Quote of the Day by Charlie Munger: ‘We want to buy something an idiot could run…’ — Here's why

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

“We have a very peculiar way of looking at things. We want to buy something that’s intrinsically a very good business, meaning that an idiot could run it and it would do alright”

What does Charlie Munger's statement mean?

The quote came in response to a question on Munger's investment philosophy at the Redlands Forum in California on 29 January 2020. The ace investor called it a “peculiar way of looking at things” but noted that both he and Buffett valued a business with strong fundamentals and “tremendous strength” over any other quality.

While the first aspect is to look for a good business, he added, “And then we want that business, which an idiot could run successfully, to have a wonderful person running it. If we have a wonderful business with a wonderful person running it, that really turns us on — and it works very well.”

Munger noted that the duo “do make exceptions”, but the philosophy is simple and they “like businesses that stand a lot of mismanagement, but don’t get it”.

“That’s our formula. We can’t make it work perfectly, but it has certainly worked better than most people’s methods. We reject some wonderful businesses and some wonderful people where it is just too tough. If the business is tough enough, it has a way of staying tough. Warren (Buffett) says that when a business with a reputation for being tough and a manager with a (reputation) for being brilliant get together, it’s the reputation of the business that remains,” he added.

WATCH: Charlie Munger explains his investment philosophy

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.