Charlie Munger, the right-hand man of Warren Buffett, died Tuesday at the age of 99. Long considered one of Buffet's closest confidants and Buffett’s reliable No. 2, Munger held the nickname of “The Abominable No-Man” because of the frequency with which he turned down investment ideas he deemed unworthy. But the older man was a renowned investor in his own right, and responsible for shaping much of Buffett’s thinking over the course of his career.

Buffet credited Munger with encouraging him to diversify his investing strategy. Prior to meeting Munger, who was trained as a lawyer, rather than investor, Buffet had focused almost exclusively on investments in distressed businesses, a strategy he described in a 1989 letter as “cigar butt” investing. “A cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the ‘bargain purchase’ will make that puff all profit,” he wrote.

But once the two became fast friends, Munger encouraged Buffett to invest in growth companies, regardless of whether they were underpriced. In Berkshire Hathaway’s 2015 shareholder letter, Buffett expounded on Munger’s influence.

“The blueprint [Munger] gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices,” Buffett wrote at the time. “Altering my behavior is not an easy task (ask my family). I had enjoyed reasonable success without Charlie’s input, so why should I listen to a lawyer who had never spent a day in business school (when – ahem – I had attended three). But Charlie never tired of repeating his maxims about business and investing to me, and his logic was irrefutable. Consequently, Berkshire has been built to Charlie’s blueprint. My role has been that of general contractor, with the CEOs of Berkshire’s subsidiaries doing the real work as sub-contractors.”

‘Most lousy businesses can’t be fixed’

The problem with cigar-butt investing, as Munger later said, was that it couldn’t scale. Buying up dirt-cheap businesses and turning them around worked for a small company, but once Berkshire got big it was unwieldy, and required some heavy-handed management.

“[I]t was kind of scroungy and unpleasant when you're firing people. Who in the hell wants to do that?” Munger said at a 2017 event at the University of Michigan, which he attended in the 1940s before joining the army. “So we just run the money out and bought better businesses. And we've been doing it ever since.”

“The reason that Berkshire has been successful as a big conglomerate…. is we try to buy things that aren't going to require much managerial talent at headquarters,” Munger explained earlier in the conversation. “Everybody else thinks they've got a lot of managerial talent at headquarters and that's a lot of hubris … Most lousy businesses can't be fixed.”