Did Charlie Munger ever invest in companies he misjudged as 'good'? How did he acknowledge and handle these mistakes?

Charlie Munger's Investment Mistakes: Misjudging "Good Companies" and Learning from Them

Hey there! I've spent years in the investment world and have a special interest in the stories of Charlie Munger and Warren Buffett. Your question is spot-on—Munger isn’t infallible. He’s made mistakes, especially when misjudging certain companies as "good investments" and pouring money into them. Let me break this down in plain language, without all the jargon.

Did Munger Invest in Misjudged "Good Companies"?

Absolutely. Munger himself has openly admitted this multiple times. Managing Berkshire Hathaway alongside Buffett, their track record is legendary, but not every bet paid off. Munger’s "value investing" philosophy focuses on buying stocks in seemingly strong, long-term profitable companies. Sometimes, though, his judgment faltered—companies weren’t as "good" as they appeared, leading to losses.

Examples:

• US Airways Investment: In the 1990s, Munger and Buffett invested in this airline, convinced it was a "great company" with solid management and low costs. But fierce competition, volatile fuel prices, and union issues pushed it toward bankruptcy. They lost heavily (reportedly hundreds of millions). Munger later called it a "huge mistake" at a Berkshire meeting, admitting they underestimated industry risks.
• Blue Chip Stamps: Early in his career, Munger invested in this supermarket coupon business, which seemed like a stable "cash cow." But when coupons fell out of favor and the company failed to adapt, it floundered. Munger acknowledged the misjudgment but pivoted wisely—using Blue Chip as a platform to invest elsewhere, eventually folding it into Berkshire.

In books (like Poor Charlie’s Almanack) and speeches, Munger often stresses how these errors taught him: Don’t just see surface-level "goodness"; dig into hidden risks. Even a strong company can stumble if its industry is declining or management is weak.

How Did He Acknowledge and Handle These Mistakes?

Munger is refreshingly candid—unlike some investors who hide failures. His approach is brilliantly practical: treating mistakes as lessons. Here’s how:

1. Public Admission: Munger never dodges failure. At Berkshire’s shareholder meetings, he and Buffett openly tell thousands: "We were wrong, and here’s why." About US Airways, he said, "We naively thought airlines could earn stable profits—reality proved otherwise." This humility also educates others (including us small investors).
2. Cut Losses Quickly: Once a mistake is clear, Munger doesn’t cling stubbornly. He warns, "Don’t fall in love with your stocks"—act rationally. Sell and exit. With US Airways, they minimized losses by admitting error early.
3. Learn from Errors: Munger’s famous "invert, always invert" method asks: "How could this go wrong?" He dissects failures—e.g., "Did we overlook competitors? Overestimate the economic moat?"—then avoids repeating errors. He believes success isn’t about never failing, but about correcting fast.

Ultimately, Munger’s journey teaches that investing isn’t gambling; it demands risk management. Even legends misjudge "good companies," but the key is admitting fault, cutting losses, and learning. If you’re new to investing, read Munger’s books or listen to his talks—they’re packed with practical insights, never overly complex.

Got more questions or want to dive deeper into specific cases? Ask away!