The short-term never bothered him: Howard Marks remembers Munger

Howard Marks, the Co-Chairman of Oaktree Capital Management.

In an illuminating conversation with Bloomberg Talks recently, Howard Marks, the astute Chairman of Oaktree Capital Management, offered profound insights into the enduring legacy of Charlie Munger, Vice-Chair of Berkshire Hathaway, who passed away at age 99 on November 28, 2023.

As we reflect on Munger's remarkable life, Marks provides a lens into the world of long-term investing and the strategic considerations for Berkshire Hathaway's future.

Long-term vision and patience

Marks opened the discussion by extolling Munger's brilliance and long-term perspective, stating, "He started off with a brilliant mind and a brilliant partner. He intensively studied the financials, thinking about the long term. He never tried to guess what a company or a stock would do in the short term." This approach, Marks emphasized, underscores the importance of patience and strategic foresight in navigating the complex world of investments.

Concentration and patient decision-making

A core tenet of Munger's success, according to Marks, was concentration and patient decision-making. "He was a great practitioner—sit on your hands, and he did it flawlessly. The lesson of Charlie Munger is long term. If you want to hit the long ball, you have to be very patient," remarked Marks. This insight serves as a timeless reminder for investors in a world often dominated by short-term thinking.

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Skepticism towards the investment management industry

Marks seamlessly integrated Munger and Buffett's skepticism towards the investment management industry into the conversation, noting, "Both Charlie and Warren felt in our industry. Relatively few members have made substantial contributions to their clients. Many more members were well paid." This skepticism echoes through Munger's famous emphasis on behaviour over an agenda, a sentiment Marks has incorporated into his own investment philosophy.

Adapting to changing markets

Navigating the ever-changing landscape of markets was a key theme. Marks reflected on Munger and Buffett's approach, stating, "On the one hand, you have to evolve with the times. On the other hand, they never went full bore into the tech sector. They put it on the too-hard pile." This nuanced approach to adaptation emphasizes the importance of selective evolution, aligning with the philosophy of finding a few exceptional opportunities rather than exploiting every sector.

Managing Berkshire Hathaway's size and cash reserves

Addressing the future management of Berkshire Hathaway, Marks acknowledged the challenge of managing a company of such magnitude. "The people who run Berkshire today and will run it tomorrow understand the limitations of size. All things being equal, size makes it harder to outperform," noted Marks.

Also Read: Investing genius Charlie Munger, Warren Buffett's trusted advisor, passes away at 99

He suggested potential strategies such as indexing the core and managing the periphery to maintain the company's stellar performance.

Regarding Berkshire Hathaway's substantial cash reserves, Marks provided insights into potential strategies, saying, "You know, the people who run Berkshire today and will run it tomorrow understand the limitations of size... I would index the core, manage the hell out of the periphery." This strategic advice hints at the delicate balance between maintaining outperformance and managing the challenges posed by the company's size.

Hence, Howard Marks' reflections on Charlie Munger's wisdom not only pay homage to a legendary investor but also provide a roadmap for navigating the complexities of the investment landscape. The conversation serves as a timely reminder of the enduring principles that have shaped Berkshire Hathaway's success, offering valuable insights for investors and enthusiasts alike.

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