Charlie Munger Once Told Ex-Trump Advisor Ray Washburne Where The American Economy Was Headed: Here Is What The Berkshire Hathaway Legend Predicted
Charlie Munger, the legendary late chairman of Berkshire Hathaway, predicted the retail split long before it showed up in earnings reports, store closures and consumer behavior.
A Surprise Call From Charlie Munger
Ray Washburne, former Trump advisor and businessman, still remembers the day, more than a decade ago, when Munger called his office out of the blue. At first, he thought it was a prank.
But it wasn't — the longtime Warren Buffett partner wanted to fly to Dallas to ask him about Highland Park Village, one of the most prestigious luxury shopping centers in the country.
Washburne, who acquired Highland Park Village in 2009 along with his family, serves as the president and managing director of the Village.
Munger arrived the next Tuesday with a small entourage, Washburne recalled in a conversation on the Intersections Podcast last month.
The famed investor toured the property, asked detailed questions about luxury retail and then over lunch explained why he was there. "He just absolutely bled me for everything I knew about luxury retail," Washburne said on the podcast.
According to Washburne, Munger told him he understood discount retail through his role as Costco's (NASDAQ:COST) largest shareholder but needed to learn the other side of the market.
"He goes, ‘I think they’re going to be two economies. The high high-end luxury, which you are, and the low low end, which Costco is, and there will be nothing in between,'" Washburne recalled Munger telling him this at the time.
Munger's Retail Prediction Comes True
At the time, the idea sounded extreme. Brands like Gap (NYSE:GAP) still filled malls nationwide, Washburne said, and mid-market chains remained fixtures of suburban shopping.
Munger's thesis has played out exactly as he warned. "Since then, brands like the Gap, which used to have a store in every mall in the city, are down to like two stores …. we’re just doing spectacular," Washburne stated.
Many traditional malls have closed or sit half-empty. Meanwhile, luxury centers such as Highland Park Village and Bal Harbour have soared and discount giants like Costco continue to dominate.
Washburne said he realized how forward-thinking Munger was when he mentioned he was traveling around the country to visit the five or six top luxury centers to understand the segment firsthand.
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In November, Gap reported quarterly earnings of 62 cents per share, topping analysts' expectations of 59 cents. The company also reported revenue of $3.94 billion, slightly above the consensus estimate of $3.91 billion.
In September, Costco delivered fourth-quarter revenue of $86.16 billion, edging past analyst expectations of $86.12 billion, according to Benzinga Pro. The retailer also posted adjusted earnings of $5.87 per share, topping forecasts of $5.80 per share.
Charlie Munger's Lasting Impact On Berkshire Hathaway
Last year, Berkshire Hathaway held its first annual meeting since Munger passed away in November 2023 at the age of 99.
Munger served as Berkshire's vice chairman and also held positions at Daily Journal Corp. and Costco, all while building a reputation for his direct, sharp commentary on markets, human nature and even cryptocurrencies.
He worked alongside Buffett starting in 1959 and helped redefine Berkshire's entire approach to investing.
Munger also persuaded Buffett to move beyond cigar-butt deals — snapping up dying companies just because they were cheap — and instead focus on buying strong, high-quality businesses at reasonable valuations.
Benzinga's Edge Stock Rankings show a downward trend for Costco across the short, medium and long term, with more detailed performance data available here.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.