Quote of the Day by Charlie Munger: ‘Berkshire Hathaway has done better than average because…’

Berkshire Hathaway co-founder and long-time friend of Warren Buffett, legendary investor Charles Thomas Munger has built a following of his own among the community. The late billionaire left behind a treasure trove of tried and tested investing advice over the years.

Even Buffett (95), dubbed ‘The Oracle of Omaha’ due to numerous impeccable investment decisions over the years, credits Munger for teaching him a few things.

In an obit piece after Munger passed away in November 2023, Bloomberg noted his importance as a “straight man and scold of corporate excesses” who provided a reality check and balance against Buffett's fame and wealth.

Quote of the Day by Charlie Munger

“At Berkshire, we’ve done better than average. And now there's a question, why has that happened? And the answer is pretty simple: We tried to do less.”

What does Charlie Munger's quote mean?

The quote is from Munger's statements at the Daily Journal Annual Meeting on 14 February 2019, where he spoke for nearly two hours. When asked about the success and he and co-founder Warren Buffett have had with Berkshire Hathaway, the ace investor felt the answer was to keep things simple.

Munger in his lengthier answer said that neither he nor Buffett had “illusions” that they know everything or could “just hire a bunch of bright young people and they would know more about canned soup and aerospace and utilities and so on”.

He noted that their best bet for looking for the company with good fundamentals and going ahead with what they know. He also acknowledged that being right a few times was more than enough rather than chasing being right every time. “We never had that dream. We never thought we could get really useful information on all subjects, and we always realized that if we worked really hard, we could find a few things when we were right. And that a few things were enough and that is a very reasonable expectation. This is a very different way to approach the process,” he noted.

Munger added that if you asked Buffet for his “best idea this year”, the billionaire would “give you one or two stocks. And you just followed that idea; you would find it worked beautifully”.

Buffett himself believes that there are only a few investment decisions you could make that yield blockbuster results, and that is enough. Speaking to students at the University of Georgia's Terry College of Business in 2001, the legendary investor said he believes in treating investment opportunities as one punch card with only 20 punches during your lifetime. This ensures “you think a long time before every investment decision – and you would make good ones, and you’d make big ones. And you probably wouldn’t even use all 20 punches in your lifetime. But you wouldn’t need to.”

Master of wit: Who is Charlie Munger?

Known for his sharp wit, brutal honesty, and no-nonsense thinking, Munger was one of the architects behind Berkshire Hathaway Inc.’s success alongside best friend and business partner Buffett. For almost 60 years the duo transformed the company from a failing textile maker into an empire, worth billions.

A lawyer by training, Munger helped Buffett, who was seven years his junior, craft a philosophy of investing in companies for the long term. Buffett has credited him with shaping Berkshire Hathaway’s investing style and pushing the ‘Oracle of Omaha’ away from cheap “cigar-butt” stocks toward high-quality businesses at fair prices.

Under their management, Berkshire averaged an annual gain of 20% from 1965 through 2022 — roughly twice the pace of the S&P 500 Index. Decades of compounded returns made the pair billionaires and folk heroes to adoring investors.

Munger was vice chairman of Berkshire from 1978 until the day he died at 99 in 2023. He was also among the company's biggest shareholders, with stock valued at about $2.2 billion. His overall net worth was about $2.6 billion, according to Forbes.