Mar 2, 2024 · 1h 17m · founders
I had dinner with Charlie Munger
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David Senra reflects on his three-hour dinner with Berkshire Hathaway Vice Chairman Charlie Munger, combining personal anecdotes with David Clark's 'The Tao of Charlie Munger.' The episode explores Munger's timeless principles regarding capital allocation, lifelong learning, emotional temperament, and high-trust partnerships.
Statements from this episode (48)
Tiny Founders Andrew Wilkinson and Chris Sparling Arranged Senra's Munger Dinner
“Andrew Wilkinson and Chris Barling are the founders of tiny. They're the ones that set up this dinner with Charlie Munger.”
Munger's blueprint: buy wonderful businesses at fair prices over fair businesses at wonderful prices
“The blueprint he gave me was simple. Forget what you know about buying fair businesses at wonderful prices, and instead, buy wonderful businesses at fair prices.”
Munger: Failing to learn probability is like fighting one-legged
“He says if you don't learn elementary probability, that you go through life like a one-legged man in an ass-kicking contest.”
Munger: good ideas are rare, so investors must bet heavily when finding one
“And another thing that he repeats is that you should remember that good ideas are rare, and when you find one, you have to bet heavily.”
Peter Thiel: Most People Systematically Undervalue Their Time
“One of my favorite quotes that I've ever heard Peter Thiel say is he says, most people systematically undervalue their time.”
Munger built five real estate projects working one hour daily
“He decided each day he would devote one hour of his time at the office to work on his own real estate projects, and by doing so, he completed five.”
Munger: Benjamin Franklin's greatest move was intentionally seeking out 'A-players'
“Charlie said one of the best things that Ben Franklin ever did, and this is advice to you and I, right? The, one of the best things that Ben Franklin ever did was that he sought out other impressive people like Washington, but a ton of others like a players on…”
Charlie Munger quit practicing law for full-time investing at age 41
“He starts this investment partnership, starts a new law firm three years in. He's like, okay, I'm going to stop practicing law. I'm going to focus on investing full time. Charlie is 41 years old, 41 years old when he makes that decision.”
Munger leveraged everything for a $19 to $22 BCP arbitrage trade
“One arbitrage deal involved British Columbia Power, a company that was being taken over by the Canadian government. The takeover price was 22 dollars a share. BCP was selling for 19 dollars a share. Charlie brought all the shares of BCP He could get his hands …”
Blue Chip Stamps float reached roughly $100 million by the late 1970s
“By the late 19 seventies, the float at blue chip had grown to approximately a hundred million dollars money that Charlie and Warren could invest.”
Munger's independent fund returned nearly 25% annually over 14 years
“When Charlie closed his fund in 1975, it had ten million dollars in assets and showed an average annual rate of return of almost 25% for the 14 years it was in operation.”
Charlie Munger's Fund Held 61% of Assets in Blue Chip Stamps
“The holding in blue chip stamp alone accounted for 61%
Of the fund's investments”
Berkshire Hathaway's Net Income Grew from $148M to ~$24B (1984–2016)
“Charlie would help Warren make the investment and management decisions that would take Berkshire Hathaway from a net income of one hundred and forty eight million in 1984 to approximately twenty four billion in 2016.”
Munger: Investors must learn to fold beloved positions when odds shift
“Charlie says, life is like a poker game, wherein you have to learn to quit. Sometimes when holding a much loved hand, you must learn to handle mistakes and new facts that change the odds.”
Berkshire exited its Freddie Mac stake at a profit in 1999
“Seeing the dramatic increase in risk and the change in the attitude of Freddie Mac's management, Berkshire sold its much-loved investment at a profit in 1999.”
Berkshire's $1.3B Coca-Cola stake grew past $17B, yielding $528M annually
“Berkshire decides to put one point, let's, let's call it 1.3 billion dollars In Coke in 1988 over the last 27 years of that investment alone has grown to over seventeen billion, but that does not include all the dividends that I received in that time period in…”
Senra: Great businesses are usually destroyed by their founders, not competition
“Even it's so hard to build a truly great business, and yet more likely than not, your truly great business is not going to be destroyed by competition. It's going to be destroyed by you.”
Senra: Charlie Munger's drive came from an inner clock, not parental validation
“And so Charlie's answer to the question was fascinating. He says, no, I always had an inner clock. And so Charlie's point there was that he was doing it for him. He did it because he wanted to do these things. He was interested in them, not because X, even if …”
Munger: Multitasking Destroys Deep Thinking While Long Attention Spans Drive Success
“I think people that multitask pay a huge price. When you multitask so much, you don't have time to think about anything deeply. You're giving the world an advantage you shouldn't do. Practically everybody is drifting into that mistake. I did not succeed in lif…”
Munger turned a single Barron's idea into $400M with Li Lu
“I read Barron's magazine for 50 years. I only found, the entire time, I found one idea that I could act on. Only one. I made eighty million dollars on that idea, basically risk-free. Then I took that eighty million dollars and I gave it to Lee Lu and he turned…”
Senra: No other investor has Buffett and Munger's patience to copy them
“One of the reasons Charlie and Warren have never worried about anyone mimicking their investment style, because no other institution or individual has the discipline or the patience to wait as long as they can.”
Munger lost half his partners' money in 1973 while Buffett held cash
“In the late 19 sixties, both Charlie and Warren had their own hedge fund. As the bull market of late 19 sixties raged on, everything became overpriced and Warren could no longer find anything cheap enough to buy. So rather than alter his investment strategy, W…”
Munger: Consistent non-stupidity yields greater long-term advantage than brilliance
“It's remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”
Senra: Learning from history provides leverage because financial disasters are quickly forgotten
“Charlie says that learning from history is a form of leverage. The fact is so few people can do this, that and you see this because financial, the financial disasters of today are almost completely forgotten in a year or two.”
Munger bound transcriptions of rare founder interviews into custom books
“In some cases he's making his own books. He has transcriptions from very valuable and rare interviews with some of history's greatest founders, and he put them in binders.”
Senra: Reading 100 business biographies beats reading 100 investing books
“One is actually better off reading a hundred business biographies than a hundred books on investing. Why? Because if we learn the history of a hundred different business models, we learn when the businesses had tough times and how they got through them. We als…”
Senra (quoting Andreessen): Seizing fleeting opportunities drives career acceleration over planning
“Instead of planning your career, focus on pursuing opportunities. Opportunities that present themselves to you are the consequence of being in the right place at the right time. They tend to present themselves when you're not expecting it, and often when you'r…”
Senra: In elite competitions, assume a rival will sacrifice everything to win
“The meta lesson is, if you are not willing to pay that price, you should presume that someone else will. If you want something like the presidency, and then my note here is ours, or being a billionaire, if you want something like the presidency, you should pre…”
Munger: Winning businesses maximize or minimize a few variables to extremes
“In business, we often find that the winning system goes almost ridiculously far in maximizing and or minimizing one or a few variables, like the discount warehouses of Costco.”
Senra: Costco saves roughly $45 million annually by omitting bags
“By simply getting rid of paper bags at checkout, Costco arguably saves itself forty five million a year.”
Senra: Berkshire businesses and headquarters share extreme cost-reduction culture
“The one thing that all of Berkshire's businesses have in common is that they are managed by people who are willing to go to great lengths to keep costs low. That goes for Berkshire's home office as well. It doesn't have a public relations department or an inve…”
Berkshire discovered See's Candies could raise prices 10% without losing customers
“When we bought C's Candies, we didn't know the power of a good brand. Over time, we just discovered that we could raise prices by 10% a year, and no one cared. Learning that changed Berkshire.”
Senra quotes Munger: Investors intolerant of 50% drawdowns get mediocre returns
“If you're not willing to rack with equanimity to market price decline at 50% two or three times a century, you're not fit to be a common shareholder, and you deserve the mediocre result you're going to get compared with the people who do have the temperament, …”
Senra: Investing in business quality generally outperforms betting on management
“Average out betting on the quality of a business is better than betting on the quality of the management. But very rarely you find a manager who is so good that you're wise to follow him into what looks like a mediocre business.”
Munger: Effective decision-making requires concentrating power in one person, not democracy
“In a democracy, everyone takes turns. But if you really want a lot of wisdom, it's better to concentrate decisions and process in one person.”
Munger's three career rules: believe in product, respect boss, like coworkers
“These are Charlie Munger's three rules for a career. Number one, don't sell anything you wouldn't buy yourself. Number two, don't work for anyone you don't respect and admire. And three, work only with people you enjoy.”
Senra cites IKEA founder's rule on embracing mistakes versus bureaucracy
“The fear of making mistakes is the root of bureaucracy and the enemy of development. It is always the mediocre people who are negative, who spend their time proving that they were not wrong. The strong person is always positive and moves forward.”
Munger: Extreme specialization is the primary path to commercial success
“Extreme specialization is the way to succeed. Most people are way better off specializing than trying to understand the world”
Senra: Reading Business Biographies Functions Like Studying Game Film for Operators
“When you're doing that, you're just watching game tape. It's no different than a young Kobe Bryant watching videotape of Michael Jordan and magic, magic Johnson, and just constantly being exposed To a million different game scenarios and then using that knowle…”
Munger predicts device-distracted multitaskers will achieve far less success than Buffett
“Look at this generation with all of its electronic devices and multitasking. I will confidently predict less success than Warren, who just focused on reading.”
Munger: Override credentialed experts when incentive bias impairs their cognition
“You must have the confidence to override people with more credentials than you, whose cognition is impaired by incentive-caused bias or some similar psychological force that is obviously present. But there are also cases where you have to recognize that you ha…”
Munger: The world is driven by envy, not greed
“It's not greed that drives the world, but envy. You have to cure yourself of this. Curing yourself of this is key, key for a well-lived life.”
Munger: No wise person exists who does not read constantly
“In my whole life, I have known no wise people who didn't read all the time. None. Zero.”
Munger: Relentless daily learners regularly outperform the smartest people
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up, and boy, does that help, particularly when you have …”
Munger: Civilization reaches its peak through a seamless web of deserved trust
“The highest form that civilization can reach is a seamless web of deserved trust. Not much procedure, just totally reliable people correctly trusting one another.”
Senra: Munger's 1973 crash pain enabled his 2008 Wells Fargo buy
“If he had never experienced the pain of the market crash of 1973 and 1974, he would have never had the foresight to stockpile the cash he used to buy Wells Fargo stock in 2008 and 2009.”
Munger: Mastering multidisciplinary models allows outperforming smarter people
“If you have enough sense to become a mental adult yourself, you can run rings around people smarter than you. Just pick up the key ideas from all the disciplines, not just a few, and you're immensely wiser than they are.”