I came across two recent interviews with Berkshire Hathaway’s Vice Chairman Charlie Munger this week – who is less than two months away from celebrating his 100th birthday (January 1).
It’s impossible to listen to Charlie (or his business partner Warren Buffett) and not come away with some words of wisdom. Feel free to listen to the podcast or read the article yourself. Here are a few of my key takeaways:
Finding a “winner” is difficult and rare
Charlie spoke at length about some of the investments that have done exceptionally well for him personally (Costco) and for Berkshire (Apple). He emphasized that finding these rare successes takes a lot of effort – and some degree of luck
“It’s very hard and rare to find a great company…only a few in a lifetime. There aren’t many times in a lifetime you know you’re right, when you know you have one that’s really going to work wonderfully”
Timing is everything
When asked about his ability to be as successful with Berkshire now vs. 60 years ago, he was adamant that it wouldn’t be possible to replicate. “It was never easy. It’s harder now.” He explained how the growth in capital (pensions, sovereign wealth funds, Venture Capital, etc), chasing fewer and fewer investments, has made the investing space very crowded, efficient, and expensive. When Berkshire began, it was far easier to find companies selling below their intrinsic value – “loaded laggards” as he called them. In today’s market, Charlie believes that “it’s all gone, all that low hanging fruit “
How to succeed today
If he were starting today, he noted the key is to ensure participation in the strong brands/companies that will do better than everyone else (adding that this thinking was behind Berkshire’s Apple investment)
“I think that the modern investor, to get ahead, almost has to get in a few stocks that are way above average…. They try and have a few Apples or Googles or so on, just to keep up, because they know that a significant percentage of all the gains that come to all the common stockholders combined is going to come from a few of these super competitors.“
He also stressed the importance of getting off to a strong start “Wonderful early years, that’s what everyone needs“
Secret to a successful partnership
When asked about his relationship with Warren, he noted some basic “secrets for success,” such as ensuring you like one other, having shared values, and perhaps having different skill sets that allow for division of labor (and for each person to do things they enjoy). He also spoke on partnerships in terms of marriage, noting that the best way to have a good spouse is to deserve one (and to have a high degree of trust)
Charlie’s recipe for success
He notes three key elements of success for people who have done very well (including himself):
1.) Be Smart 2.) Work hard 3.) Be lucky He humbly emphasized the role luck (namely in terms of timing and market backdrop) had played in his career and in Berkshire’s success.
On Anti-Trust Cases
Always the practical voice in the room, Charlie rebuffed the need to “break up” the large tech companies (a few of which are facing legal challenges to that end right now).
“I would not break them up. I don’t consider it all that significant. They’ve got their little niches. Microsoft maybe has a nice niche, but it doesn’t own the earth. I like these high-tech companies. I think capitalism should expect to get a few big winners by accident. “
When asked how he develops investing conviction, he said he reads, thinks and visits with the companies. Reading has been a part of his life since he was a young child.
“I think that one of the reasons I was as economically successful as I was in life is because I read so damn much all my life, starting when I was about six years old. I don’t know how to get smart without reading a lot.“
Few Parting Words
Advice for youth: It will be an interesting life you’re leading but it won’t be that easy
What he’d tell his 70 year old self: It’s not a bit easy. It’s very hard
What is fun these days: Practically everything is!
Thanks for sharing your wit and wisdom with us Charlie. And here’s to you and your (almost) 100 years!
Leave a note