The late Charlie Munger was notoriously cynical of new technologies.
But he sure knew a great investment narrative when he saw one. And it set up one of the best investments of his career, ironically in a technology company.
Munger passed away in November 2023 at age 99 – about a month before his 100th birthday. He’s considered one of the greatest investors of all time.
It’s no secret why…
Munger was Warren Buffett’s right-hand man at Berkshire Hathaway. Over their 60-year partnership, they built the company into a $780 billion empire.
Much like Buffett, Munger had a disdain and distrust for technology. Typically, they preferred to invest in companies they understood.
Buffett even went so far as to call Munger the “abominable no-man.” Such was his aversion to investing in any idea he didn’t understand.
Over the years, they added blue-chip companies like American Express, Coca-Cola, Wells Fargo, and Costco to Berkshire’s portfolio.
Munger was a self-confessed “total addict” of Costco stock. He once vowed, “I’m never going to sell a share.”
But when it came to technology, Munger had a completely different attitude.
Talking about the rise of AI, Munger stayed true to form, saying, “I am personally skeptical of some of the hype that has gone into artificial intelligence” and “I think old-fashioned intelligence works pretty well.”
He once called bitcoin (which is similar to a tech stock) “detestable.” And he said it was only useful for kidnappers and extortionists.
Until his final days, Munger considered bitcoin “evil.”
But what you may not know is that a large chunk of Munger’s net worth came from a speculative tech stock.
In fact, he considered it one of the biggest winners of his long, storied career.
Against the Tide of Popular Opinion
In 2008, Munger advised Buffett to invest in a “new energy” company called BYD.
If you’re not familiar with BYD, it’s a Chinese electric vehicle (EV) and battery maker.
It’s not the type of company Berkshire Hathaway is known for investing in. Yet it’s one of the best-performing investments of Munger’s career.
It seems an odd investment for the likes of Munger and Buffett with their aversion to tech, Buffet is also on record saying he wasn’t a fan of carmakers, either.
In a 2009 Fortune article, Buffett said, “I don’t know a thing about cellphones or batteries. And I don’t know how cars work.”
So why would an avowed technophobe like Munger suggest to his fellow technophobe Buffett they become early investors in a “new energy” EV maker?
Because he knew BYD was in the early stages of a long-term investment narrative.
To quote the character Tyrion Lannister from the HBO hit series Game of Thrones, “There is nothing in this world more powerful than a good story.”
And Munger was renowned as an extraordinary storyteller and communicator.
According to economist John Maynard Keynes in his 1936 book, The General Theory of Employment, Interest and Money, a good investment narrative can unleash “animal spirits” on the market. And those animal spirits will drive prices higher.
(The reverse of this is true, too. A bad investment narrative can sink the price of an asset.)
You can see what I’m referring to in the chart below. It shows the psychology of a market cycle.
When we’re deep in a bear market, it’s depressing. It feels like the sky is falling. But as prices improve, hope begins to find its way back into investors’ mindset.
As optimism and belief builds, rising prices attract more attention to the investment until it begins to trade at the euphoric peak of the bull market.
Based on this chart, you can see why Munger nailed his BYD investment.
When Berkshire took a position in the company in 2008, EVs were only just starting to enter the optimism stage.
There were several catalysts in 2008 that Munger knew would eventually propel the EV market to the euphoria stage.
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An ambitious U.S.-based company called Tesla debuted the Roadster. It was the first EV to use lithium-ion battery cells.
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During his presidential campaign, Barack Obama made a pledge to put 1 million “advanced technology vehicles” (mainly EVs) on the road by 2015.
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And General Motors unveiled the Chevy Volt. Although production ended in 2019, the Volt is still the all-time top-selling plug-in hybrid in the U.S. market.
Munger might not have understood EV technology, but he understood the EV story. More importantly, he knew he was getting in at the right time, before the EV story turned into full-on euphoria.
Munger did, of course, take a bit more interest than just the narrative. He could see the vision of the founder and that the Chinese market was a big opportunity.
But he was savvy enough to understand that even though this wasn’t his area of expertise, he couldn’t just turn a blind eye to it.
And since 2008, the EV narrative has taken off in both investment markets and as a mainstream narrative. You can see below the exponential growth of EV market share from 2010 to 2022.
In 2008, BYD’s private shares traded for around $1.02. At that time, Berkshire took a 20% stake worth about $230 million.
Today, BYD shares trade for around $25 – a 2,350% rise from 2008. And Berkshire’s current stake (it has sold a bit over the last few years) stands at $3.9 billion.
“I have never helped do anything at Berkshire that was as good as BYD… And I only did it once,” Munger would later say.
As you can see, narratives can help you predict where an asset price is headed.
Even if you don’t necessary understand the depth of a technology, like Munger with EVs, you should be savvy enough like he was to see the opportunity opening in front of you.
Based on our research, we’ve identified three huge narratives opening up right now, right in front of us, based on developments happening in the crypto market.
And we believe these narratives will drive crypto prices to insane new highs…
Position Yourself Ahead of These Catalysts
In tomorrow’s Daily, I’ll reveal what these three narratives are. So make sure to check your inbox for your next essay.
In the meantime, you can get the inside scoop on the catalysts that will drive these narratives from Daily editor Teeka Tiwari.
You see, Teeka says a coming shock could potentially send hundreds of tiny crypto coins soaring 10x, 50x, or 100x higher – in just days.
Even with bitcoin’s recent pullback, we’ve seen coins like Solana and Bonk skyrocket 585% and an incredible 20,000%, respectively, in just three months.
To help you prepare, he’s revealing his No. 1 FREE crypto investment for 2024 – no strings attached. Click here to get the ticker.
(As a reminder, Teeka’s free picks have an average peak gain of more than 1,000%.)
Until next time,
Sam Volkering
Analyst, Palm Beach Daily