I'm Cal Masser and I'm Tim Steneveek. On Tuesday, we learned of the passing of Charlie Monger, known for helping Warren Buffett build Berkshire Hathaway. We get more from Bloomberg's John Tucker.
Charles Munger served as alter egos, sidekick and foyle to Warren Buffett for almost sixty years as they transformed Berkshire Hathaway from a failing textile maker into an empire. A lawyer by training, Munger helped a Buffet craft a philosophy of investing in companies for the long term, and even as his partner became a worldwide celebrity known far and wide as the Oracle of Omaha, Munger believed Berkshire's success would outlast Buffett's star power. In my opinion, Berkshire will
flourish after Warren's gone. I don't think anybody is is essential given the momentum we now have in place. He didn't overstate his own importance either, sharing his vice chairman title at Berkshire in twenty eighteen with two next generation senior executives and affirming the company's commitment to a succession plan. I'm John Tucker Bloomberg Radio.
That was Bloomberg's John Tucker.
Well.
Munger passed away Tuesday at a California hospital. According to a statement from Berkshire Hathaway, he was ninety nine years old.
For a closer look at Munger's life in Legacy, we had a long conversation with Bloomberg News reporter Noah Boohier, who spent years covering Berkshire Hathaway and someone who spent decades following and being influenced by both Warren Buffett and Charlie Munger. Speed Capital Management founder and chief investment Officer Bill Smead, also a longtime Berkshire investor.
First of all, I'm sorry because I know you know, these individuals Charlie, Charlie Munger and Warren Buffett just together built something so iconic in the investment world.
I wrote a letter to Buffett probably five years ago, just thanking him for how incredibly generous that him and Munger have been with all of us. I mean it literally changed start alive.
What do you mean by that?
Yeah?
Oh, by communicating the discipline that they practiced, they shared why they were doing what they're doing all these years. In the writing in the annual meetings, sitting there and taking questions for six hours all the way up, way up into their nineties. It's like a gold mine of wisdom. I used to get irritated because I kind of wish they would restrict the questions to better questions, because as the years went by, there were a lot of goofy questions that came up.
Because sometimes they got some goofy answers, which were fun.
Yeah, but here was this incredible resource, right Charlie Munger was the Solomon of our era. He was the wisest man in the investment business. He was what he was a cal Tech grad, Harvard law educated, started a law firm in Los Angeles, had a successful career in real estate, successful career in making common stock choices, and the right hand guide to the most successful investment selector and asset
allocator of all time. I mean he is, you know, we just admired him so much, and then, of course we admired him immensely because he'd say exactly what he was thinking and didn't really care very much who he might offended the process.
You mentioned that you've been doing this for over forty years. What are some lessons that you've incorporated from Charlie Munger over these decades into the way that you manage portfolios and you allocate assets.
Yeah, when we're talking to people, I'm here in New York talking to some possible new customers, and we tell him, when it comes to value people, we hold our winners to a fault because compounding is the eighth wonder of the world. So if you can find a business, let's just right off the top of our head, pick Occidental Petroleum, who Munger and Buffett started buying in the last year and a half or two years. They're generating massive free cash flow, they're paying down debt with it, but then
they're also buying backstock. So, like Buffett says, over the years, if it's a company generating high returns on equity, high free cash flow buying back their stock, he ends up owning a larger and larger and larger part of the business as the years go by. That's what he did with Coke, That's what he did in a the Iraic Express, That's you know what he did with a lot of different companies. And holding your winners the fault is a
key component of alpha. As I explained to people, you buy a stock at thirty and pay cash, the worst thing happen is it goes to zero, you lose thirty points of alpha. If you buy a stock at thirty and it goes to ninety and you sell it and goes to two ten, you lose one hundred and twenty points. And Buffett Monger taught that to people as a powerful thing.
It's it's much better to get a less spectacular company that you can hold all the way through a ten or fifteen times your money than it is a spectacular company that you might make five times in five years, but you've got to be smart enough to sell it and go to another project.
Well, and you're you're you know something. I want to ask you a little bit more too, about what Charlie Munger was to Warren Buffett, what he brought out, and Warren Buffett having said that, I want to bring Noah Bouhier into this because you know, Noah, it's one of those things where you think, as we're hearing from Bill, you know, these are both brilliant men, successful men, and would have been on their own, but something about them together brought out even so much more.
Yeah, I think that's a That's a critical point here, is there The combination of talents that they they brought to bear really was was deeply important in the evolution of Berkshire. The other thing, just just speaking as a journalist, the thing that I always found so incredibly amazing about Charlie Munger was his directness and his willingness to speak his mind, even if his opinion and wasn't necessarily a
popular one. You know, as a as a as a business reporter and someone writing about investing, you you always knew that Charlie was not just going to give you the piffy quote, but something that actually had some real substance behind it. And I think that's, you know, in large part what has resonated with a lot of investors
over time. I mean, people would go One of the things that's that's underappreciated about Charlie Munger is is that deep into his nineties, people would go to Los Angeles to hear him speak at the annual meeting of a small publishing company called The Daily Journal. This was Buffett had nothing to do with this thing. They would just
go to hear Munger alone. And I remember the first time I went to this thing that were maybe one hundred or two hundred people, and you know, three or four years later word had gotten out and a couple thousand were going. I mean, you have to under stand Charlie Munger was respected in his own right. It wasn't you know. He's often known for his affiliation with Buffett, but he really did have his own loyal following.
To back up Noah on that, one of our favorite things is when it comes to climate change, he just said, why don't we just build a sea wall? Right? That was his opinion. It's like, okay, if it's real, let's do what they did in Amsterdam and just build a seawall in California and New York. And that's so simple and logical and less expensive. But that's Charlie Munger. It was always common sense, always won. The difference between the two men is Warren. Warren wants to die without any enemies.
He has more of an urge to be liked. It's a wonderful man and he wants to be liked, whereas Charlie could care less if he's liked, right, He just he wants to share wisdom, share truth.
What was it like from the different meetings you went to and just kind of seeing them up on stage things that kind of stood out for you.
Well, there's hardly any better comedy routine that's ever been done, the back and forth. Of course, Munger had lots of the singers, but Buffett had plenty himself, and yeah, they played off fantastically. It was I had a next door neighbor that was four years ahead of me in school, and I had no brothers, three sisters, and he was one of four brothers and here I are extremely close friends. But he's four years older than me in the same way that Munger was six or seven years older than
six years older than Warren. But yet you know, we met and we were finishing each other sentences. And that's the way these guys were. They were finishing each other sentences. They'd say the first part of the sentence and they didn't have to continue because the other guy already knew what the rest of the sentence was going to be.
It's just that kind of relationship we.
Knew a bouohire, I'm so glad you're with us, because we've been reading from your obituary NonStop for the last hour here, and you know, to to Bill's point, about this, this idea of common sense and not you know, not
always needing to be liked. You mentioned this some of his donations, and this one's this one's at the top of mind from him because it's it's relatively recent forty five percent dorm on UCSB's campus, which actually got a lot of people interested in dormitory architecture who didn't think
that they would actually be interested in dormitory architecture. But you know, here Munger is trying to solve this problem of student housing, and he got a lot of blowback to this idea, and ultimately they canceled it.
What happened, Yeah, I mean, look, in his later years, Munger used these donations that he gave the universities to play architect I mean, he was deeply, deeply interested in architecture, and you know, he had some pretty unconventional ideas that I think really bothered people, and it became its own, you know, subplot, it's own right. But like you have to understand, for Munger, he was an incredibly wide, widely read person. He wasn't as narrowly interested in investing and
you know, how to make money. Obviously, he spent a lot of time doing that, but he had an interest outside of it. The other thing I wanted to add, and the stakes us in a slightly different action. But like you know, for all that Munger would you know, sit up on stage and sort of act as the
skold and the curmudgeon next to Buffet. He he did have a you know, a generous heart and you know, when you talk to people who spent time with Charlie, you know he was he was a deeply nice and caring person and you know, on some level, this sort of purmudgeon stance he would take on stage in public sometimes was a bit of an act, but like you know, it helped him make his points.
So, Bill, how do you think about you know, Berkshire Hathaway going forward. They've obviously thought about succession and there's aug Jane and Greg Gable, But I do think about, you know, Warren without Charlie, yes, and what the impact that might be.
Yeah, So Charlie and Warren have set a team together to to kind of come in. They've got two talented stock pickers in the wings. I'm guessing that this will be when when they begin to emerge. At the annual meeting, greg Abel runs the operating businesses, and Todd Combs and Ted Westlers are running about thirty billion dollars other important that's who we think bought the home builders, for example, because it was smaller quantities than buff advice, and so
that will cause their emergence. But Charlie's a cerbic common sense and sensibility. There's just not going to be any replacing that talent. He was a genius in that his he he he would look at the situation and hit it only with the best logic right, each situation, regardless of who might be offended by the logic of it. So he'd quote scripture and and then he'd support abortion rights right. So but logically, you know, he was trying
to solve a problem with money. And the architecture thing just brings back to mind that he graduated from Harvard Law School and cal Tech and was an architect and and he was the most he was the renaissance man.
Kind of different sides of the brain.
Oh, just unbelievable mixture of mental model talent, just amazing.
Uh.
He his family called him a book with legs because he's always reading. Our podcast is called a book with legs because my son Cole is a gigantic Charlie Munger fan. And that's what that's what we call the podcast. We interview authors of books, so we call it a book with legs.
And he's quoted in Noah's Story Noah. We'll obviously be talking this all week and then some another thought. You know, as you were putting together Charlie's story, you know for for Bloomberg, what jumps out for you here?
Well, I think you know to your point of what's next for Berkshirt the fundamentally bigger, different place than you know where he and Buffett started. So while you know a mini levels Munger is not replaceable, there are a lot of things that he and Buffett pioneered together that you know, there's a lot of there's a lot of that's been written, there's a lot that has been passed on based in the way that these guys did thing. And you know, again, Berkshire is a huge company now
with different needs. But a lot of the ways that Munger and Buffett think about the company are you know, certainly going to live.
On right Exactly what Munger said in late twenty twenty one that this was the largest financial euphori episode in his career, which was seventy five years, and then at the annual meeting this year, he said, I really don't think stocks are going to do very well the next ten years, and then Buffett, I love this. Buffett chimes in He goes, well, if I was running smaller amounts of money, I think I still think I could do really well.
Our thanks to Bloomberg News reporter Noah Bouhier and Bill Smeed of SMED Capital Management. He's founder and chief investment officer at that company and also longtime Berkshire investor. I'm Carol Master along with Tim Stenovic. This is Bloomberg