The late investor Charlie Munger offered Costco some valuable advice during his tenure as a board member for over 25 years. Costco chairman Hamilton James recently recounted that Munger advised the company to “stick to our knitting.” He emphasized that the warehouse store chain should continue with “what we’ve always been doing.”
How does a retail giant like Costco maintain its business success? The late Charlie Munger had a straightforward recommendation: remain focused on your “knitting.” In an interview with Chief Executive magazine published Thursday, Costa chairman Hamilton “Tony” James, who has been a board member since 1988, discussed Munger’s insights.
Munger, known for his prominent investment acumen and as a business partner of Warren Buffett, served as vice chairman of Berkshire Hathaway from 1978 until his passing in 2023. His experience on Costco’s board lasted more than 25 years.
“For a sizable corporation like Costco facing significant pressures, grasping the situation can get complicated and overwhelming. But for Charlie, he had a remarkable ability to navigate through it all and stay oriented,” James stated. “This made him an invaluable member of the board.”
According to James, Munger urged Costco to “stick to our knitting, our values, and our principles.” He added, “Charlie understood that we didn’t need to change course. His guidance was always decisive and clear on this point. He’d remind us, ‘The right thing for the long term is simply what we’ve always been doing, so let’s not overthink this.’
Regarding Munger’s relationship with Costco’s board and its leadership, James mentioned that they never placed him on a pedestal. There was always room for debate, and they felt free to disagree or even disregard Munger’s advice — although James cautioned that “doing so could be risky.”
A self-described “total addict” of the store, Munger once professed his admiration for “everything about Costco,” famously stating, “I’m never going to sell a share.” He was one of the chain’s largest individual shareholders, holding over 187,000 shares as of November 2022.
In many respects, Costco has adhered to Munger’s counsel by continuing its established practices. One notable example is the pricing strategy for its food court hot dog and soda combo, which has remained at $1.50 since 1985. When former CEO Craig Jelinek proposed raising the price, former CEO Jim Sinegal famously responded, “If you raise the [price of the] effing hot dog, I will kill you. Figure it out.”
Additionally, James discussed Costco’s strategy of enticing wealthier members. “Affluent customers appreciate a good deal,” he remarked. “From the outset, we’ve always recognized that if the quality is exceptional and the price is right, we can sell anything in volume — whether it’s Rolex watches, Dom Perignon, or 10-karat diamonds.” He recalled a Porsche dealer in Seattle who placed their cars on display at a Costco, and the inventory sold out within a week.
