Charlie Munger is perhaps most known as Warren Buffett’s business partner and right hand man, as vice chairman of Berkshire Hathaway. But before he met Buffett, Munger had a storied life — one full of love, and tragedy, and a business education forged in the school of hard knocks.
This is that story.
In 1945, Charlie Munger married one Nancy Huggins, whom he had met through his sister, Mary Munger. This was in the immediate aftermath of World War 2, a euphoric period in the United States after a number of very dark years. Munger was still very young.
Years later, Molly, his daughter, said of the pair: “They utterly rushed into marriage — he was 21, she 19 — no idea of what they were doing, both people of high spirits. Young people in the middle of a war. They made severe mistakes.”
Of course, it wouldn’t be clear that they were incompatible, at least not for a awhile. Shortly after getting married Munger attended Harvard Law School under the GI Bill, graduating magna cum laude three years later. He started a family with Nancy: Teddy, the eldest, born 1945, Molly, born in 1946, and Wendy, born 1948. Munger moved to California and was admitted to the California Bar in 1949, at age 25. He had, at this point, no direct experience of business.
In 1950, Munger built a relationship with one Ed Hoskins — an engineer by training and an entrepreneur. At the time, practicing the law was not a path to riches that it became in latter decades, and it was more acceptable for lawyers to go into business with their clients. Munger had done some legal work for Hoskin’s small company, Transformer Engineers Ltd, and got along well with the team there. One morning, whilst driving past the company offices on his way in to work, Munger decided that he was being too shy: he shouldn’t be waiting for clients that he liked, he should be taking the initiative to reach out to them! So he did a U-turn in the middle of the street and visited Hoskins and his partners; after a brief chat, he got more work from them.
Hoskins had raised money from venture capitalists to start Transformer Engineers. Around the time Munger met him, Hoskins got into a conflict with his backers — who, in typical VC fashion, wanted to replace him. Munger helped Hoskins buy the investors out, using large amounts of debt. Munger himself borrowed some money to buy into the business as a part-owner. Years later, Munger said of the deal: “It was an early leveraged buyout. It was a nonlegal solution to what looked like a legal problem.”
The big problem was that Transformer Engineers was a bad business. Munger didn’t know it in 1950, when he bought into the company. But it would become clear over the course of the next few years.
In 1953, things came to a head with Nancy. Munger was now 29 years old; Nancy 27. Molly remembers much of what happened when her parents divorced. (The following is taken from Janet Lowe’s biography of Munger, Damn Right!):
Charlie and the first Nancy had married young and now, “They fought, yelled at each other. It was abundantly clear they weren’t happy,” explained Molly. And when it was obvious that the Mungers could no longer live together, “They handled themselves in a way that was exemplary. They said all the right things. We’re not happy with each other. We need to be apart. We love you guys. It won’t affect our relationship with you.”
As is the case with so many families, the children didn’t fully understand what caused the irreconcilable differences between their parents, one a serious young lawyer and the other a free spirit, but they quickly grasped the consequences of the decision to end the marriage.
“He lost everything in the divorce,” Molly continued. Her mother stayed in the house in South Pasadena, but despite his absence, Charlie went to great lengths to help the children realise that he was still their father and responsible fo ...
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