With Berkshire Hathaway's annual shareholder meeting set for Saturday, many investors' thoughts undoubtedly are turning to a key figure in the conglomerate who will be missing for the first time: Charlie Munger, who died late last year at 99.
Munger not only helped steer Berkshire as its vice chairman, he served as mentor to the firm's legendary chairman, Warren Buffett, who earlier this year credited his business partner as the company's architect.
Chris Davis, chairman and portfolio manager at Davis Advisors, anticipating his investment management firm's annual pilgrimage to Omaha for the Berkshire meeting, recently posted a tribute to Munger and included important lessons he learned from the famous investor.
Davis said he made it a regular part of his routine over the years to visit Munger in Los Angeles and "sit at his feet and learn."
One idea that Munger reinforced in Davis, a Berkshire board member, was the question: "What it is to be entrusted with somebody's savings?"
In the early days of growth and hedge funds, some in finance asked, "Why are we in the business of managing money for people that live on Main Street when we could run hedge funds for endowments and billionaires?" Davis said.
"And Charlie said: It's a real duty to be entrusted with somebody's life savings, and it's a field where to dedicate yourself to that alone may distinguish you. Because, he said, you're in a field where a lot of people get taken advantage of."
Munger's rules "remain at the bedrock of our firm," Davis said.
Davis, who has a bust of Munger behind his office desk, noted that Munger had a bust of Benjamin Franklin in his office. Munger, he said, explained that he liked to have someone he admired looking over his shoulder.
Here are 6 lessons that Davis took from Munger, some for company leaders, some for investors.
1. Be aligned with clients.
Alignment of incentives is the most important Munger rule for Davis and his firm.
Munger "said so many firms, well, all they want to do is get bigger. And he said, but if you're a large investor in your own funds, if you invest your money alongside your clients, you're going to do better by 10% better performance than 10% more assets under management," he said.
