Belridge Oil and the $10 Billion Lesson from Charlie Munger
How One Missed Opportunity Cost Charlie Munger $10 Billion: Lessons on Courage, Action, and Seizing Rare Investments
Investing is supposed to be logical, right? You crunch numbers, look at fundamentals, and if something’s clearly undervalued, you buy. But what happens when emotions, hesitation, or just plain bad judgment get in the way? You miss out on the kind of windfall that keeps you up at night for decades. Just ask Charlie Munger.
In 1977, Munger—a man who built his fortune alongside Warren Buffett—made what he calls his “biggest investing mistake.” A broker called him one day, offering 300 shares of Belridge Oil at $115 per share. Munger saw it for what it was: a no-brainer deal. He took the shares, knowing the company was worth much more than the market price suggested.
The next day, the same broker called back with even better news. There were 1,500 more shares available at the same dirt-cheap price. But Munger hesitated. He had the confidence and the understanding that this was a steal, but he didn’t have the cash on hand. Raising the extra $173,000 would’ve required selling some of his other holdings. He thought it over for 10 minutes and then said, “No.”
That “No” ended up costing him more than $10 billion.
The Opportunity: Belridge Oil—An Uncut Gem
Belridge Oil wasn’t your average small-cap company. It had everything an investor dreams of. They owned the oil fields outright—not just the oil rights, but the land itself. No leases, no middlemen, no complications. And the field was loaded with 376 million barrels of proven reserves, producing about 40,000 barrels a day. Even more enticing, Shell Oil later estimated that the actual amount of oil was far larger, and they saw potential to ramp up production even higher.
If you’re new to investing, understand this: owning the land and the resources is the ultimate jackpot. Belridge was in a prime position with zero debt and assets that were grossly undervalued. Shell saw the gold mine and wasn’t going to let it slip by.
Shell’s Move: A Historic Buyout
Fast forward to 1979, just two years after Munger’s decision to pass on the 1,500 extra shares. Shell Oil stepped in and offered to buy Belridge for $3.65 billion—the biggest cash takeover in U.S. history at the time. Belridge’s stock price, which was trading at $115 per share when Munger got his offer, shot up to $3,665 per share.
Shell knew exactly what they were getting. They were desperate for oil, running their refineries at less than full capacity due to a shortage. The California field was a lifeline, not just for its proven reserves but for its future potential. The deal included over 20,000 acres of land, loaded with heavy oil reserves and even a farm producing cotton, citrus, and almonds.
Shell paid 82 times Belridge’s earnings, a staggering valuation, but it was still a home run for them. Why? Because they had the technology and resources to extract even more oil, making the field profitable well into the next century.
The Aftermath: What Munger Could Have Had
Let’s put this into perspective. If Munger had bought the 1,500 additional shares at $115, his total investment would’ve been $173,000. After Shell’s buyout, those shares would’ve been worth a jaw-dropping $5.5 million. But that’s not where the real pain comes in.
Munger took his gains from the original 300 shares he bought and rolled it into Berkshire Hathaway stock, which was trading at around $375 per share back then. We all know what happened to Berkshire: it grew exponentially. The same principle applies to what those 1,500 shares could have become if invested in Berkshire. Today, they would be worth nearly $10 billion. That’s not just a missed opportunity—that’s a blunder that defines the word “regret.”
The Lessons: Don’t Let Fear Hold You Back
So, what can newbie investors like you and me take away from this?
Truly Great Opportunities Are Rare — Recognize Them
Most of your investing career will be about making solid, average gains. But once in a blue moon, a unicorn comes along—a stock so undervalued and full of potential it makes your palms sweat. When that happens, act decisively. If you hesitate, someone else will snatch it up, and you’ll be left nursing the regret of what could have been.Don’t Be Afraid to Double Down
When you know you’re looking at a sure thing, don’t just dip your toe in. Dive in headfirst. Munger’s initial purchase of 300 shares was good, but if he’d had the gumption to take on the full 1,500 shares, his life would’ve been dramatically different. Yes, it would’ve meant taking on some risk—maybe selling other stocks or even borrowing. But the best opportunities don’t come without a little discomfort.Understand the Value Beyond the Numbers
Shell paid 82 times Belridge’s earnings. At first glance, that looks insane. But they saw value beyond the earnings—massive reserves, long-term production potential, and strategic advantages for their own operations. Don’t get tunnel vision on one metric like P/E ratio. Think big picture.Have the Courage to Execute
Let’s be real: most people don’t fail because they lack intelligence or information. They fail because they lack the courage to execute. Munger had the brains, but he second-guessed himself. The result? A $10 billion loss. So, the next time you’re facing a decision and everything lines up, don’t let fear, doubt, or laziness hold you back.
Final Thoughts: You’ll Regret Inaction More Than Action
Munger’s story isn’t just a reminder that even the best can make mistakes. It’s a wake-up call. Don’t let hesitation, over-analysis, or fear of what others might think hold you back. Whether you’re buying stocks, starting a business, or making a big life change, inaction is often far worse than taking a calculated risk.
If Munger—one of the greatest investing minds of all time—can miss out on a fortune because of hesitation, what does that mean for the rest of us? It means we have to train ourselves to recognize the rare chances, get out of our own way, and act with courage.
Because at the end of the day, you’d rather be the person who tried and fell short than the one who stood on the sidelines and watched opportunity pass by.
So next time opportunity knocks, don’t just answer the door—invite it in, roll out the red carpet, and make the damn deal.