With Charlie Munger’s Death, Berkshire Loses a Custodian of Its Culture

Shares of Berkshire Hathaway barely budged on Wednesday, a day after its vice chairman, Charlie Munger, died, reflecting the view among shareholders that Mr. Munger’s absence on the conglomerate’s day to day would have little impact on its future, even as they mourned the loss of the man who helped shape Berkshire’s culture.

Mr. Munger, who helped build Berkshire into a global investing powerhouse, died at a California hospital on Tuesday morning, according to an announcement from Berkshire. He was just over a month short of his 100th birthday.

Warren Buffett, the chairman and chief executive of Berkshire Hathaway, who built the company over decades with Mr. Munger’s steering, said it was his partner’s “inspiration, wisdom and participation,” that had proved vital to Berkshire’s success. Since the mid-1960s, Berkshire, whose collection of companies includes insurers, a railroad and a candy company, has posted annualized returns of close to 20 percent — a record that stands out for being roughly twice the rally of the S&P 500 over the same time.

“Berkshire Hathaway could not have been built to its present status without Charlie,” Mr. Buffett said.

Mr. Buffett, who is 93, and Mr. Munger, had laid out succession plans for this moment long ago, partly to limit any upheaval at the company. It was Mr. Munger himself who let slip two-and-a-half years ago that Greg Abel, who handles all the non-insurance businesses at Berkshire and who had been among a cadre of senior employees in line for the top job, was the heir apparent.

“In terms of the day to day running of the business, that was not his forte, that was not his role,” said Cathy Seifert, an analyst at CFRA Research who has covered Berkshire Hathaway for three decades.

“Where Charlie Munger contributed and where he will be missed is in his role as a sounding board to Warren Buffett and probably one of the few people at Berkshire Hathaway who could tell Buffett how it is, stand up to him, disagree with him,” Ms. Seifert said.

At Berkshire’s 2021 annual meeting, when Mr. Buffett and Mr. Munger were asked if the $300 billion conglomerate is too big to effectively manage, Mr. Munger said that the conglomerate’s structure — which gave the managers of its independent businesses plenty of freedom to make their own decisions — was vital to its continued success.

“We have decentralized so much, and we have so much authority in the subsidiaries that we can keep doing it for a long, long time, as long as it keeps working,” he said.

Mr. Buffett added that Berkshire built a system that requires trust, and as a result, “decentralization won’t work unless you have the right kind of culture accompanying it.”

“But we do,” Mr. Munger replied, before an accidental show of faith that one of the most prominent contributions that Mr. Munger brought to the company — its culture — would remain after he was gone.

“Greg will keep the culture,” he said, a nod to Mr. Abel.

Alongside Mr. Abel, the longtime Berkshire executive Ajit Jain handles Berkshire’s insurance businesses, with both lieutenants supported by the investment managers Ted Weschler and Todd Combs, tipped to become co-chief investment officers when Mr. Buffett steps down from his perch.

Paul Lountzis, who runs an investment firm that owns Berkshire shares, has been going to Berkshire’s annual meetings for more than three decades. He now attends with his son, who he first took to the meeting in 1998 at age 11. Mr. Lountzis remembered Mr. Munger’s terse, direct speaking style, in contrast to Mr. Buffett’s own mannerisms. “Charlie was very different to Warren, but they complemented each other beautifully,” he said.

It’s that cultural impact that is hard to quantify and doesn’t easily equate to a number on a balance sheet, or movement of a share price. Berkshire Hathaway’s Class B shares were almost unchanged on Wednesday at around $360 per share.

Mr. Munger’s death “creates a void in terms of chemistry, information flow, things like that,” Ms. Seifert said.

Then there is the impact on Mr. Buffett himself.

“I think this is a significant loss for him,” Ms. Seifert said. “This wasn’t just a business relationship; this was a very deep personal relationship.”