Power Players

Why Warren Buffett's right-hand man, Charlie Munger, wouldn't hire Elon Musk

Charles Munger, vice chairman of Berkshire Hathaway Inc., left, and Warren Buffett, chairman of Berkshire Hathaway Inc., attend a BYD Co. press event in China, on Monday, Sept. 27, 2010.
Nelson Ching | Getty Images

Billionaire investors Warren Buffett and his right-hand man, Charlie Munger, are both famously risk averse. That's why Munger, who serves as the vice chairman of Buffett's Berkshire Hathaway holding company, says someone like Tesla CEO Elon Musk would not be his ideal hire.

Munger, who reportedly has a net worth of $1.7 billion, took a light-hearted shot at fellow billionaire Musk while answering questions last week at the annual meeting of the newspaper publishing company Daily Journal Corp, as the Observer pointed out. A shareholder of the company asked Munger, who serves as chairman, about his long-held maxim that he would rather work with someone who has a 130 IQ, but thinks it's 120, as opposed to someone with an IQ of 150 who thinks their IQ is 170.

"You must be thinking about Elon Musk," Munger responded, prompting laughs from the shareholders in attendance.

Munger went on to explain that he prefers to hire people who don't often overestimate their own abilities, because overestimation can lead to big results, but it often creates more risk than reward.

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"Of course, I want the guy who understands his limitations instead of the guy who doesn't," Munger said. "On the other hand, I've learned something terribly important in life … never underestimate the man who overestimates himself. These weird guys who overestimate themselves occasionally knock it right out of the park."

So, while it's important not to discount someone like Musk, who frequently sets goals others view as impossible, Munger believes it's less of a risk to surround himself with people who know their limits.

"I don't want my personal life to be [around] a bunch of guys who are living in a state of delusion, who happen occasionally to win big," Munger told Daily Journal's shareholders. "I want the prudent person."

Tesla did not immediately respond to CNBC Make It's request for comment.

Munger's position is not at all surprising coming from a 95-year-old investor who values stability and has made billions of dollars, mostly through seeking out relatively safe, long-term investments. Munger, and Buffett for that matter, did not get wealthy by taking the sort of risks that have made Musk famous, from betting that Tesla could compete with giant auto manufacturers to building an aerospace company SpaceX with the goal of transporting humans to Mars.

But Munger has had nice things to say about Musk in the past. Last year, Munger told Yahoo Finance that Musk "is bold and brilliant, and he swings for the fences."

"People like that get some remarkable results," Munger continued. "Sometimes they get some quick failures. I haven't the faintest idea how Elon Musk will turn out, but he has a considerable chance of success and considerable chance of failure. He seems to like it that way."

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