Charlie Munger, the billionaire Berkshire Hathaway vice chairman and investing legend who died Tuesday at the age of 99, offered predictably colourful advice on estate planning earlier this year at his final Berkshire annual meeting, as the 93-year-old Warren Buffett, Berkshire’s CEO and chairman, prepares to hand the keys to his empire to the next generation.
Charlie Munger, right, and Warren Buffett at Berkshire’s 2019 annual meeting.
AFP via Getty Images
Key Takeaways
- After a shareholder asked the billionaire duo in May about their thoughts on how to ensure smooth estate planning, Buffett offered up a lengthy response on the subject, saying he won’t sign a will until each of his children have thoroughly reviewed it and warning about the “terrible mistake” some make by keeping their children out of the loop entirely.
- But Buffett’s foil Munger blankly instructed heirs to “just hold the goddamn stock,” pointing to the “sample problem of estate planning” demonstrated by Berkshire, whose shares have posted an an annual return of 21% since 1976, far stronger than the S&P 500’s 11% average return.
- Buffett retorted that the holding strategy doesn’t “fit everybody,” to which Munger said it’s just 95%.
- The lighthearted exchange between Buffett and Munger, who had plenty of them in their nearly five decades together at the helm of Berkshire, not only shed light on their relationship, but also further highlights the succession planning question for the $780 billion company led by the nonagenarian Buffett.
- Greg Abel, the 61-year-old chief of Berkshire’s non-insurance businesses, is Buffett’s pick to replace him as CEO, while the 72-year-old insurance boss Ajit Jain would step into the secondary role, becoming Munger’s de facto replacement (Buffett’s eldest son, Howard Buffett, will become non-executive chairman of Berkshire to ensure the transition is smooth).
- At Berkshire’s shareholder meeting this spring, Buffett discussed the importance of the structure he and Munger sat atop for years, advising Abel to “sit at a position where he needs his equivalent or something close to his equivalent” and needs to closely heed Jain’s “best advice.”
Tributes
In a company-issued statement, Buffett said Berkshire “could not have been built to its present status without Charlie’s inspiration, wisdom and participation.” Numerous other notable billionaires and business leaders paid their respects to Munger, including Apple CEO Tim Cook, who called Munger a “titan of business and keen observer of the world around him” and Microsoft cofounder Bill Gates, who said Munger was a “guiding influence” for him who “reshaped the world’s understanding of business and investing” alongside Buffett. Costco CEO Craig Jelinek told Yahoo Finance that Munger “was a legend” to him, noting the long-time Costco board member Munger was a “tremendous asset” to the retailer.
Forbes Valuations
Munger was worth $2.6 billion at the time of his death, according to our estimates, while Buffett is the sixth-richest person in the world with a $120 billion fortune.
Crucial Quote
“Invest in a business any fool can run, because someday a fool will. If it won’t stand a little mismanagement, it’s not much of a business,” Munger said in 2009.
This article was first published on forbes.com and all figures are in USD.
