Munger-Buffett legacy cannot be easily reproduced
Legendary investor Charlie Munger passed away on Tuesday, November 28. As vice chairman of Berkshire Hathaway (BRK-A, BRK-B) and long-time friend of CEO Warren Buffett, Munger provided valuable perspectives that shaped decisions, says University of Maryland Finance Professor David Kass.
Despite Munger's death, Kass believes investors have "every reason" to stick with Berkshire Hathaway, noting Buffett's intention to create a company "built to last." According to Check Capital Management President and CIO Steve Check, Munger was the only person who could truly sway Buffett's thinking. Check stresses the depth of their 60-plus-year friendship and mutual respect of each other in the C-suite.
Rather than fearing mistakes, Munger embraced them as life lessons that enabled shared success. Check recounts Buffett and Munger's general investing philosophy: "Give us the bad news, the good news will take care of itself." Check believes this outlook powered their investing accomplishments more than any individual decision.
"Certainly, as a team, there was only that one Munger-Buffett team," Kass tells Yahoo Finance, adding: "But I think, certainly going forward, Munger's input to the investment process at Berkshire will continue in terms of his principles."
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Video Transcript
DAVID KASS: He brought that sort of a second opinion, so to speak, to Buffett. And the two of them just were certainly thinking on the same wavelength and together made just a team that I don't think could easily be reproduced. I've said before, there's only one Warren Buffett, and of course, there's only one Charlie Munger. And certainly as a team, there was only that one Buffett-Munger team. But I think certainly going forward, Munger's input to the investment process at Berkshire will continue in terms of his principles.
- Steve. So then my question to you is as you just mentioned, Munger has played that right hand man to Buffett sounding board, acquisitions, buying stocks. For as long as Buffett now stays atop Berkshire, do you think he will be reluctant to pull the trigger on that long-awaited big deal?
STEVE CHECK: No. I mean, first of all, I think they thought of each other as the two smartest guys-- well, the smartest guy that each of them had each other met. And certainly, the only one that really swayed Warren Buffett over the history is Charlie Munger. But as far as making the big decisions at Berkshire, that still is Warren Buffett. And that will continue, of course, as long as Warren Buffett is running Berkshire. But boy, he's going to really miss Charlie. I really got the feeling that both men really just kind of worked as hard as they did to almost impress each other more than anybody else. They just loved each other, best friends, and the relationship goes back over 60 years.
- And as someone who watches Berkshire, Steve, did you see any mistakes that the duo made, or are there notable things that you saw them sort of learn from as time went on?
STEVE CHECK: Well, I think Charlie was more about life lessons than he even was about investing as great as an investor as he was. But he was so well-rounded and so well-read. And one of the things he used to like to talk about was we like to review our mistakes, and rub our noses in them, and really learn from them. If you're going to make a mistake, you try to take the positive from it. So they've made mistakes. They've acknowledged those mistakes. And they acknowledge that they'll make more mistakes.
A lot of times, the annual reports that Warren Buffett would write would start with the mistakes. He says they were always about give us the bad news. The good news will take care of itself. So they weren't afraid. They were very confident men. They were obviously the best there was at this and the best duo that we've ever witnessed. And they weren't afraid to admit to making mistakes and saying everyone does that.
- David, is there any reason to own Berkshire Hathaway shares?
DAVID KASS: I think there's every reason in the world. I don't see Berkshire doing any worse, let's say, in the years ahead. Certainly, Berkshire has substantially outperformed the market over its 55-year history under Warren Buffett. In recent years, it's been tracking the S&P 500. But going forward, in Buffett's recent words, it's been built to last. I think it is well-diversified, growth opportunities. And then with Greg Abel coming in at some point when Warren is no longer there, I think the succession plan is in place, and the outlook is just as bright as it has ever been.
