Charlie Munger Gives Elon Musk A Backhanded Compliment, Says, 'These Weird Guys Who Overestimate Themselves Occasionally Knock It Right Out Of The Park'

Tesla Inc. has been at the forefront of the electric vehicle revolution, seeing its stock double this year and become a favorite among investors and consumers alike. The company's success story has gained a great deal of attention, with debates over its valuation and future potential raging among investors and analysts.

While many sing praises for Tesla and its leader Elon Musk, Berkshire Hathaway Inc. Vice Chairman Charlie Munger remains more reserved. His caution is not entirely without basis, given his history and investment choices.

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Munger once had a shot at investing in Tesla when it was getting off the ground, but he decided to skip it, thinking it was a bit too dicey. Fast forward to today, and Musk, thanks to Tesla, is sitting at the top of the Forbes 400 as the richest guy around. From its days as a young company with big dreams, Tesla is now a perfect example of how a fresh idea can be a lucrative investment opportunity.  Anyone can invest in the next Tesla or other promising startups with as little as $100. 

Munger was skeptical of Tesla but was not opposed to owning stock in other electric cars. He spoke enthusiastically earlier this year about the Chinese electric vehicle manufacturer BYD Co. Ltd. Munger played a major role in Berkshire Hathaway's investment in BYD in 2008. He has often praised the CEO Wang Chuanfu, once comparing him to people like inventor Thomas Edison and former General Electric Chairman and CEO Jack Welch.

Munger has made comments comparing Tesla and BYD, saying "BYD is so much ahead of Tesla in China, it's almost ridiculous." 

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In February, at the Daily Journal's virtual annual meeting, Munger raves about the investment saying, "I have never helped do anything at Berkshire that was as good as BYD and I only did it once."

In June, Reuters reported that Berkshire Hathaway had sold 2.53 million shares of BYD for $86.3 million, according to a stock exchange filing. The company owns a roughly 8% stake, down from 10%. 

At a shareholders meeting for the Daily Journal in 2020, Munger, who also is the publication's chairman, was questioned about his thoughts on Musk and the volatility surrounding Tesla's stock. His response was straightforward.

"I would never buy [Tesla], and I would never sell it short," he said. 

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This viewpoint illustrates Munger's penchant for avoiding investments he finds uncertain or unpredictable. When asked his opinion on Musk, he said, "I think Elon Musk is peculiar and he may overestimate himself, but he may not be wrong all the time."

When Munger was asked why BYD sales were lower than Tesla's, he said,  "Tesla's sales went up because Elon has convinced people that he can cure cancer." 

The year before at the 2019 Daily Journal annual meeting, Munger provided insight into his hiring philosophy, emphasizing the value of self-awareness. Someone mentioned their favorite line was when Munger talked about preferring to hire someone with an IQ of 130 who believes it's 120 over someone with an IQ of 150 thinking it's 170. Munger responded, "You must be thinking of  Elon Musk."

Munger elaborated on his hiring criteria, emphasizing his preference for people who recognize their limitations. Munger referenced a lesson he says he learned cautioning against underestimating those who overestimate themselves. He went on to express his hesitance about Musk's attitude and followed up saying, "These weird guys who overestimate themselves occasionally knock it right out of the park."

While Tesla's growth story remains a subject of much debate and attention, BYD's success in the last decade cannot be understated. With its stock jumping more than 600% over a decade and Berkshire Hathaway seeing a multibillion-dollar valuation of its BYD stake, Munger's confidence in the Chinese electric vehicle maker is not unfounded.