customer base , a strong brand and a high return on capital , which allowed it to raise prices and increase cash flow over time .
The See ’ s acquisition began Berkshire ’ s legendary practice of buying high-quality businesses with durable competitive advantages at reasonable prices , rather than mediocre ones on the cheap . Good examples are marquee Berkshire subsidiaries such as Benjamin Moore , Dairy Queen and Fruit of the Loom , along with a collection of regional furniture marts and jewelry stores . Berkshire used this approach to buy and hold shares in some of the most successful and profitable companies in history , such as American Express , Apple and Coca-Cola . Munger and Buffett have often repeated what is now a talismanic lesson : “ A great business at a fair price is superior to a fair business at a great price .”
Munger and Buffett maintained a strong and harmonious partnership across six decades . They shared a fundamental philosophy , a passion for learning and a sense of humor , despite occasional disagreements and different temperaments , with Buffett being gregarious and upbeat , Munger dour and cynical .
One example of their humor was the naming of a corporate jet they acquired in the 1980s , which they dubbed the “ Indefensible ,” reflecting their aversion to unnecessary expenses and awareness of the irony of owning a luxury item . They sold the jet in 2000 , after buying Net Jets , a fractional aviation company , which they considered a better investment and a more efficient way of traveling .
Munger devised Berkshire ’ s distinctive shareholder charitable giving program in 1981 , which during its 20-year run allowed every Berkshire shareholder to choose charities to receive a certain amount of money from Berkshire . This program responded to the company ’ s growing wealth and diverse shareholders . Munger ’ s unique and democratic design reflected Buffett and Munger ’ s belief not only in the importance of the affluent giving back to society , but their conviction that a company ’ s shareholders , not its managers , should decide how corporate philanthropy is directed .
Munger was known for his sparing but decisive veto power over improvident acquisitions at Berkshire . He always said no to Buffett when he thought a deal was too risky , expensive or complex , earning
Warren Buffett and Charlie Munger at the symposium for The Essays of Warren Buffett , held at the Cardozo Law School in New York City in October 1996 .
him the nickname “ abominable no-man ,” as Buffett put it while quipping of Munger ’ s role as a “ negative feedback system .”
Buffett admitted to making mistakes when failing to consult with Munger , such as losing a billion dollars on a $ 2 billion investment in the debt of a leveraged buyout of Texas Electric Utilities in 2007 . He regretted not seeking Munger ’ s advice , who would have warned of the dangers of excessive leverage and the unpredictability of the energy market .
Munger also taught Buffett to avoid the “ institutional imperative ”: the tendency of managers to follow the crowd and imitate peer behavior , regardless of the merits .
Munger drew on his deep reading in the fields of psychology and human behavior to help Buffett to think independently and rationally , and to resist the pressures of conformity and convention .
Munger extolled Berkshire ’ s decentralized structure , which gives managers the freedom to run their businesses without interference from headquarters , as long as they followed basic principles and reported honestly and promptly . Such autonomy helped make Berkshire the buyer of choice for business sellers wishing to continue operating them . Munger famously put it at the 1998 Berkshire annual meeting : We delegate “ to a point
Courtesy of Lawrence A . Cunningham www . MoAF . org | Winter 2024 | FINANCIAL HISTORY 13