Charlie Munger once warned that "smart men go broke three ways: liquor, ladies and leverage." Venture capitalist Chamath Palihapitiya admits that the leverage he piled on during the pandemic bull run "almost broke" him.
What Happened: Palihapitiya posted the admission on X while quoting the late Berkshire Hathaway BRK BRK vice chair.
Palihapitiya, once dubbed the "SPAC King," raised billions through blank-check companies in 2020-21 and often bought stakes with borrowed cash. Many deals collapsed when tech valuations slid and interest rates jumped, forcing him to shut two vehicles and return funds to shareholders in 2023.
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Financial planners say leverage, typically via margin loans or derivatives, magnifies gains but can erase equity in a sell-off. In 2022, the UK gilt crisis and U.S. tech rout triggered forced liquidations when yields spiked and collateral shrank, according to a research note from Return Stacked. As of May 2025, margin debt remains elevated even after three straight monthly declines, Advisor Perspectives data show, highlighting investor appetite for borrowed bets.
Why It Matters: Munger's aphorism has long guided Berkshire's conservative stance on borrowings. In his 2010 annual letter, Warren Buffett https://www.benzinga.com/personal-finance/24/12/42702543/warren-buffett-says-borrowed-money-can-make-you-very-rich-or-be-lethal-warning-it-can-even-bring-an-entire-country-to-its-knees, "History tells us leverage all too often produces zeros, even when very smart people employ it."">told Berkshire employees, "History tells us leverage all too often produces zeros, even when very smart people employ it."
Buffett and the late Munger had always prioritized financial stability over short-term gains and that approach is echoed in Berkshire Hathaway’s current strategy. The company currently sits on a record-shattering $334.2 billion in cash, more than the company’s stock portfolio, which shrank to $272 billion last year.
Palihapitiya, meanwhile, promised to detail his near-miss "soon," but warned followers that debt can ruin fortunes faster than any other temptation.
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