Category: Investing

Warren E. Buffett has been at the forefront of American capitalism for decades as the chief executive of Berkshire Hathaway, the conglomerate he built into a $1.1 trillion colossus.

By the end of the year, he is preparing to give up that role.

Mr. Buffett said at Berkshire’s annual shareholder meeting on Saturday that he plans to ask the company’s board to approve making Gregory Abel, his heir apparent, the chief executive by the end of the year.

Mr. Abel would have “the final word” when it comes to the company’s operations, how it invests and more, Mr. Buffett, 94, told the tens of thousands of Berkshire shareholders at the meeting in Omaha.

But Mr. Buffett added that he “would still hang around and conceivably be useful in a few cases.” He will remain chairman of Berkshire — turning that role over to his son Howard Buffett upon his death — and remains the company’s single biggest shareholder, with a roughly 14 percent stake that is worth about $164 billion.

Mr. Buffett’s plan, which he said had been known only to two of his children who sit on the company’s board, Howard and Susan Buffett, was greeted by a minute-long standing ovation by Berkshire shareholders Mr. Abel, 62, appeared surprised by his boss’s announcement. After the announcement, several board members attending Berkshire’s meeting hugged each other.

Though Mr. Buffett looked in good health, having led several hours of questions from investors on Saturday, changes to this year’s annual meeting — his 60th at Berkshire — reflected his advancing age. He used a cane, which he first mentioned in the company’s annual letter in February, and shortened the shareholder question session by several hours.

If the board approves the plan, it would signify the end of an era for one of the most successful companies in modern capitalist history, and one of its most famous investors. Mr. Buffett has amassed a Midas-like fortune by being a savvy stock picker, buying up companies and holding them for the long term.

Through that investing philosophy, he assembled a conglomerate that runs a huge insurance operation, a major railroad, dozens of consumer companies and oversees a vast stock portfolio.

Among Berkshire’s most notable holdings are names that many consumers recognize: the auto insurer Geico, the BNSF railroad, the power utility Berkshire Hathaway Energy, Dairy Queen, See’s Candies, Fruit of the Loom, the paint company Benjamin Moore and the private jet company NetJets. Together, those businesses helped Berkshire grow a cash hoard that now sits at nearly $348 billion, more than the stock market valuation of McDonald’s.

Berkshire’s financial firepower has made Mr. Buffett one of the most influential businessmen in the world, giving his pronouncements on many topics, including politics, great weight. That included his criticism of President Trump’s trade policies, which Mr. Buffett took aim at on Saturday.

“Trade should not be a weapon,” Mr. Buffett said at the annual meeting. “I don’t think it’s right and I don’t think it’s wise.”

Mr. Buffett’s comments on tariffs were far from his first foray into politics. A Democratic supporter, his name was attached to a proposal years ago by former President Barack Obama that would have raised taxes on millionaires. But Mr. Buffett has kept a low profile for months, and even on Saturday he did not mention Mr. Trump by name.

Mr. Buffett’s plan to step down would complete one of the most-watched leadership transitions in corporate America. For years, he faced questions about who could take over Berkshire, a uniquely complicated business, and a number of executives had been floated as his successor.

But in 2021, Mr. Buffett finally confirmed that it would be Mr. Abel who joined the Berkshire fold when the company bought his energy business in 1999. Since then, the Canadian executive has risen through the ranks, turning what is now called Berkshire Hathaway Energy into one of America’s biggest power producers.

Mr. Abel is currently the vice chairman of Berkshire’s businesses other than insurance. Oversight of the conglomerate’s behemoth insurance operations has remained with Ajit Jain, a longtime Buffett lieutenant. Mr. Buffett and other executives have professed their belief that Mr. Abel could maintain Berkshire’s culture.

“Greg is ready,” Ronald L. Olson, a longtime Berkshire director who is also stepping down, told CNBC after Mr. Buffett’s announcement on Saturday.

Mr. Olson added that he hoped Mr. Buffett could serve as a valuable sounding board for Mr. Abel, much as Charles T. Munger, Mr. Buffett’s longtime business partner who died in 2023, did.

Together, Mr. Buffett and Mr. Munger entertained investors and more — notably at the Berkshire annual meetings, now in their 60th year — with a sort of vaudeville act, Mr. Buffett as the wry optimist and Mr. Munger as the sharp-tongued pessimist.

Berkshire’s latest financial report card underscored the complications that Mr. Abel will confront as chief executive.

The company reported a sharp drop in first-quarter earnings, with operating income — Mr. Buffett’s preferred measure — down 14 percent from the same time a year ago to $9.6 billion. Using generally accepted accounting principles, Berkshire reported a nearly 64 percent drop in net income, largely because of paper investment losses.

But while markets have grown more volatile in response to Mr. Trump’s whipsawing approach to trade, Mr. Buffett professed little worry about the effects of that volatility on Berkshire.

“It’s really nothing,” he told shareholders, suggesting that riding out market vicissitudes was part of stock investing.

The company reported that a “majority” of its businesses had lower sales and earnings in the first three months of the year, particularly in insurance underwriting income, which was hit by losses tied to the California wildfires.

In a regulatory filing on Saturday, Berkshire warned that Mr. Trump’s trade policies were generating “considerable uncertainty,” which could affect the company’s operating results. “We are currently unable to reliably predict the potential impact on our businesses, whether through changes in product costs, supply chain costs and efficiency, and customer demand for our products and services.”

Berkshire’s cash pile grew to $347.7 billion, a record, reflecting that Mr. Buffett has not found the kind of blockbuster investment opportunities that helped put the company on the map. In the past, he has acknowledged that given Berkshire’s size, it is nearly impossible now for Berkshire to find deals that could meaningfully augment its earnings.

During his question-and-answer session with shareholders at the annual meeting on Saturday, Mr. Buffett acknowledged stocking up on cash to prepare for any potential buying opportunity. He revealed that he had weighed a potential $10 billion investment, but later refused to elaborate.

Berkshire continued to be a net seller of stocks, selling $4.68 billion worth of equity in the quarter, compared with $3.18 billion in purchases.

One matter that Mr. Buffett did not directly address on Saturday is what would happen to Todd Combs and Ted Weschler, whom he hired more than a decade ago to help pick stocks for Berkshire. The two have been widely expected to become Berkshire’s stock pickers after Mr. Buffett steps away, though Mr. Combs has also become the chief executive of Geico.

A number of prominent corporate and business leaders were on hand on Saturday, including the Microsoft co-founder Bill Gates, Tim Cook of Apple (which is one of Berkshire’s biggest stock holdings) and the billionaire financier William A. Ackman. Two first timers, Hillary Rodham Clinton and Priscilla Chan, the wife of Meta’s chief executive Mark Zuckerberg, were also present.

Charles T. Munger, who quit a well-established law career to be Warren E. Buffett’s partner and maxim-spouting alter-ego as they transformed a struggling New England textile company into the spectacularly successful investment firm Berkshire Hathaway, died on Tuesday in Santa Barbara, Calif. He was 99.

His death, at a hospital, was announced by Berkshire Hathaway. He had a home in Los Angeles.

Although overshadowed by Mr. Buffett, who relished the spotlight, Mr. Munger, a billionaire in his own right — Forbes listed his fortune as $2.6 billion this year — had far more influence at Berkshire than his title of vice chairman suggested.

Mr. Buffett has described him as the originator of Berkshire Hathaway’s investing approach. “The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices,” Mr. Buffett once wrote in an annual report.

That investing strategy was a revelation for Mr. Buffett, who had made his name in the 1950s buying troubled companies at deep discounts. (He called them “cigar butts,” because investing in them, he said, was like “picking up a discarded cigar butt that had one puff remaining in it.”)

Mr. Munger counseled Mr. Buffett that if he wanted to build a large, sustainable company that would outperform other investors, he should buy solid brand-name companies. “He was the architect and I was the general contractor,” Mr. Buffett said of their relationship.

The partnership, spanning more than 50 years, produced one of the most successful and largest conglomerates in history. Among other properties, Berkshire, which is based in Omaha, owns the insurance giant Geico and the Burlington Northern Santa Fe railroad company and holds stakes in Coca-Cola, American Express and other corporate heavyweights. By 2022 it had about 372,000 employees.

Mr. Munger, an erudite man who sprinkled his conversations with references to Cicero, Albert Einstein, Mark Twain and Confucius, was widely known for his witty common-sense maxims, so much so that they were called Mungerisms and collected in books, including “Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger” (2005).

“Envy is a really stupid sin,” goes one, “because it’s the only one you could never possibly have any fun at.” Another: “The ethos of not fooling yourself is one of the best you could possibly have. It’s powerful because it’s so rare.”

Mr. Buffett and Mr. Munger would talk to each other on the telephone for hours every day, Mr. Buffett from his office in Omaha (their mutual hometown) and Mr. Munger from Los Angeles.

“We’ve never had an argument,” Mr. Buffett said. Repeating one of Mr. Munger’s favorite lines, Mr. Buffett said that when they did differ, Mr. Munger would say, “Warren, think it over and you’ll agree with me because you’re smart and I’m right.” 

Mr. Buffett and Mr. Munger were the faces of Berkshire’s annual meeting in Omaha, what became known as the Woodstock of Capitalism. They would hold forth in front of tens of thousands of rapt Berkshire shareholders, answering questions for up to six hours and dispensing their investment wisdom.

“The trouble with making all these pronouncements is people gradually begin to think they know something,” Mr. Munger told the audience in 2015. “It’s much better to think you’re ignorant.” He added, “If people weren’t so often wrong, we wouldn’t be so rich.”

Many of those listeners had become vastly wealthy themselves by investing with Mr. Buffett and Mr. Munger. A $1,000 investment in Berkshire made in 1964 is worth more than $10 million today.

Mr. Munger was often viewed as the moral compass of Berkshire Hathaway, advising Mr. Buffett on personnel issues as well as investments. His hiring policy: “Trust first, ability second.”

A Lawyer’s Son

Charles Thomas Munger was born in Omaha on Jan. 1, 1924, the son of Alfred Case Munger, a lawyer, and Florence (Russell) Munger. As a boy he worked Saturdays in a grocery store then owned by Mr. Buffett’s grandfather. (Mr. Buffett worked there for a time himself, but the two did not meet until much later.) At 17, Charles went to the University of Michigan to major in mathematics, but in his sophomore year, after the attack on Pearl Harbor, he enlisted in the Army Air Corps.

Promoted to second lieutenant, he was dispatched to the California Institute of Technology in Pasadena to train as a meteorologist. In Pasadena he met Nancy Huggins, daughter of a local shoe store owner, and they married, he at 21 and she at 19. They went on to have three children.

Soon he was assigned to Nome, Alaska, where he developed a talent that would serve him well.

“Playing poker in the Army and as a young lawyer honed my business skills,” Mr. Munger told Janet Lowe in her 2000 book “Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger.”

“What you have to learn is to fold early when the odds are against you,” he said, “or if you have a big edge, back it heavily, because you don’t get a big edge often, so seize it when it does come.

Even before his discharge from the Army in 1946, Mr. Munger, who once said he had a black belt in chutzpah, applied to Harvard Law School, from which his father had graduated, even though he had desultory work habits and no undergraduate degree. He was accepted only after intervention by a fellow Nebraskan, Roscoe Pound, a retired dean of the school and a family friend.

Graduating with honors, Mr. Munger returned to California and began practicing law. He eventually struck out on his own by founding the law firm Munger, Tolles & Hills (now Munger, Tolles & Olson). But his life had begun to unravel: He and his wife divorced; their only son, Teddy, died of leukemia at 9 years old; and he suffered financial reverses.

With Mr. Munger practically broke, his daughter Molly complained to him about his beat-up yellow Pontiac. “Daddy, this car is just awful, a mess,” she said. “Why do you drive it?” As recounted in Ms. Lowe’s biography, he replied, “To discourage gold diggers.”

Seeking to rebuild, and drawing on his preternatural math skills (“I always took math courses because I could get an ‘A’ without doing any work,” he said), he began investing on the side, in stocks, businesses and real estate.

“It soon occurred to me that I’d rather be one of our rich and interesting clients than be their lawyer,” he said.

His investments generated his first million dollars.

Mr. Munger married Nancy Barry Borthwick in 1956, and he met Mr. Buffett by happenstance three years later. Mr. Munger had flown back to Omaha to organize the affairs of his recently deceased father when he was invited to lunch at the local Omaha Club. There he was introduced to Mr. Buffett by a mutual friend.

Later that week, Mr. Munger attended a dinner party to which Mr. Buffett had also been invited. They hit it off and spent the evening talking. Mr. Buffett later recalled, “He was rolling on the floor laughing at his own jokes, and I thought, ‘That is my kind of guy.’ I do the same thing.”

Days later, they and their wives went to lunch at Johnny’s Cafe.

As quoted in “The Snowball,” Alice Schroeder’s 2008 biography of Mr. Buffett, Nancy Munger at one point asked her husband, “Why are you paying so much attention to him?” Mr. Munger replied: “You don’t understand. That is no ordinary human being.”

‘A Passion to Get Rich’

The men soon found themselves on the phone nearly every day talking about investing strategies. “Warren obviously had a better business model than I did,” Mr. Munger said, referring to his billing by the hour for his legal services. “He kept pointing out to me that I had an insane way of making a living, and that his was better and that I should do what he was doing.”

Mr. Munger was won over. “Like Warren, I had a considerable passion to get rich,” Mr. Munger was quoted as saying in Roger Lowenstein’s book “Buffett: The Making of an American Capitalist” (1995). “Not because I wanted Ferraris — I wanted the independence. I desperately wanted it. I thought it was undignified to have to send invoices to other people.”

Mr. Munger began investing side by side with Mr. Buffett, in companies like Wesco Financial and See’s Candies, before officially joining him as vice chairman. For the first year, he said, “I kept one toe in the law firm in case my capitalist career cratered.”

Together they built Berkshire into a $500 billion-plus juggernaut whose original shares posted annual gains averaging 21.6 percent between 1965 and 2014, more than twice the 9.9 percent rise for the Standard & Poor’s 500. (The company got its name when, early on, Mr. Buffett took over a fading Massachusetts textile manufacturercalled Berkshire Hathaway.)

The money Mr. Munger made far surpassed his greatest expectations, he said, but it could have been even more. He said his biggest mistakes were not bad investments, but investments Berkshire failed to make.

He and Mr. Buffett “were offered a stake in McDonald’s way early” and decided against it, he said.

“We should have bought a big block of Wal-Mart young,” he added. “That was billions that we should’ve made. We avoided the pharmaceutical industry entirely, and it was the easiest industry to make a lot of money out of all the ones around, and we never made a nickel out of it.”

Mr. Munger used his many nickels for an unusual philanthropic passion: architecture. He gave away hundreds of millions of dollars to university architecture projects, including $65 million for the Kavli Institute for Theoretical Physics at the University of California, Santa Barbara. 

At least one of his projects caused controversy: His design for a windowless dorm room building at the Santa Barbara campus, for which he contributed $200 million, was criticized by some architects and students. He defended it as efficient and effective.

Active Into His 90s

Mr. Buffett remained a vocal proponent of philanthropy through his Giving Pledge, an organization he founded with Bill and Melinda Gates to persuade billionaires to give away at least half their fortunes. But Mr. Munger was conspicuously not on the list. He said it was not that he did not want to sign the pledge. He said his wife, Nancy, who died in 2010 at 86, had wanted her half of the estate passed to the children, “and so I more than did that.” He added: “I felt it would be hypocritical for me to be a big pledger. I’ve already violated the total spirit of it.”

Mr. Munger is survived by two daughters from his first marriage, Wendy and Molly Munger; a daughter from his second marriage, Emilie Munger Ogden; three sons from that marriage, Charles Jr., Barry and Philip; two stepsons, William and David Borthwick; 15 grandchildren; and seven great-grandchildren.

A treasured retreat of his was a northern Minnesota wilderness compound on Star Island in Cass Lake, where his grandparents began summering in 1932 and which became the extended-family seat. In addition to Los Angeles, he had a home in Hawaii. 

Under Mr. Buffett and Mr. Munger, Berkshire invested heavily in newspapers, among them The Washington Post, The Buffalo News and The Omaha World-Herald. Mr. Munger himself was the chairman of the Daily Journal Corporation, a newspaper publisher, from 1977 to 2022.

He remained active in Berkshire Hathaway into his 90s while serving for decades as chairman of Good Samaritan Hospital in Los Angeles, to which he lavishly donated. A Republican, he was also outspoken in support of Planned Parenthood.

Perhaps in another life Mr. Munger, with all his drive and self-assurance, would have been the chief of a giant corporation. But he had no regrets about making his fortune in the shadow of Mr. Buffett.

“I didn’t mind at all playing second fiddle to Warren,” he said in an interview for this obituary. “Ordinarily, everywhere I go I am very dominant, but when somebody else is better, I’m willing to play the second fiddle. It’s just that I was seldom in that position, except with Warren. But I didn’t mind it at all.”