Charlie Munger, the late chairman of Berkshire Hathaway, famously said, “I don’t invest in what I don’t understand.” This principle, applied to Facebook, became a significant example of his investment philosophy.
In 2012, Munger and his partner Warren Buffett, CEO of Berkshire Hathaway, chose not to invest in Facebook’s initial public offering (IPO), for both their personal portfolios and their company. Buffett, speaking at Berkshire Hathaway’s annual meeting in Omaha, explained, “We never buy into an offering.” He further emphasized the mathematical impossibility of an IPO being the best investment among countless options.
Munger, known for his bluntness, stated, “I don’t invest in what I don’t understand. And I don’t want to understand Facebook.” He never joined the social media platform, highlighting his commitment to his principle of investing only in what he fully comprehends.
This approach resonated with other seasoned investors. In 2021, one such investor echoed Munger’s sentiment on Twitter, now rebranded as X, saying, “Don’t invest in what you don’t know. Learn first then invest.”
Munger’s guiding principles, including his famous “Invert, always invert” approach to problem-solving, were celebrated at a tribute hosted by the Museum of American Finance and the Gabelli School of Business at Fordham University in June 2023. This principle suggests that complex problems can be solved by first understanding what actions to avoid.
Munger also emphasized the importance of patience and discipline in investing, stating, “It takes character to sit with all that cash and to do nothing. I didn’t get to be where I am by going after mediocre opportunities.”
Despite Munger’s initial skepticism, Meta Platforms, formerly Facebook, is currently worth $1.337 trillion, making it the seventh richest company in the world. However, Munger’s consistent emphasis on understanding the underlying business, patience, and discipline remains valuable advice for investors seeking long-term success.
