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After high school graduation, she faced the stress and uncertainty of
going east to attend an Ivy League school. She graduated from Radcliffe,
then stayed in New England to go to Harvard Law School. When Molly
returned to California, several important events had occurred. Her father
had turned 50, he possessed several million dollars, and his business life
had become entwined with Buffett's. It was an arrangement that seemed
to fit the long-term plans of both men.

"Daddy had always been buying small companies," said Molly. "With
Warren, they had so much more capital."

Though Munger had worked with several partners already, Buffett had
been working mostly on his own. "We saw that we had odd personalties
that happened to fit fairly well, and we've been partners in one way or another ever since," said Buffett. "We weren't formally business partners,
but intellectually we've been partners ever since." Buffett sometimes calls
Munger his "junior partner in good years and senior partner in bad years."

Although they agreed to collaborate shortly after meeting, the partnership evolved gradually and naturally, based on trust and a solid respect
for one another's intelligence.

"We were certainly business partners at Blue Chip Stamps," recalls
Munger. "We certainly were business partners when we formed Diversified Retailing to buy department stores, buying at less than the liquidating
value of the company, a Ben Graham type of play."

From the 1960s and through the turn of the century, the two analyzed business opportunities often on the telephone, talking many times a
week. When the time came to close a deal, they got together in the same
place. When one couldn't be reached, the other had the authority to act.
"We know so much about how each other thinks that we may move pretty
far along even if the other isn't available," Buffett said.

Buffett was only 29 when he met Munger, but he already had strong
investment credentials. He grew up listening to his stockbroker father
talk and hanging out at the brokerage offices in Howard Buffett's building. Money fascinated Warren and investing was his obsession from boyhood on. As a student at the University of Nebraska, Buffett read a
recently published book, The Intelligent Investor by Ben Graham, and
his course was set. The year was 1949, and Graham, known as a sort of intellectual Dean of Wall Street, was one of the most successful and best
known money managers in the country. Buffett enrolled in the graduate
business school at Columbia University, where Graham taught, and later
he briefly worked at Graham's New York investment firm. When Ben retired and closed the business, Buffett returned to Omaha to set up his
own investment operation. His first clients were relatives, who already
knew how bright he was, and some former Graham investors who were
looking for the next Ben Graham and had reason to believe Buffett could
pull the sword from the stone.

Munger brought a business law perspective to this rich mix, but from
his independent forays into the commercial world, he also understood
how businesses work. "Charlie can analyze and evaluate any kind of deal
faster and more accurately than any man alive. He sees any valid weakness
in 60 seconds. He's a perfect partner."

As they studied and acquired retail stores and companies such as Blue
Chip Stamps and See's Candy, both Munger and Buffett were pushing
themselves and venturing into higher realms. They also were learning
how to be effective partners.

"A partner ideally is capable of working alone," explained Munger.
"You can be a dominant partner, subordinate partner, or an always collaborative equal partner. I've done all three. People couldn't believe that I
suddenly made myself a subordinate partner to Warren. But there are
some people that it's okay to be subordinate partner to. I didn't have the
kind of ego that prevented it. There always are people who will be better
at something than you are. You have to learn to be a follower before you
become a leader. People should learn to play all roles. You can divide up
in different ways with different people."

When he worked with Rick Guerin, Munger's relationship was different from the one he had with Buffett, even though what they did was
similar. In fact, Guerin was sometimes a partner in the deals Munger and
Buffett put together.

"Charlie is older than I and had legal experience," said Guerin. "He
was the senior partner, you might say. He's always willing to listen. Always had an open mind. If you said 'Charlie, stop talking and listen to me,
to what I'm trying to say,' he would listen."

A friend once noted that "Charlie is about as much like Warren as you
can get. One of Warren's strengths is that lie's very good at saying no, but
Charlie is better. Warren uses Charlie as one last litmus test. If Charlie
can't think of it reason for not doing something, they'll do it."3

Buffett has called Munger "the abominable no man," but Lou Simpson
said that's more of a joke than anything. There is more to Charlie than negativity. "Charlie thinks outside of the box. He thinks quite differently and
this leads him to some interesting conclusions. He has the ability to zero
in on things that are really crucial to making good decisions. Charlie will
give lots of negatives, but [he and Buffetti finally come up with a similar
conclusion."

The tendency for him and Buffett to think alike hasn't always been an
advantage. "If a mistake goes through one filter, it is likely to go through
both," said Charlie.-'

The relationship between Munger and Buffett, however, is more than
a business arrangement. Though Munger can be self-willed, preoccupied,
and abrupt, says Buffett, "He's just the best pal a guy could have."

A LESS OBVIOUS ELEMENT OF THIS MENTAL MATRIX, one that was woven deeply
into the background, was the old master of the investment game, Ben
Graham. Because Graham was now living in the same town with Munger,
the two became acquainted. In certain ways, the similarities between Buffet's two closest associates were eerie. Both men admired and purposely emulated Benjamin Franklin. All three, Franklin, Graham, and Munger,
lost their beloved first sons to diseases that, had they occurred even a few
years later, most likely would have been cured or prevented.

Both Graham (who died in 1976) and Munger shared a wry and occasionally silly sense of humor and a deep interest in literature, science, and
the teachings of the great thinkers. Both liked to quote the classics. One
of Munger's favorite ideas is from Aristotle, "The best way to avoid envy is
to deserve the success you get."

Like Munger, Graham was known for his integrity and dedication to
objectivity and realism. Graham often told his students that there were
two requirements for success on Wall Street: the first is to think correctly
and the second is to think independently.

Munger also urges independent thought: "If, in your thinking, you
rely entirely on others, often through purchase of professional advice,
whenever outside a small territory of your own, you will suffer much
calamity." Charlie recognizes the need to hire a doctor when he needs
medical advice, an accountant or other professional help when necessary.
But he doesn't take the experts entirely at their word. He considers what
they say, continues his research, seeks other opinions, and in the end,
reaches his own conclusion.

As Lou Simpson pointed out, Munger probably does not realize how
much his mind works like Graham's. That said, there were major differences between Munger and Graham. Graham was an unrepentant ladies
man until the end of his life but Munger has no such reputation. The important women in Charlie's life are his wife and three daughters. Differences in investment philosophy became increasingly apparent as
Munger's career progressed.

Munger was among those who attended a now famous conference
that Buffett organized in Coronado, California, in 1968. A group of
Buffett's investing buddies met with Graham to discuss the best way to
react to the flagging stock market. At that meeting, Buffett introduced
Munger and his law partner Roy Tolles to friends he'd made when studying and working in New York. The Graham acolytes included Bill Ruane,
founder of the Sequoia Fund, Tom Knapp of Tweedy Brown, Walter
Schloss, Henry Brandt, David "Sandy" Gottesman, Marshall Weinberg, Ed
Anderson, Buddy Fox, and Jack Alexander. These were investors of the
high caliber that would impress Munger.

However, Charlie did not share the special affection and admiration
that Buffett felt for Graham. Some of Graham's precepts, did not impress
him at all. "I thought a lot of them were just madness," he said. "They ignored relevant facts."

Specifically, said Munger, "Ben Graham had blind spots. He had too
low an appreciation of the fact that some businesses were worth paying
big premiums for."s

Yet Charlie agreed with Graham's most fundamental teachings and
they have been part of the Buffett-Munger success formula from the start.
"The basic concept of value to a private owner and being motivated when
you're buying and selling securities by reference to intrinsic value instead
of price momentum-I don't think that will ever be outdated," said
Munger.

Though Munger isn't interested in Graham's old-fashioned "cigar
butt" stocks that have one puff left in them, Charlie is still too conservative to overpay for an asset. "I never want to pay above intrinsic value for
stock-with very rare exceptions where someone like Warren Buffett is
in charge," said Munger. "There are people-very few-worth paying up
a bit to get in with for a long-term advantage. The investment game always
involves considering both quality and price, and the trick is to get more
quality than you pay for in price. It's just that simple."

Buffett has had a lifelong connection with most of the people who
were in Coronado with him that summer, and he gives Graham a lot of
credit for what happened to them afterward. "They were all moderately
well-to-do then. They're all rich now. They haven't invented Federal Express or anything like that. They just set one foot in front of the other.
Ben put it all down. It's just so simple."

It may not have been obvious in Coronado that Munger was replacing
the ailing Graham as Buffett's confidant and advisor, but the transition
had begun. Carol Loomis, an editor and writer at Fortune, explained that
while Buffett maintained his respect for Graham's ideas, Munger helped
him expand his approach, to take the next big step forward:

When he met Buffett, Munger had already formed strong opinions about the
chasms between good businesses and bad. lie served as a director of an International Harvester dealership in Bakersfield and saw how difficult it was
to fix up an intrinsically mediocre business; as an Angeleno, he observed
the splendid prosperity of the Los Angeles Times; in his head he did not
carry a creed about "bargains" that had to be unlearned. So in conversations with Buffett over the years he preached the virtues of good businesses- By 1972, Blue Chip Stamps, a Berkshire affiliate that has since been
merged into the parent, was paying three times book value to buy See's
Candies, and the good-business era was launched.-

Buffett agrees with Loomis' explanation. "Charlie shoved me in the
direction of not just buying bargains, as Ben Graham had taught me. This was the real impact he had on me. It took a powerful force to move me on
from Graham's limiting view. It was the power of Charlie's mind. He expanded my horizons."'

Buffett says he slowly came around to Munger's point of view on
many points. "I evolved," Buffett said. "I didn't go from ape to human or
human to ape in a nice, even manner."

To that Buffett has added a simple observation: "Boy, if I had listened
only to Ben, would I ever be a lot poorer."'"

In spite of what he says, it didn't take long for Buffett to put together
what he had learned from Graham and what he was learning from
Munger. "I became very interested in buying a wonderful business at a
moderate price," he said.''

The 1968 meeting that Buffett organized in Coronado developed into
a combination study group/party held every other year. The original
Buffett Group was comprised of 13 investors. Now more than 60 top
corporate executives and personal friends of Buffett attend. Buffett and
Munger exchange ideas with old friends like Al Marshall, Walter Schloss,
and Bill Ruane, and newer friends such as Katharine Graham and Bill Gates.

"Our group," as Buffett calls it, has met at Lyford Cay in the Bahamas;
Dublin, Ireland; Williamsburg, Virginia; Santa Fe, New Mexico; Victoria,
British Columbia; and more than once in Monterey, California. One year
they booked the Queen Elizabeth II for a cruise to England and it rained
the entire trip. Members take turns playing host, and whoever hosts the
event gets to pick the location.

The group holds seminars on public policy, investments, charitable
giving, and life's toughest and silliest moments. Once Munger gave a
lecture on Einstein's Theory of Relativity. Few people were interested,
but most felt obligated to go. One member recalls, "If Buffett was there,
he probably understood it. I don't think anyone else did." 12