Warren Buffett explains the problem with one of his favorite rules for investing

REUTERS/Rick WilkingBerkshire Hathaway Chairman Warren Buffett (L) and Vice Chairman Charlie Munger arrive to begin the company’s annual meeting in Omaha May 4, 2013.

Charlie Munger and Warren Buffett have often argued that it’s smart to “invest in a business any fool can run, because someday a fool will.”

Or, as Buffett explained it in more detail back in 2010 in an interview with the FCIC:

“If you’ve got a good enough business, if you have a monopoly newspaper, if you have a network television station — I’m talking of the past — you know, your idiot nephew could run it. And if you’ve got a really good business, it doesn’t make any difference.”

Basically, the thinking here is that is if ten years ago someone owned the only newspaper in town, then they’re the person with the pricing power — and that’s a good business. It almost doesn’t matter who’s running it, because the townspeople are still going to buy the paper.

But, as with every rule, this one, too, has an exception.

In Saturday’s annual Berkshire Hathaway meeting, streamed live on Yahoo Finance, Munger and Buffett emphasized that the world has changed, and now the duo has become just as good at finding businesses with good management as they once were at finding businesses that didn’t require great management to succeed.

Specifically, Buffett noted that Mark Donegan, the CEO of Precision Castparts, is “one of a kind,” in part because he can concentrate on what’s important for the businesses and he doesn’t have to come to Omaha to make a presentation for Buffett to justify a move.

And Munger added that Precision Castparts, which became a subsidiary of Berkshire Hathaway in January 2016, requires superior management.

For what it’s worth, several other CEOs and managers have become almost synonymous with their companies as well. Perhaps most notably nowadays: Jeff Bezos. And in cases like this, it’s interesting to think about what the company would be like without the same leadership and/or with different leadership.

In any case, the bottom line is that although it’s obviously a great idea to invest in a business that any fool can run, there are some differences when it comes to management — and it may be worth taking that into consideration.