- The late investor Charlie Munger gave Costco some advice while a member of its board for over 25 years.
- Costco chairman Hamilton James recently said Munger advised to "stick to our knitting."
- Munger said the warehouse store chain should keep doing "what we've always been doing."
How does a warehouse club giant like Costco sustain business success? The late investor Charlie Munger had some simple advice: stick to your "knitting."
Costco chairman Hamilton "Tony" James, who has sat on the company's board since 1988, talked about Munger's advice for the company in an interview with Chief Executive magazine published Thursday.
Munger was a prominent investor, business partner of Warren Buffett, and vice chairman of Berkshire Hathaway from 1978 until his death in 2023. He was on Costco's board for more than a quarter of a century.
"For a giant company like Costco with huge pressures, understanding what's going on can be complex and confusing, but not for Charlie, who had an unerring compass to see through it all to stay on the right path," James said. "That made him an extremely valuable board member."
Munger's advice to Costco as a board member was to "stick to our knitting, our values and our principles," James said.
"Charlie understood we didn't have to do anything different than that," James added. "His voice was very strong and clear on the matter. He'd remind us, 'The right thing for the long term is what we've always been doing, so let's not get confused.'"
As for Munger's interactions with Costco's board and leadership, and vice versa, James said they never put him on a pedestal.
They would debate and always felt free to disagree or even ignore Munger's advice — something James said that "you did that at your peril."
A self-proclaimed "total addict" of the store, Munger once said he loves "everything about Costco."
"I'm never going to sell a share," he added at the time.
Munger was one of Costco's largest individual shareholders. In November 2022, he owned more than 187,000 shares in Costco.
The company has in many ways followed Munger's advice in doing what it's always done.
Perhaps the most famous example: The company has charged $1.50 for its food court hot dog and soda combo since 1985.
When Costco's former CEO, Craig Jelinek, once approached Sinegal, who was then still CEO, about raising the price, Sinegal told him, "If you raise the [price of the] effing hot dog, I will kill you. Figure it out."
Also in the interview, James talked about Costco's approach to generating business from wealthier members.
"Affluent people love a good deal," he said.
"Since the beginning, we've always known we could move anything in volume if the quality was good and the price was great — Rolex watches, Dom Perignon, 10-karat diamonds," he told Chief Executive magazine. "A Porsche dealer in Seattle put their cars on the floor of a Costco, and they sold out in a week."
