At age 50, Munger's stocks were cut in half, only recovering after 16 years

You only see Munger's wisdom and wealth, but you may not know that he faced the darkest lows of his life at age 50.
And he climbed out of this quagmire, taking a full 16 years.
Before the 1973 stock market crash, Munger achieved an astonishing annualized return of 22%.
Subsequently, the U.S. stock market collapsed, and his partnership lost 53%.
And he personally used leverage, with his net worth declining even more.
On a cold winter night that year, Munger drove home looking haggard.
Passing by a gas station, he saw a middle-aged man in oil-stained uniform, exhausted but peaceful inside, refueling a car.
At that moment, Munger fell into a great spiritual crisis.
He rolled down the window and looked at the man, asking himself:
“If I had continued to be an honest lawyer back then, avoiding investments, would life be much better than it is now?”
In that instant, Munger was infinitely close to giving up.
In 1975, the market rebounded strongly, and Munger’s partnership soared 73.2%.
However, after losing 53% of his assets, he needed a 113% increase to break even.
Therefore, even with a 73.2% surge in 1975, his assets only recovered to 80% of the original.
And his personal wealth was even far from breaking even.
Munger made a painful decision: to admit failure and liquidate the partnership.
He told himself: I will start over, but I will not give up investing because I believe I can do better.
Then, it took him exactly 16 years to return to the peak of his wealth before the crash.
Of course, using the word “break even” is clearly wrong.
Once a person desperately wants to quickly “break even,” they instantly become a gambler.
During his low point, Munger did not engage in high-risk short-term speculation to “quickly recover,” but instead completely reconstructed his investment system:
1. Be with the best people: In 1978, he officially became vice chairman of Berkshire Hathaway, teaming up with Buffett, and exchanged most of his assets for Berkshire stock.
2. Quit debt and deadly leverage: Having experienced a cliff, Munger deeply realized that as long as the power of compound interest is given enough time, leverage is unnecessary.
3. Shift from “buying cheap stocks” to “buying great companies”: He successfully persuaded Buffett to abandon Graham-style “tatter stock” investing and instead buy great companies at reasonable prices.
This period, rather than being 16 years of Munger’s decline, was more like 16 years of self-reinvention.
So, when Munger’s wealth returned to its high point in 1990, it was not simply breaking even, but building an indestructible compound interest machine, leading to an epic explosion.
From the “finally breaking even” in 1990 to his passing at age 99 in 2023, his personal wealth soared to billions of dollars.
Although there is a significant gap with Buffett, Munger’s wisdom and wit seem to have a greater influence on the world.
And this was inseparable from the forging during those dark years.
Even the most talented can experience a wipeout.
The difference is, ordinary people choose to sink into despair, while masters choose to restart in adversity.