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Speaker 1: I'm Cal Masser and I'm Tim Steneveek. On Tuesday, we

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Speaker 1: learned of the passing of Charlie Monger, known for helping

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Speaker 1: Warren Buffett build Berkshire Hathaway. We get more from Bloomberg's

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Speaker 1: John Tucker.

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Speaker 2: Charles Munger served as alter egos, sidekick and foyle to

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Speaker 2: Warren Buffett for almost sixty years as they transformed Berkshire

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Speaker 2: Hathaway from a failing textile maker into an empire. A

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Speaker 2: lawyer by training, Munger helped a Buffet craft a philosophy

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Speaker 2: of investing in companies for the long term, and even

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Speaker 2: as his partner became a worldwide celebrity known far and

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Speaker 2: wide as the Oracle of Omaha, Munger believed Berkshire's success

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Speaker 2: would outlast Buffett's star power. In my opinion, Berkshire will

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Speaker 2: flourish after Warren's gone. I don't think anybody is is

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Speaker 2: essential given the momentum we now have in place. He

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Speaker 2: didn't overstate his own importance either, sharing his vice chairman

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Speaker 2: title at Berkshire in twenty eighteen with two next generation

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Speaker 2: senior executives and affirming the company's commitment to a succession plan.

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Speaker 2: I'm John Tucker Bloomberg Radio.

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Speaker 3: That was Bloomberg's John Tucker.

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Speaker 4: Well.

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Speaker 3: Munger passed away Tuesday at a California hospital. According to

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Speaker 3: a statement from Berkshire Hathaway, he was ninety nine years old.

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Speaker 1: For a closer look at Munger's life in Legacy, we

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Speaker 1: had a long conversation with Bloomberg News reporter Noah Boohier,

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Speaker 1: who spent years covering Berkshire Hathaway and someone who spent

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Speaker 1: decades following and being influenced by both Warren Buffett and

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Speaker 1: Charlie Munger. Speed Capital Management founder and chief investment Officer

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Speaker 1: Bill Smead, also a longtime Berkshire investor.

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Speaker 3: First of all, I'm sorry because I know you know,

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Speaker 3: these individuals Charlie, Charlie Munger and Warren Buffett just together

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Speaker 3: built something so iconic in the investment world.

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Speaker 4: I wrote a letter to Buffett probably five years ago,

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Speaker 4: just thanking him for how incredibly generous that him and

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Speaker 4: Munger have been with all of us. I mean it

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Speaker 4: literally changed start alive.

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Speaker 1: What do you mean by that?

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Speaker 3: Yeah?

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Speaker 4: Oh, by communicating the discipline that they practiced, they shared

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Speaker 4: why they were doing what they're doing all these years.

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Speaker 4: In the writing in the annual meetings, sitting there and

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Speaker 4: taking questions for six hours all the way up, way

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Speaker 4: up into their nineties. It's like a gold mine of wisdom.

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Speaker 4: I used to get irritated because I kind of wish

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Speaker 4: they would restrict the questions to better questions, because as

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Speaker 4: the years went by, there were a lot of goofy

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Speaker 4: questions that came up.

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Speaker 1: Because sometimes they got some goofy answers, which were fun.

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Speaker 4: Yeah, but here was this incredible resource, right Charlie Munger

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Speaker 4: was the Solomon of our era. He was the wisest

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Speaker 4: man in the investment business. He was what he was

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Speaker 4: a cal Tech grad, Harvard law educated, started a law

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Speaker 4: firm in Los Angeles, had a successful career in real estate,

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Speaker 4: successful career in making common stock choices, and the right

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Speaker 4: hand guide to the most successful investment selector and asset

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Speaker 4: allocator of all time. I mean he is, you know,

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Speaker 4: we just admired him so much, and then, of course

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Speaker 4: we admired him immensely because he'd say exactly what he

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Speaker 4: was thinking and didn't really care very much who he

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Speaker 4: might offended the process.

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Speaker 1: You mentioned that you've been doing this for over forty years.

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Speaker 1: What are some lessons that you've incorporated from Charlie Munger

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Speaker 1: over these decades into the way that you manage portfolios

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Speaker 1: and you allocate assets.

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Speaker 4: Yeah, when we're talking to people, I'm here in New

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Speaker 4: York talking to some possible new customers, and we tell him,

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Speaker 4: when it comes to value people, we hold our winners

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Speaker 4: to a fault because compounding is the eighth wonder of

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Speaker 4: the world. So if you can find a business, let's

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Speaker 4: just right off the top of our head, pick Occidental Petroleum,

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Speaker 4: who Munger and Buffett started buying in the last year

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Speaker 4: and a half or two years. They're generating massive free

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Speaker 4: cash flow, they're paying down debt with it, but then

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Speaker 4: they're also buying backstock. So, like Buffett says, over the years,

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Speaker 4: if it's a company generating high returns on equity, high

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Speaker 4: free cash flow buying back their stock, he ends up

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Speaker 4: owning a larger and larger and larger part of the

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Speaker 4: business as the years go by. That's what he did

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Speaker 4: with Coke, That's what he did in a the Iraic Express,

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Speaker 4: That's you know what he did with a lot of

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Speaker 4: different companies. And holding your winners the fault is a

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Speaker 4: key component of alpha. As I explained to people, you

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Speaker 4: buy a stock at thirty and pay cash, the worst

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Speaker 4: thing happen is it goes to zero, you lose thirty

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Speaker 4: points of alpha. If you buy a stock at thirty

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Speaker 4: and it goes to ninety and you sell it and

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Speaker 4: goes to two ten, you lose one hundred and twenty points.

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Speaker 4: And Buffett Monger taught that to people as a powerful thing.

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Speaker 4: It's it's much better to get a less spectacular company

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Speaker 4: that you can hold all the way through a ten

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Speaker 4: or fifteen times your money than it is a spectacular

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Speaker 4: company that you might make five times in five years,

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Speaker 4: but you've got to be smart enough to sell it

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Speaker 4: and go to another project.

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Speaker 3: Well, and you're you're you know something. I want to

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Speaker 3: ask you a little bit more too, about what Charlie

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Speaker 3: Munger was to Warren Buffett, what he brought out, and

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Speaker 3: Warren Buffett having said that, I want to bring Noah

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Speaker 3: Bouhier into this because you know, Noah, it's one of

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Speaker 3: those things where you think, as we're hearing from Bill,

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Speaker 3: you know, these are both brilliant men, successful men, and

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Speaker 3: would have been on their own, but something about them

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Speaker 3: together brought out even so much more.

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Speaker 5: Yeah, I think that's a That's a critical point here,

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Speaker 5: is there The combination of talents that they they brought

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Speaker 5: to bear really was was deeply important in the evolution

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Speaker 5: of Berkshire. The other thing, just just speaking as a journalist,

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Speaker 5: the thing that I always found so incredibly amazing about

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Speaker 5: Charlie Munger was his directness and his willingness to speak

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Speaker 5: his mind, even if his opinion and wasn't necessarily a

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Speaker 5: popular one. You know, as a as a as a

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Speaker 5: business reporter and someone writing about investing, you you always

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Speaker 5: knew that Charlie was not just going to give you

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Speaker 5: the piffy quote, but something that actually had some real

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Speaker 5: substance behind it. And I think that's, you know, in

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Speaker 5: large part what has resonated with a lot of investors

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Speaker 5: over time. I mean, people would go One of the

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Speaker 5: things that's that's underappreciated about Charlie Munger is is that

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Speaker 5: deep into his nineties, people would go to Los Angeles

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Speaker 5: to hear him speak at the annual meeting of a

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Speaker 5: small publishing company called The Daily Journal. This was Buffett

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Speaker 5: had nothing to do with this thing. They would just

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Speaker 5: go to hear Munger alone. And I remember the first

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Speaker 5: time I went to this thing that were maybe one

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Speaker 5: hundred or two hundred people, and you know, three or

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Speaker 5: four years later word had gotten out and a couple

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Speaker 5: thousand were going. I mean, you have to under stand

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Speaker 5: Charlie Munger was respected in his own right. It wasn't

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Speaker 5: you know. He's often known for his affiliation with Buffett,

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Speaker 5: but he really did have his own loyal following.

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Speaker 4: To back up Noah on that, one of our favorite

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Speaker 4: things is when it comes to climate change, he just said,

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Speaker 4: why don't we just build a sea wall? Right? That

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Speaker 4: was his opinion. It's like, okay, if it's real, let's

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Speaker 4: do what they did in Amsterdam and just build a

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Speaker 4: seawall in California and New York. And that's so simple

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Speaker 4: and logical and less expensive. But that's Charlie Munger. It

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Speaker 4: was always common sense, always won. The difference between the

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Speaker 4: two men is Warren. Warren wants to die without any enemies.

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Speaker 4: He has more of an urge to be liked. It's

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Speaker 4: a wonderful man and he wants to be liked, whereas

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Speaker 4: Charlie could care less if he's liked, right, He just

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Speaker 4: he wants to share wisdom, share truth.

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Speaker 3: What was it like from the different meetings you went

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Speaker 3: to and just kind of seeing them up on stage

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Speaker 3: things that kind of stood out for you.

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Speaker 4: Well, there's hardly any better comedy routine that's ever been done,

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Speaker 4: the back and forth. Of course, Munger had lots of

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Speaker 4: the singers, but Buffett had plenty himself, and yeah, they

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Speaker 4: played off fantastically. It was I had a next door

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Speaker 4: neighbor that was four years ahead of me in school,

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Speaker 4: and I had no brothers, three sisters, and he was

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Speaker 4: one of four brothers and here I are extremely close friends.

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Speaker 4: But he's four years older than me in the same

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Speaker 4: way that Munger was six or seven years older than

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Speaker 4: six years older than Warren. But yet you know, we

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Speaker 4: met and we were finishing each other sentences. And that's

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Speaker 4: the way these guys were. They were finishing each other sentences.

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Speaker 4: They'd say the first part of the sentence and they

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Speaker 4: didn't have to continue because the other guy already knew

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Speaker 4: what the rest of the sentence was going to be.

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Speaker 3: It's just that kind of relationship we.

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Speaker 1: Knew a bouohire, I'm so glad you're with us, because

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Speaker 1: we've been reading from your obituary NonStop for the last

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Speaker 1: hour here, and you know, to to Bill's point, about this,

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Speaker 1: this idea of common sense and not you know, not

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Speaker 1: always needing to be liked. You mentioned this some of

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Speaker 1: his donations, and this one's this one's at the top

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Speaker 1: of mind from him because it's it's relatively recent forty

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Speaker 1: five percent dorm on UCSB's campus, which actually got a

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Speaker 1: lot of people interested in dormitory architecture who didn't think

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Speaker 1: that they would actually be interested in dormitory architecture. But

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Speaker 1: you know, here Munger is trying to solve this problem

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Speaker 1: of student housing, and he got a lot of blowback

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Speaker 1: to this idea, and ultimately they canceled it.

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Speaker 5: What happened, Yeah, I mean, look, in his later years,

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Speaker 5: Munger used these donations that he gave the universities to

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Speaker 5: play architect I mean, he was deeply, deeply interested in architecture,

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Speaker 5: and you know, he had some pretty unconventional ideas that

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Speaker 5: I think really bothered people, and it became its own,

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Speaker 5: you know, subplot, it's own right. But like you have

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Speaker 5: to understand, for Munger, he was an incredibly wide, widely

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Speaker 5: read person. He wasn't as narrowly interested in investing and

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Speaker 5: you know, how to make money. Obviously, he spent a

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Speaker 5: lot of time doing that, but he had an interest

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Speaker 5: outside of it. The other thing I wanted to add,

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Speaker 5: and the stakes us in a slightly different action. But

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Speaker 5: like you know, for all that Munger would you know,

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Speaker 5: sit up on stage and sort of act as the

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Speaker 5: skold and the curmudgeon next to Buffet. He he did

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Speaker 5: have a you know, a generous heart and you know,

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Speaker 5: when you talk to people who spent time with Charlie,

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Speaker 5: you know he was he was a deeply nice and

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Speaker 5: caring person and you know, on some level, this sort

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Speaker 5: of purmudgeon stance he would take on stage in public

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Speaker 5: sometimes was a bit of an act, but like you know,

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Speaker 5: it helped him make his points.

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Speaker 3: So, Bill, how do you think about you know, Berkshire

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Speaker 3: Hathaway going forward. They've obviously thought about succession and there's

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Speaker 3: aug Jane and Greg Gable, But I do think about,

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Speaker 3: you know, Warren without Charlie, yes, and what the impact

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Speaker 3: that might be.

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Speaker 4: Yeah, So Charlie and Warren have set a team together

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Speaker 4: to to kind of come in. They've got two talented

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Speaker 4: stock pickers in the wings. I'm guessing that this will

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Speaker 4: be when when they begin to emerge. At the annual meeting,

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Speaker 4: greg Abel runs the operating businesses, and Todd Combs and

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Speaker 4: Ted Westlers are running about thirty billion dollars other important

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Speaker 4: that's who we think bought the home builders, for example,

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Speaker 4: because it was smaller quantities than buff advice, and so

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Speaker 4: that will cause their emergence. But Charlie's a cerbic common

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Speaker 4: sense and sensibility. There's just not going to be any

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Speaker 4: replacing that talent. He was a genius in that his

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Speaker 4: he he he would look at the situation and hit

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Speaker 4: it only with the best logic right, each situation, regardless

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Speaker 4: of who might be offended by the logic of it.

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Speaker 4: So he'd quote scripture and and then he'd support abortion

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Speaker 4: rights right. So but logically, you know, he was trying

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Speaker 4: to solve a problem with money. And the architecture thing

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Speaker 4: just brings back to mind that he graduated from Harvard

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Speaker 4: Law School and cal Tech and was an architect and

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Speaker 4: and he was the most he was the renaissance man.

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Speaker 1: Kind of different sides of the brain.

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Speaker 4: Oh, just unbelievable mixture of mental model talent, just amazing.

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Speaker 5: Uh.

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Speaker 4: He his family called him a book with legs because

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Speaker 4: he's always reading. Our podcast is called a book with

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Speaker 4: legs because my son Cole is a gigantic Charlie Munger fan.

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Speaker 4: And that's what that's what we call the podcast. We

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Speaker 4: interview authors of books, so we call it a book

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Speaker 4: with legs.

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Speaker 3: And he's quoted in Noah's Story Noah. We'll obviously be

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Speaker 3: talking this all week and then some another thought. You know,

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Speaker 3: as you were putting together Charlie's story, you know for

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Speaker 3: for Bloomberg, what jumps out for you here?

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Speaker 5: Well, I think you know to your point of what's

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Speaker 5: next for Berkshirt the fundamentally bigger, different place than you

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Speaker 5: know where he and Buffett started. So while you know

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Speaker 5: a mini levels Munger is not replaceable, there are a

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Speaker 5: lot of things that he and Buffett pioneered together that

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Speaker 5: you know, there's a lot of there's a lot of

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Speaker 5: that's been written, there's a lot that has been passed

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Speaker 5: on based in the way that these guys did thing.

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Speaker 5: And you know, again, Berkshire is a huge company now

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Speaker 5: with different needs. But a lot of the ways that

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Speaker 5: Munger and Buffett think about the company are you know,

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Speaker 5: certainly going to live.

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Speaker 4: On right Exactly what Munger said in late twenty twenty

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Speaker 4: one that this was the largest financial euphori episode in

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Speaker 4: his career, which was seventy five years, and then at

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Speaker 4: the annual meeting this year, he said, I really don't

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Speaker 4: think stocks are going to do very well the next

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Speaker 4: ten years, and then Buffett, I love this. Buffett chimes

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Speaker 4: in He goes, well, if I was running smaller amounts

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Speaker 4: of money, I think I still think I could do

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Speaker 4: really well.

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Speaker 3: Our thanks to Bloomberg News reporter Noah Bouhier and Bill

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Speaker 3: Smeed of SMED Capital Management. He's founder and chief investment

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Speaker 3: officer at that company and also longtime Berkshire investor. I'm

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Speaker 3: Carol Master along with Tim Stenovic. This is Bloomberg