Most of the time, it seems as if investors and analysts view Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio) as one and the same. But I think this view is incorrect, or if it is not incorrect, it is far too simplistic.
Buffett and Munger have been business partners for over five decades, and their relationship goes back far further. One of the reasons they have been able to work so well together is that they complement each other. Munger has been able to offer Buffett advice, and the Oracle of Omaha has been more than happy to take it.
This is a desirable quality. Being able to appreciate and understand the input of others, rather than attack it as criticism, can help investors develop and grow.
While Munger's input on Buffett's life is well-observed in the public eye, it is less apparent how Buffett has influenced Munger. Aside from their joint investments in companies like Blue Chip, Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) and Wesco Financial and Buffett's initial push to get Munger into the fund management business, we don't often hear Munger saying that Buffett has talked him into an idea. In contrast, Buffett is always quick to attribute an idea to his right-hand man.
I don't think one should take anything away from this observation. It is merely an observation, although it reinforces the idea that these two investors have different strategies and mindsets outside of their common investments.
The difference between Buffett and Munger
One area where Buffett and Munger appear to differ most concerns the length of time one should own an investment. Many investors would label Buffett as the world's most patient investor, but I think that title belongs to Munger.
Buffett and Berkshire have owned thousands of individual securities over the past seven decades. And in the past few years, Buffett has become much more active in buying and selling securities, both in terms of more significant $1 billion positions and smaller holdings (his portfolio managers are likely to have been behind the less than $1 billion trades).
Indeed, one of Buffett's skills is his ability to concentrate on companies that are performing well in his portfolio and sell those that are struggling. He has become incredibly adept at watering the flowers and cutting the weeds.
This strategy is far more active than anything Munger would pursue. This observation is based on publicly available information, as we do not know much about the billionaire's personal equity holdings.
For example, according to the Daily Journal's (DJCO, Financial) 13F report, the firm has only completed three equity transactions since the financial crisis. It sold Posco (PKX) in the fourth quarter of 2014 and started buying Alibaba (BABA) in the first quarter of 2021. Meanwhile, Berkshire completed 13 transactions in the third quarter of 2021 alone.
I will admit these two companies are not entirely comparable. There are different factors to consider such as the overall size of the portfolio, and the different goals of each operation.
Nevertheless, we do know that Munger believes Buffett has been trading too much. Earlier this year, the Oracle revealed that his partner had criticized him for selling shares of Apple (AAPL) and increasing turnover overall.
Munger has also continued to hold Wells Fargo (WFC) as Berkshire has dumped the holding. He has remarked that he is a "little more lenient" when evaluating management, and he expects "less out of bankers" than Buffett. Munger is also prepared to wait around longer for a company to change its ways.
I think it is important to notice the different investment strategies between these two investors. Munger's style is unique for him because it involves so much patience, which many investors do not possess. On the other hand, Buffett has refined a style built around watering the flowers and cutting out the weeds. This is something that is also worked incredibly well for him.
There are many ways to make money as an investor. As Buffett and Munger demonstrate, your best chance of success is developing a strategy that works for you.
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