Charlie Munger, Unplugged

Charlie Munger spoke to WSJ reporters Nicole Friedman and Jason Zweig for six hours over dinner in his Los Angeles home on April 23. He covered a wide array of subjects. Here is an edited transcript from that conversation and a follow-up telephone discussion.

Reposted from The Wall-Street Journal
By Jason Zweig and Nicole Friedman

Q: What do you make of the world-wide fan club that you and Warren Buffett have attracted?

A: Well, the world is very peculiar. And these people that like me are mostly nerds in China or India. It’s a very deep attachment. They’re so passionately interested in improving themselves. Some of them just want to get rich in some easy way, but mostly they’re trying to improve themselves.

An awful lot of graduates of great engineering schools are investors. I wouldn’t call a man who uses computer science to sift vast amounts of data for correlation, and then starts trading the correlation and if it works, keeps going, and if it doesn’t, stops, I wouldn’t call him an investor. It’s really, what he is is a trader. And those correlations are very peculiar…. Of course, the more people that try and trade that one correlation, once they find it, the less well it works.

Q: If you were just starting out as an investor, what approach would you take?

A: Well, the original [Benjamin] Graham approach of looking for cases where you’re getting more than you’re paying for is correct. All good investing involves getting a better investment than you’re paying for. And you’re just looking for it in different places, just as a fisherman can fish in one place or another. But he’s always looking for more value than [he’s] paying for. That will never go out of style. I mean, that is just basic and fundamental.

Some people look at it in stocks where the earnings are going up all the time, some look at consumer goods, some look at bankruptcies, some look at distressed debt. There are different ways to hunt, just like different places to fish. And that’s investing.

And knowing that, of course, one of the tricks is knowing where to fish. Li Lu [of Himalaya Capital Management LLC in Seattle] has made an absolute fortune as an investor using Graham’s training to look for deeper values. But if he had done it any place other than China and Korea, his record wouldn’t be as good. He fished where the fish were. There were a lot of wonderful, strong companies at very cheap prices over there.

Let me give you an example. One guy in Korea, he cornered the sauce market. And when I say cornered, he had like 95% of all the sauce in Korea. And he couldn’t stand anybody else  ever selling any sauce. So he could have made two or three times as much if he wanted to by raising the prices.

Li Lu figured that out. It’s called Ottogi. And of course we’ve made 20 for 1. There was nothing like that in the United States. Continue reading “Charlie Munger, Unplugged”

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Berkshire Hathaway, Buffett, Munger, Gates Post-AGM Interviews

Here are the videos from the CNBC Monday morning post-BRK AGM.

Continue reading “Berkshire Hathaway, Buffett, Munger, Gates Post-AGM Interviews”

Charlie Munger Google Talk?

I just recently found out that Charlie Munger was interviewed by Ruth Porat, CFO Alphabet Inc. I found a set of notes from this blog: http://d0j.blogspot.com/2016/09/notes-from-charlie-munger-talk.html. The notes are from 2016. Despite the weird formatting, it looks legit and it’s Charlie in the picture. However I can’t find any video evidence of this. Usually Google Talks are recorded, available on Youtube with 40 views. There’s nothing on Google either (I even tried Bing in case Google was suppressing results). It appears to be a private talk. If anybody know more about this feel free to share.

Other business: I got back from the Fairfax AGM and have a ideas for a couple new posts in the coming weeks.

I made a copy of the notes below just in case they get lost on the Internet. It seems to be the only copy I could find.

Charlie Munger notes from Alphabet interview. Sorry for the formatting. It’s straight copy and paste from the website.

Reposted from d0j.blogspot.com
By thus spake hareesh nagarajan

Notes from the Charlie Munger Talk
Charlie Munger was interviewed by Ruth Porat, CFO Alphabet Inc earlier in the Mountain View campus today. Here are some (unedited) notes I jotted down:

munger: “What you have to learn is to fold early when the odds are against you, or if you have a big edge, back it heavily because you don’t get a big edge often. Opportunity comes, but it doesn’t come often, so seize it when it does come.”

take a simple idea and take it seriously
to get a good spouse, you need to deserve a good spouse
the google culture is unique
what do you like about google culture?
you got more brain power
larry created a different culture
ruth “incrementalism leads to irrelevance”
charlie: not all companies keep growing. you cannot compound infinitely
berkshire hathaway is decentralized
we are similiar to google in how to accumulate money. we dont know what to do with it.
investing money is difficult
professional investment used to be simple and stupid in old days
when u compete with idiots you can do well
ruth “competition is one click away”
audience “which sectors are attractive to you”
folks that have momentum
if i had to buy one tech stock id buy google
the Chinese are hungry. the engineers are coming out of poverty

berkshire is like a swimmer that keeps swimming with or without the tide. we dont anticipate swings in the tide.
vc in 2000 took 100B
sam goldwyn — “Gentlemen, You May Include Me Out “

we own the biggest carbide cutting tools company
these israeli guys run it as fanatics
we dont know anything about carbide cutting tools.
but these israeli guys are winning
the culture they’ve created fosters winning

berkshire avoids mistakes by continous learning
judging people has been crucial
our philisophy: if a guy can juggle 20 milk bottles, then why would we interfere?

a mistake we learned from:
guy we had from beginning from berkshire had cancer. we kept him. but he signed bad contracts. we learned from that. you dont want wrong compassion

advice for the young:
underspend your income.
you may not get rich but you won’t do badly.
keep at it.
investing money is harder TODAY
world today is radically different
you don’t have the time to find value stocks like warren used to.

ibm let gates put out software on their hardware. they lost.
“it’s never going to be easy”
avoid the crazyness
crazy bubbles should be avoided.

“i want a fair advantage”
you have to specialize to succeed
specialization works
5-10% time to think of your hobbies

what i learned from other fields:
psychology was most important. “why is everyone so crazy”
i was going to synthesize psychology with everything else i do.
psychologists on the other hand just focus on psychology.
but i’m trying to figure out how to use psychology in investing and everything else i do .

you have to be alert when the rare opportunity comes by. u have to have patience.
‘your opportunities are rare but you have to move’ said his great grandfather
few decisions get to be very important
venture capital is a bubble. there has been overpaying.

i dont understand computer software. i dont understand your culture.

but it can’t be easy
what we are good at: “we know how to buy businesses”

you need to be able to destroy your own idea.
you should be ok with making a dumb mistake

everyone is useful. he can always be used as a bad example

Charlie Munger’s Commentary on the 1960s Buffett Partnerships Fee Structure

Charlie Munger used Monish Pabrai as an example because he’s one of the rare to used the original Buffett Partnerships free structure. Monish went 10 years without taking fees, just living off his capital. That’s tough. But this is the right way to do it. It’s extremely rare to see investment managers use that formula because it’s  simply too hard.

The formula is 0/6/25:

  • 0% Management fee
  • 6% Annual performance hurdle with high water mark. That means you need a minimum of 6% gain to start getting paid. The high water mark is the highest peak in value that the investment has reached. The manager cannot collect an incentive fee unless the fund’s value is above the high water mark and returns are above the hurdle rate.
  • 25% fee on gains over 6%

A good question is do you think that formula would incentive a manager to take higher risk just to get over the hurdle rate? Or does it align the interest of the shareholders with the manager? I think the answer depends on the manager.

Charlie Munger At The 2018 Daily Journal Corporation AGM

It’s been a while since I posted anything on Seeking Alpha. I was due. The post is part of my California trip. More posts on the subject will come later. Here’s the part of my trip at that concerns Charlie Munger.

The article is available on Seeking Alpha. They have exclusive rights. Here’s a preview:


Charlie Munger At The 2018 Daily Journal Corporation AGM

Reposted from Seeking Alpha
From Brian Langis

Summary

  • Charlie Munger did a two-hour Q&A. He answered questions on a variety of topics.
  • DJCO is a cult stock. It’s not in an attractive business, but the company has gained a following with Munger as its Chairman.
  • In 2009, DJCO invested its excess cash in a portfolio of securities that has gained in value. This portfolio of securities and dividend provides a cushion to DJCO.
  • DJCO is not a mini Berkshire Hathaway.

*I was in LA for the DJCO AGM. If you are reading this article for an advance analysis on DJCO, you won’t really find it. This article is about the AGM and Charlie Munger.

I recently attended the annual shareholder meeting of Daily Journal Corp. (DJCO) in Los Angeles. I am not a shareholder in DJCO, and I don’t plan to be one anytime soon. But I wouldn’t overlook the company either. I will explain later. So, why attend? The main reason for attending a DJCO AGM is not for its results or the company itself, but for the opportunity to hear Charlie Munger’s wisdom in his Q&A segment, who is the chairman of DJCO. Also, part of the reason for attending is the DJCO meeting reveals itself as a community gathering of fun, fellowship, and learning. There are dinners, lunches, and social gatherings related to investing. It’s great to see familiar faces and to meet new people. Ideas are generated and exchanged. You learn a lot. Attending these investment events is a way for me to regenerate myself. It’s like adding wood to a fire. It fuels the core of why I do this for a living. I can’t wait to get back to my desk. Value investing is a lone wolf business. You spend a lot of time in your bubble. Sometimes, you can drift, so it’s good to re-center yourself. Like the Berkshire Hathaway (BRK.A) AGM, the DJCO one offers a great experience for any serious investors on a much smaller scale. Continue reading “Charlie Munger At The 2018 Daily Journal Corporation AGM”

Charlie Munger DJCO Meeting

I will be attending the Charlie Munger DJCO Meeting in LA on February 14, 2018. I booked the day.  I will probably bounce around the meetups and lunch afterward.  I will then go to San Francisco for a couple days.  I also posted on Reddit here. One of the best part of these meetings are the great people that you meet. If anyone wants to meetup reach out. This approach worked when I went to Omaha.

 

Damn Right! Behind the Scenes With Berkshire Hathaway Billionaire Charlie Munger

Munger

“Teaching people formulas that don’t really work in real life is a disaster for the world.”

“Why shouldn’t we do more of what works well for us and what’s less complicated?”

“There are huge advantages for an individual to get into a position where you make a few great investments and just sit back, you’re paying less to brokers, you’re listening to less nonsense.” – All three quotes by Charlie Munger

Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger is an excellent biography by Janet Lowe. As the title of the book state, the book is obviously about Charlie Munger and there’s also a lot on Warren Buffett since it’s hard to separate the two. Even though Charlie Munger is associated with investing, this book is not a how-to investing guide.  This is a book on Munger’s life, background, up-bringing, his misfortunes, his failures and success, his philosophy and specific episodes in his life. When we think of Munger we see success and money but there’s some pretty dark moment in his life (death of his son, lost of an eye, divorce etc…) Known for his investing success, Charlie is actually many other things. He’s a businessman, lawyer, architect, and developer among many things.

There’s no need to introduce Charlie Munger, the 92 year old Vice-Chairman of Berkshire Hathaway (BRK). When you think of Berkshire Hathaway, the first thing that comes to mind is Warren Buffett. Charlie is generally portrayed as the guy who “fine tuned” Warren Buffett’s investing strategy from cigar butt investing (deep value) to buying high-quality businesses even if they were more expensive. The early version of Buffett the investors would try to find undervalued beat-up companies that had one more puff out of them. His approach was heavily model on Ben Graham‘s value investing approach, the father of modern security analysis. After a while, especially after Warren Buffett’s portfolio grew in size, it became harder to exploit this cigar butt strategy (e.g. tripling your money on a $100 milion market cap company won’t really affect your returns if you manage $100 billion). So Charlie was one of few individuals that had an influence on Warren and made him a better investor. Without taking anything away from Buffett, I don’t think BRK would have been this investment machine it is today without Charlie. I doubt the purchase of companies like GEICO, American Express or Coca-Cola would have happened without Munger’s influence. (However Ben Graham did own GEICO and made more with it that all his other trade combined, some a even suggesting that Graham was starting to change towards the end of his career, that’s ok to pay a premium for a high-quality earning stream, but don’t quote me on it).

There’s more to Charlie Munger than a guy that tweaked Buffett’s investment approach. I think the media and the investment community in general is under-covering him. He’s the 2nd half of BRK but he gets a fraction of the attention Buffett gets. I think that’s the way he wants it. Buffett is the showman, the entertainer, the teacher and it’s my belief that Munger is perfectly fine with that. Munger isn’t the showman Buffett is, though he can be enormously entertaining. For what many considers the “brain” behind Buffett, I would study Munger just as much as Buffett if you want to become a better investor.

When I think of Charlie Munger, the following words comes to mind: genius, rational thinker, logic, no-nonsense, mental models, multi-disciplinary, life lessons, philosophy, funny, avid reader, brilliant thinker, ethics, morals, discipline, and patience.

On investing, Charlie doesn’t rely on gut feel; he uses a range of what he calls mental models to help assess the risks and opportunities. He knows a lot about a lot. When it comes making a great investment, there’s more than just having great numbers or a robust financial model, you also need to look at the proposition from many angles.

“When I urge a multidisciplinary approach- that you’ve got to have the main models from from a broad array of disciplines and you’ve got to use them all – I’m really asking you to ignore jurisdictional boundaries. If you want to be a good thinker, you must develop a mind that can jump these boundaries.

You don’t have to know it all. Just take in the best big ideas from all these disciplines. And it’s not that hard to do.”  

The book was published in 2003 and Janet Lowe approached him in 1997. I estimate that Munger was in mid to late 70s when it was written. Since a lot of time has passed since the content of the book was written, don’t let that steer you away. This book is well-researched and rich in content. It’s one those books that you highlight all over the place and that you go back to once in a while. Munger also contributed directly. He didn’t want to get involved at first and he didn’t think it would sell many copies.  The Munger family didn’t a biography of him and they didn’t want their privacy slipping away. Janet told Charlie that the book was going to happen with or without his cooperation because she had a contract to deliver the book, so he decided to contributes since the book would have been much better.

Enjoy!

Berkshire Hathaway 5th Anniversary Annual Selection 2015 – Official Book List

MungerThis is the official list of books recommended by BRK at the 2015 AGM.  It’s a pretty good list. You will find some familiar names such as the The Intelligent Investor and new ones like Berkshire Beyond Buffett: The Enduring Value of Value by well-known author Lawrence Cunningham. If you want to become a better investor, reading books from the list is a pretty good place to start.

The books are divided in categories such as:

  • About Warren Buffett – 14 books + a poster chart
  • About Charlie Munger – 2 books
  • On Investing – 13 books
  • General Interest – 9 books
  • Family & Children’s Interest – 5 books

The official list: BRK 2015 50th Anniversary Annual Selection

Berkshire Hathaway 2012’s Shareholder Letter

Warren Buffett’s latest masterpiece. By now I hope do not have to explain why this is a must read for anyone that wants to learn more about the investing world. You want to be a better investor? Read this and all the other ones.

Berkshire Hathaway 2012 Shareholder Letter

Happy Reading!

Here are some of the news out there about it’s release:

Wall Street Journal: 2012 Returns Were Subpar

Fortune: Warren Buffett Stays Mum on Successor

Business Insider: Warren Buffett Explains Buying Newspapers

The Atlantic: Warren Buffett to American CEOs: Please Stop Complaining About Uncertainty

The Motley Fool: Warren Buffett on Risk, Optimism and Ketchup