'A great investment is finding a company that earns money automatically' — What examples did Charlie Munger provide?

The core idea behind Charlie Munger's statement that "a great investment is finding a company that makes money automatically" refers to seeking out businesses possessing strong and enduring competitive advantages (i.e., an "economic moat"). These companies can consistently generate high profits and cash flow over long periods with minimal additional capital investment. Their business models function like automatic money-printing machines.

In his speeches, interviews, and shareholder Q&A sessions, Munger repeatedly cited the following classic examples to illustrate this concept:

Classic Cases Frequently Cited by Munger

1. Coca-Cola

This is Munger and Buffett's favorite example, perfectly illustrating the "automatic money-making" model.

Powerful Brand Moat: Coca-Cola's brand value is unparalleled. In the minds of global consumers, it is almost synonymous with the "cola" category. This "mindshare" leads consumers to subconsciously choose it when purchasing, creating an almost automated consumption behavior.
Simple Business Model: The core business involves selling a syrup (with a secret formula), which is then produced and distributed by bottlers worldwide. This model requires relatively light capital investment and has strong scalability.
Pricing Power: Due to strong brand loyalty, Coca-Cola can gently raise prices with inflation without losing significant numbers of customers. This ability ensures sustained profit growth.
Global Distribution Network: It possesses a nearly irreplicable global distribution system, with products available in every corner of the world, which itself constitutes a massive moat.

Munger once said that even if you gave a new company $100 billion, you couldn't destroy Coca-Cola's position in people's minds.

2. See's Candies

This was an important early acquisition for Berkshire Hathaway, teaching Munger and Buffett a valuable lesson about brands and pricing power.

Regional Brand Loyalty: In core markets like California, See's Candies represents "high quality" and "the perfect gift" for generations of customers. People buy it not for the price, but for the emotional connection and trust in quality.
Strong Pricing Power: Munger discovered that See's Candies could effortlessly raise prices after Christmas each year with almost no impact on sales volume. Customers were willing to pay a premium for this "nostalgia" and "quality." This investment deeply impressed upon them the immense value of intangible assets (brands).
Low Capital Requirements: Once the brand was established, the capital required to maintain operations and enable slow expansion was relatively small, allowing the company to generate substantial free cash flow.

3. Gillette

Gillette's "razor-and-blades" model is a classic example of a business model moat.

Razor-and-Blades Model: Sell razor handles at a relatively low price (to attract users into the ecosystem), then make money through the continuous sale of high-margin, consumable blades.
High Switching Costs: Once consumers purchase a particular brand's razor handle, they typically continue buying the matching blades, showing low willingness to switch to other brands.
Patents and Technology: Through continuous R&D and patent protection, Gillette consistently launched new products, maintaining its technological leadership and making it difficult for competitors to catch up.
Brand Effect: Gillette established the image of being the "best" brand in the minds of men, granting its products pricing power.

4. Wrigley's Chewing Gum

This is an example of how a simple, low-cost, high-frequency consumer product can form a moat.

Market Dominance: At its peak, Wrigley's virtually monopolized the chewing gum market.
Habitual Consumption: Chewing gum is a low-cost, impulse purchase where consumers don't deliberate much; brand recognition is decisive.
Scale Effects: Massive production and distribution scale provided cost advantages, making it hard for new entrants to compete.
Deep Brand Penetration: The Wrigley's brand image became deeply intertwined with the chewing gum category itself.

5. Moody's

This is an excellent example of an "automatic money-making" machine in the service industry, representing a moat formed by industry structure and regulation.

Oligopoly: The global credit rating market is dominated by three firms: Moody's, S&P, and Fitch. When corporations or governments issue bonds, they almost always need ratings from one or two of them.
High Barriers to Entry: The core of the credit rating business is "reputation," which takes decades or even centuries to build. It is extremely difficult for a new company to establish comparable credibility.
Regulatory Requirement: Many regulations and institutional investment charters mandate that bonds must have ratings from designated agencies, creating mandatory demand.
Strong Pricing Power: Due to its indispensable position and lack of effective competition, Moody's possesses immense pricing power, resulting in very high business profit margins.

A More Modern Example

BYD

Munger's late investment in BYD demonstrates that his understanding of "automatic money-making" machines also evolved. BYD's moat differs from Coca-Cola's; it's not based on brand, but on a profound, systemic engineering and manufacturing culture.

Obsession with Vertical Integration: BYD produces its own batteries, motors, electronic control systems, and even semiconductor chips. This extreme vertical integration provides huge advantages in cost control, supply chain security, and rapid iteration.
Engineer Culture and Founder-Driven: Munger greatly admired founder Wang Chuanfu. He considered Wang a "combination of Edison and Welch" – both a technical genius and a management master. This innovation system driven by top talent is itself a "machine" capable of continuously solving problems and capturing market share.
Scale Effects and Cost Advantage: In the new energy vehicle and battery sectors, BYD achieves costs that competitors struggle to match through massive production scale, enabling it to offer highly cost-effective products that automatically capture market share.

Summary of Core Ideas

The common characteristics of the "automatic money-making companies" Munger described are:

Possession of a Deep Moat: Whether it's brand, business model, network effects, high switching costs, or scale/cost advantages.
Pricing Power: The ability to withstand inflation and pass cost increases on to consumers.
Simple and Predictable Business: Its core business is unlikely to undergo disruptive change for a very long time.
Low Capital Requirements: No need for continuous massive capital investment to maintain its competitive advantage.

Ultimately, these traits enable the company to create value for shareholders year after year like a machine, or as Munger and Buffett often said – "a business that even a fool could run, because someday a fool will."