 shares as a younger man — a case where, in his words, “any idiot could've told there was no possibility of losing money” — he bought them; but when offered 1,500 more a few days later, he passed, because funding them meant selling something else. Shell bought Belridge in 1979 for about $3.65 billion. Munger tallied the cost of that single omission at roughly $200 million in 2001, and about $300–400 million when he retold it at the 2014 Daily Journal meeting. Two famous omissions need careful attribution. The roughly $10 billion Walmart miss — balking at 100 million pre-split shares because the price ticked up — is Warren Buffett's story and Buffett's number, from the 2004 Berkshire meeting; Munger owned it too, in his own blunter words: “We blew Wal-Mart. It was a total cinch.” Google is squarely Munger's own admission: despite watching Berkshire's own GEICO pay Google for search ads, they missed it, and he said so. He kept naming them to the end. At the 2019 Daily Journal meeting he pointed to Teledyne's Henry Singleton — a capital-allocation genius he admired from afar but never invested in — as “one of many mistakes of omission.” The costliest investing errors are usually the great, well-understood businesses you decline to buy — inaction inside your circle of competence, not the losers you actually bought.

Question 3

How much did Charlie Munger lose in the 1973–74 bear market?

Accepted Answer

Charlie Munger's investment partnership fell about 31.9% in 1973 and 31.5% in 1974 — roughly halving — and though the holdings recovered sharply and vindicated his valuations, the pain of reporting those losses to his partners led him to wind the partnership down. Wheeler, Munger & Co., the partnership Munger ran from 1962, was down about 31.9% in 1973 and about 31.5% in 1974 — so a $1,000 stake at the start of 1973 was worth roughly $467 two years later, while the Dow held up considerably better. The cause was concentration meeting a savage market: by the end of 1974 about 84% of the partnership sat in two positions, Blue Chip Stamps and the New America Fund, both marked down to a fraction of what Munger judged them worth — with some borrowed money on the New America stake amplifying the fall. Honesty requires the nuance: this was not a stock-picking blunder in the usual sense. The holdings were quotationally crushed, not permanently impaired — both recovered enormously afterward (the partnership itself rebounded 73.2% in 1975), and over its 1962–1975 life it compounded about 19.8% a year (13.7% to limited partners) versus roughly 5% for the Dow, per Buffett's “Superinvestors of Graham-and-Doddsville.” Munger never regarded the underlying value as a mistake. What he couldn't stomach was reporting temporary losses to outside partners. His biographer notes that losing his own money never bothered him, but explaining paper losses to his limited partners caused him “tremendous pain.” Having resolved by the end of 1974 to stop managing others' money, he waited for the 1975 recovery and liquidated Wheeler, Munger in early 1976, distributing its Blue Chip Stamps and Diversified Retailing shares to partners in kind. (Those companies later merged into Berkshire separately — Diversified Retailing in 1978, Blue Chip in 1983 — a distinct event from the wind-down.) Concentration plus any leverage guarantees stomach-churning drawdowns even when you're right on value — and the real hazard of managing outside money is being forced to explain paper losses at the worst possible moment.

Question 4

What did Charlie Munger learn from buying a department store?

Accepted Answer

Charlie Munger, Warren Buffett, and Sandy Gottesman bought the Baltimore department store Hochschild-Kohn in 1966 and sold it about three years later having barely broken even — the deal Munger credited with teaching him that a great business beats a cheap one. In January 1966, Munger, Buffett, and David “Sandy” Gottesman formed Diversified Retailing Company — 80% Buffett, 10% Munger, 10% Gottesman — and its first acquisition was Hochschild, Kohn & Co., a venerable Baltimore department store. Munger was a genuine principal here, not a bystander, so the lesson is legitimately his (shared with Buffett). They sold Hochschild-Kohn to Supermarkets General on December 1, 1969, extracting roughly their capital back — no real loss, but no home run either. (Sources disagree on whether it was a small nominal gain or a small nominal loss, which is itself the point: a fully-priced downtown department store, forever forced to match rivals' escalators and displays, was a low-moat treadmill.) The enduring value was the lesson, not the money. Munger paired it explicitly with See's Candies — bought two years later at a premium to book, and a triumph — to explain the single most important shift in his and Buffett's investing: away from cheap, mediocre “cigar-butt” businesses and toward paying up for genuinely great ones. It's far better to buy a wonderful business at a fair price than a fair business at a cheap one — and retailing offers no durable moat, only a permanent arms race.

Question 5

Did Charlie Munger make a bad acquisition at Wesco Financial?

Accepted Answer

Yes — Charlie Munger had Wesco Financial buy the furniture-rental company CORT Business Services in early 2000 for about $386 million, near the top of the dot-com bubble, and he admitted the timing was badly wrong as the bust and 9/11 gutted its business. In February 2000, Wesco Financial — the “mini-Berkshire” Munger chaired — acquired CORT Business Services, a furniture rent-to-rent company, for roughly $386 million in cash. It was almost the exact top of the dot-com bubble, and CORT's customers included the very start-ups and expanding offices about to evaporate. The bust, then the post-9/11 downturn, hollowed out demand for rented office furniture. The numbers turned quickly: CORT's after-tax profit fell from about $29 million (for ten months of 2000) to a loss by 2003. Munger, characteristically, owned the misjudgment rather than spinning it — conceding in Wesco's shareholder letters that the company had been bought “during the tail end of the dot-com bubble” and acknowledging the unforeseen bad timing. It's a smaller, less-cited mistake than Alibaba, and Munger held CORT (it eventually recovered somewhat) — but it is a genuine, on-record acquisition error he made and owned, unlike Berkshire's USAir preferred, which was Buffett's decision, or the slow decline of Blue Chip Stamps, which Munger foresaw and exploited for its float rather than regretting. Even a sound business is a mistake if you buy it at a cyclical peak — price and timing are part of the decision, not separable from it.

Инвестиционные ошибки Мангера

Потерял ли Чарли Мангер деньги на Alibaba?

Какую свою самую большую инвестиционную ошибку называл Чарли Мангер?

Сколько Чарли Мангер потерял на медвежьем рынке 1973–74 годов?

Чему Чарли Мангер научился, купив универмаг?

Совершил ли Чарли Мангер неудачное приобретение в Wesco Financial?