WEBVTT - Special Report: Berkshire Hathaway's Charles Munger Dies at 99

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<v Speaker 1>I'm Cal Masser and I'm Tim Steneveek. On Tuesday, we

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<v Speaker 1>learned of the passing of Charlie Monger, known for helping

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<v Speaker 1>Warren Buffett build Berkshire Hathaway. We get more from Bloomberg's

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<v Speaker 1>John Tucker.

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<v Speaker 2>Charles Munger served as alter egos, sidekick and foyle to

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<v Speaker 2>Warren Buffett for almost sixty years as they transformed Berkshire

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<v Speaker 2>Hathaway from a failing textile maker into an empire. A

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<v Speaker 2>lawyer by training, Munger helped a Buffet craft a philosophy

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<v Speaker 2>of investing in companies for the long term, and even

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<v Speaker 2>as his partner became a worldwide celebrity known far and

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<v Speaker 2>wide as the Oracle of Omaha, Munger believed Berkshire's success

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

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<v Speaker 2>flourish after Warren's gone. I don't think anybody is is

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<v Speaker 2>essential given the momentum we now have in place. He

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<v Speaker 2>didn't overstate his own importance either, sharing his vice chairman

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<v Speaker 2>title at Berkshire in twenty eighteen with two next generation

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

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<v Speaker 2>I'm John Tucker Bloomberg Radio.

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<v Speaker 3>That was Bloomberg's John Tucker.

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<v Speaker 4>Well.

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<v Speaker 3>Munger passed away Tuesday at a California hospital. According to

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<v Speaker 3>a statement from Berkshire Hathaway, he was ninety nine years old.

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<v Speaker 1>For a closer look at Munger's life in Legacy, we

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<v Speaker 1>had a long conversation with Bloomberg News reporter Noah Boohier,

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<v Speaker 1>who spent years covering Berkshire Hathaway and someone who spent

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<v Speaker 1>decades following and being influenced by both Warren Buffett and

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<v Speaker 1>Charlie Munger. Speed Capital Management founder and chief investment Officer

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<v Speaker 1>Bill Smead, also a longtime Berkshire investor.

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<v Speaker 3>First of all, I'm sorry because I know you know,

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<v Speaker 3>these individuals Charlie, Charlie Munger and Warren Buffett just together

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<v Speaker 3>built something so iconic in the investment world.

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<v Speaker 4>I wrote a letter to Buffett probably five years ago,

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<v Speaker 4>just thanking him for how incredibly generous that him and

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<v Speaker 4>Munger have been with all of us. I mean it

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<v Speaker 4>literally changed start alive.

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<v Speaker 1>What do you mean by that?

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<v Speaker 3>Yeah?

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<v Speaker 4>Oh, by communicating the discipline that they practiced, they shared

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<v Speaker 4>why they were doing what they're doing all these years.

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<v Speaker 4>In the writing in the annual meetings, sitting there and

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<v Speaker 4>taking questions for six hours all the way up, way

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

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<v Speaker 4>I used to get irritated because I kind of wish

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<v Speaker 4>they would restrict the questions to better questions, because as

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<v Speaker 4>the years went by, there were a lot of goofy

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<v Speaker 4>questions that came up.

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<v Speaker 1>Because sometimes they got some goofy answers, which were fun.

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<v Speaker 4>Yeah, but here was this incredible resource, right Charlie Munger

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<v Speaker 4>was the Solomon of our era. He was the wisest

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<v Speaker 4>man in the investment business. He was what he was

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<v Speaker 4>a cal Tech grad, Harvard law educated, started a law

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<v Speaker 4>firm in Los Angeles, had a successful career in real estate,

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<v Speaker 4>successful career in making common stock choices, and the right

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<v Speaker 4>hand guide to the most successful investment selector and asset

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<v Speaker 4>allocator of all time. I mean he is, you know,

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<v Speaker 4>we just admired him so much, and then, of course

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<v Speaker 4>we admired him immensely because he'd say exactly what he

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<v Speaker 4>was thinking and didn't really care very much who he

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<v Speaker 4>might offended the process.

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

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<v Speaker 1>What are some lessons that you've incorporated from Charlie Munger

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<v Speaker 1>over these decades into the way that you manage portfolios

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<v Speaker 1>and you allocate assets.

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

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<v Speaker 4>York talking to some possible new customers, and we tell him,

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<v Speaker 4>when it comes to value people, we hold our winners

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<v Speaker 4>to a fault because compounding is the eighth wonder of

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

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<v Speaker 4>just right off the top of our head, pick Occidental Petroleum,

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<v Speaker 4>who Munger and Buffett started buying in the last year

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<v Speaker 4>and a half or two years. They're generating massive free

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<v Speaker 4>cash flow, they're paying down debt with it, but then

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

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<v Speaker 4>if it's a company generating high returns on equity, high

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<v Speaker 4>free cash flow buying back their stock, he ends up

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<v Speaker 4>owning a larger and larger and larger part of the

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<v Speaker 4>business as the years go by. That's what he did

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

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<v Speaker 4>That's you know what he did with a lot of

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<v Speaker 4>different companies. And holding your winners the fault is a

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<v Speaker 4>key component of alpha. As I explained to people, you

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<v Speaker 4>buy a stock at thirty and pay cash, the worst

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<v Speaker 4>thing happen is it goes to zero, you lose thirty

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<v Speaker 4>points of alpha. If you buy a stock at thirty

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<v Speaker 4>and it goes to ninety and you sell it and

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<v Speaker 4>goes to two ten, you lose one hundred and twenty points.

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<v Speaker 4>And Buffett Monger taught that to people as a powerful thing.

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<v Speaker 4>It's it's much better to get a less spectacular company

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<v Speaker 4>that you can hold all the way through a ten

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<v Speaker 4>or fifteen times your money than it is a spectacular

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<v Speaker 4>company that you might make five times in five years,

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<v Speaker 4>but you've got to be smart enough to sell it

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<v Speaker 4>and go to another project.

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<v Speaker 3>Well, and you're you're you know something. I want to

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<v Speaker 3>ask you a little bit more too, about what Charlie

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<v Speaker 3>Munger was to Warren Buffett, what he brought out, and

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<v Speaker 3>Warren Buffett having said that, I want to bring Noah

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<v Speaker 3>Bouhier into this because you know, Noah, it's one of

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<v Speaker 3>those things where you think, as we're hearing from Bill,

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<v Speaker 3>you know, these are both brilliant men, successful men, and

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<v Speaker 3>would have been on their own, but something about them

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<v Speaker 3>together brought out even so much more.

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<v Speaker 5>Yeah, I think that's a That's a critical point here,

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<v Speaker 5>is there The combination of talents that they they brought

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<v Speaker 5>to bear really was was deeply important in the evolution

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<v Speaker 5>of Berkshire. The other thing, just just speaking as a journalist,

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<v Speaker 5>the thing that I always found so incredibly amazing about

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<v Speaker 5>Charlie Munger was his directness and his willingness to speak

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<v Speaker 5>his mind, even if his opinion and wasn't necessarily a

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<v Speaker 5>popular one. You know, as a as a as a

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<v Speaker 5>business reporter and someone writing about investing, you you always

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<v Speaker 5>knew that Charlie was not just going to give you

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<v Speaker 5>the piffy quote, but something that actually had some real

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

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<v Speaker 5>large part what has resonated with a lot of investors

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<v Speaker 5>over time. I mean, people would go One of the

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<v Speaker 5>things that's that's underappreciated about Charlie Munger is is that

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<v Speaker 5>deep into his nineties, people would go to Los Angeles

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<v Speaker 5>to hear him speak at the annual meeting of a

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<v Speaker 5>small publishing company called The Daily Journal. This was Buffett

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<v Speaker 5>had nothing to do with this thing. They would just

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<v Speaker 5>go to hear Munger alone. And I remember the first

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<v Speaker 5>time I went to this thing that were maybe one

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<v Speaker 5>hundred or two hundred people, and you know, three or

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<v Speaker 5>four years later word had gotten out and a couple

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<v Speaker 5>thousand were going. I mean, you have to under stand

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<v Speaker 5>Charlie Munger was respected in his own right. It wasn't

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

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<v Speaker 5>but he really did have his own loyal following.

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<v Speaker 4>To back up Noah on that, one of our favorite

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<v Speaker 4>things is when it comes to climate change, he just said,

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<v Speaker 4>why don't we just build a sea wall? Right? That

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

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<v Speaker 4>do what they did in Amsterdam and just build a

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<v Speaker 4>seawall in California and New York. And that's so simple

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<v Speaker 4>and logical and less expensive. But that's Charlie Munger. It

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<v Speaker 4>was always common sense, always won. The difference between the

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<v Speaker 4>two men is Warren. Warren wants to die without any enemies.

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<v Speaker 4>He has more of an urge to be liked. It's

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<v Speaker 4>a wonderful man and he wants to be liked, whereas

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<v Speaker 4>Charlie could care less if he's liked, right, He just

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<v Speaker 4>he wants to share wisdom, share truth.

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<v Speaker 3>What was it like from the different meetings you went

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<v Speaker 3>to and just kind of seeing them up on stage

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<v Speaker 3>things that kind of stood out for you.

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

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<v Speaker 4>the back and forth. Of course, Munger had lots of

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<v Speaker 4>the singers, but Buffett had plenty himself, and yeah, they

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<v Speaker 4>played off fantastically. It was I had a next door

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<v Speaker 4>neighbor that was four years ahead of me in school,

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<v Speaker 4>and I had no brothers, three sisters, and he was

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<v Speaker 4>one of four brothers and here I are extremely close friends.

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<v Speaker 4>But he's four years older than me in the same

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<v Speaker 4>way that Munger was six or seven years older than

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<v Speaker 4>six years older than Warren. But yet you know, we

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<v Speaker 4>met and we were finishing each other sentences. And that's

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<v Speaker 4>the way these guys were. They were finishing each other sentences.

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<v Speaker 4>They'd say the first part of the sentence and they

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<v Speaker 4>didn't have to continue because the other guy already knew

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<v Speaker 4>what the rest of the sentence was going to be.

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<v Speaker 3>It's just that kind of relationship we.

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

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<v Speaker 1>we've been reading from your obituary NonStop for the last

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<v Speaker 1>hour here, and you know, to to Bill's point, about this,

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<v Speaker 1>this idea of common sense and not you know, not

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<v Speaker 1>always needing to be liked. You mentioned this some of

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<v Speaker 1>his donations, and this one's this one's at the top

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<v Speaker 1>of mind from him because it's it's relatively recent forty

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<v Speaker 1>five percent dorm on UCSB's campus, which actually got a

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<v Speaker 1>lot of people interested in dormitory architecture who didn't think

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<v Speaker 1>that they would actually be interested in dormitory architecture. But

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<v Speaker 1>you know, here Munger is trying to solve this problem

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<v Speaker 1>of student housing, and he got a lot of blowback

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<v Speaker 1>to this idea, and ultimately they canceled it.

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<v Speaker 5>What happened, Yeah, I mean, look, in his later years,

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<v Speaker 5>Munger used these donations that he gave the universities to

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<v Speaker 5>play architect I mean, he was deeply, deeply interested in architecture,

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<v Speaker 5>and you know, he had some pretty unconventional ideas that

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<v Speaker 5>I think really bothered people, and it became its own,

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<v Speaker 5>you know, subplot, it's own right. But like you have

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<v Speaker 5>to understand, for Munger, he was an incredibly wide, widely

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<v Speaker 5>read person. He wasn't as narrowly interested in investing and

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<v Speaker 5>you know, how to make money. Obviously, he spent a

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<v Speaker 5>lot of time doing that, but he had an interest

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<v Speaker 5>outside of it. The other thing I wanted to add,

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<v Speaker 5>and the stakes us in a slightly different action. But

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<v Speaker 5>like you know, for all that Munger would you know,

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<v Speaker 5>sit up on stage and sort of act as the

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<v Speaker 5>skold and the curmudgeon next to Buffet. He he did

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<v Speaker 5>have a you know, a generous heart and you know,

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<v Speaker 5>when you talk to people who spent time with Charlie,

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<v Speaker 5>you know he was he was a deeply nice and

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<v Speaker 5>caring person and you know, on some level, this sort

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<v Speaker 5>of purmudgeon stance he would take on stage in public

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<v Speaker 5>sometimes was a bit of an act, but like you know,

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<v Speaker 5>it helped him make his points.

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<v Speaker 3>So, Bill, how do you think about you know, Berkshire

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

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<v Speaker 3>aug Jane and Greg Gable, But I do think about,

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<v Speaker 3>you know, Warren without Charlie, yes, and what the impact

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<v Speaker 3>that might be.

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<v Speaker 4>Yeah, So Charlie and Warren have set a team together

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<v Speaker 4>to to kind of come in. They've got two talented

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<v Speaker 4>stock pickers in the wings. I'm guessing that this will

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<v Speaker 4>be when when they begin to emerge. At the annual meeting,

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<v Speaker 4>greg Abel runs the operating businesses, and Todd Combs and

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<v Speaker 4>Ted Westlers are running about thirty billion dollars other important

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<v Speaker 4>that's who we think bought the home builders, for example,

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<v Speaker 4>because it was smaller quantities than buff advice, and so

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<v Speaker 4>that will cause their emergence. But Charlie's a cerbic common

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<v Speaker 4>sense and sensibility. There's just not going to be any

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<v Speaker 4>replacing that talent. He was a genius in that his

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<v Speaker 4>he he he would look at the situation and hit

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<v Speaker 4>it only with the best logic right, each situation, regardless

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<v Speaker 4>of who might be offended by the logic of it.

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<v Speaker 4>So he'd quote scripture and and then he'd support abortion

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<v Speaker 4>rights right. So but logically, you know, he was trying

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<v Speaker 4>to solve a problem with money. And the architecture thing

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<v Speaker 4>just brings back to mind that he graduated from Harvard

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<v Speaker 4>Law School and cal Tech and was an architect and

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<v Speaker 4>and he was the most he was the renaissance man.

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<v Speaker 1>Kind of different sides of the brain.

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<v Speaker 4>Oh, just unbelievable mixture of mental model talent, just amazing.

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<v Speaker 5>Uh.

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<v Speaker 4>He his family called him a book with legs because

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<v Speaker 4>he's always reading. Our podcast is called a book with

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<v Speaker 4>legs because my son Cole is a gigantic Charlie Munger fan.

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<v Speaker 4>And that's what that's what we call the podcast. We

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<v Speaker 4>interview authors of books, so we call it a book

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<v Speaker 4>with legs.

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<v Speaker 3>And he's quoted in Noah's Story Noah. We'll obviously be

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<v Speaker 3>talking this all week and then some another thought. You know,

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<v Speaker 3>as you were putting together Charlie's story, you know for

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<v Speaker 3>for Bloomberg, what jumps out for you here?

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<v Speaker 5>Well, I think you know to your point of what's

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<v Speaker 5>next for Berkshirt the fundamentally bigger, different place than you

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<v Speaker 5>know where he and Buffett started. So while you know

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<v Speaker 5>a mini levels Munger is not replaceable, there are a

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<v Speaker 5>lot of things that he and Buffett pioneered together that

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<v Speaker 5>you know, there's a lot of there's a lot of

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<v Speaker 5>that's been written, there's a lot that has been passed

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<v Speaker 5>on based in the way that these guys did thing.

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<v Speaker 5>And you know, again, Berkshire is a huge company now

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<v Speaker 5>with different needs. But a lot of the ways that

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<v Speaker 5>Munger and Buffett think about the company are you know,

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<v Speaker 5>certainly going to live.

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<v Speaker 4>On right Exactly what Munger said in late twenty twenty

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<v Speaker 4>one that this was the largest financial euphori episode in

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<v Speaker 4>his career, which was seventy five years, and then at

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<v Speaker 4>the annual meeting this year, he said, I really don't

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<v Speaker 4>think stocks are going to do very well the next

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<v Speaker 4>ten years, and then Buffett, I love this. Buffett chimes

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<v Speaker 4>in He goes, well, if I was running smaller amounts

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<v Speaker 4>of money, I think I still think I could do

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<v Speaker 4>really well.

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<v Speaker 3>Our thanks to Bloomberg News reporter Noah Bouhier and Bill

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<v Speaker 3>Smeed of SMED Capital Management. He's founder and chief investment

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<v Speaker 3>officer at that company and also longtime Berkshire investor. I'm

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<v Speaker 3>Carol Master along with Tim Stenovic. This is Bloomberg