Charlie Munger

Transcript from https://podmenti.com/t/7cb2950f39fb1c58

Ben when we tease this episode in the email about the Jensen
episode that we just released.
The guesses that we were getting from folks were amazing. I mean, people were like, It's Charlie, it's Warren, or it's Taylor Swift, and a lot of people were right.
Hey.
Taylor.
You know where to find us. Acquired fm at gmail.com. If you are looking to get more publicity, we're open. Have Travis get in touch.
Alright.
Let's do it.
Who got the truth?
Is it you, is it you, is it you Who got
No.
Is it you, is it you, is it you
Let me down

Another story on the way
Welcome to this episode of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert. I'm David Rosenthal.
And we are your hosts.
This episode is a very unique one for David and I.
Good friend of the show, Andrew Marks, organized a little dinner for us with Charlie Munger and a few other folks at Charlie's home in Los Angeles.
You can hear Andrew a few times in the background asking Charlie questions.
We are pretty sure that this is the only podcast that Charlie has ever done.
Charlie, aside from being one of the most prolific investors of all time, alongside his partner Warren Buffett, is 99 years old.
He will turn one hundred on januir.
Of course, our conversation was interesting because he's freaking Charlie Munger.
But also
Because it was interesting to get the perspective of someone who has seen the last ninety nine years of human history.
We talked with Charlie, of course, about Costco.
his history investing in retailers over the last fifty years. We also got to hear his views on what it takes to build a great partnership.
What's gone wrong in the global securities markets these days?
The concept of investing versus gambling, and where investment opportunities remain in the world today.
Yeah. Ben, this was
Such a special life experience for you and me and you and me together to do this. And the fact that we got to record it and now share it with the world for posterity.
Just
Icing on the cake and the whole thing was unbelievable.
Yeah, listeners, we knew we were gonna have dinner. We were not sure whether we were gonna be able to record it, and now we get to share it with all of you.
With that, join the Slack. There is awesome discussion of every episode and the news of the day at acquire.fm slash slack.
If you sign up for acquired emails, you will get episode corrections and follow up from previous episodes plus hints.
Yeah what the next
Episode will be.
That's acquired dot fm slash email.
And we have only one sponsor for this interview.
Yes, a special conversation deserves a special sponsorship.
And longtime listeners will know there's only one company in the acquired universe that is truly appropriate.
Because everything they do is modelled after Charlie and Warren and that's tiny.
Yep.
Tiny is the Berkshire Hathaway of the Internet. Literally, they are such huge fans that they started a company that makes bronze busts of Buffett and Munger themselves. But more on that in a minute. Yeah. So Berkshire, as we know, started as a textile mill in Massachusetts nearly two hundred years ago, and almost twenty years ago.
Tiny founders Andrew Wilkinson and his partner Chris took their version of an internet textile mill.
The premier design agency Metalab, which designed the UIs for Slack, Uber, Tinder, Headspace, Coinbase, and others.
And they asked themselves.
What would Charlie and Warren do if they were us?
And that led to the realization that
Just like Berkshire discovered in the physical world, the internet also has wonderful niche businesses with great cash flows.
In fact, they tend to be even better than the old days of C's candies and blue chip stamps because they require zero capital reinvestment, have software margins, and can build global brands much faster than the what fifty some odd years it took Cs to expand around the world.
Yep.
So Andrew and Chris took the extra cash flow from Metalab and their other businesses and created Tiny, the world's first and best permanent holding company for wonderful internet businesses, and boy did it work.
Yeah, fast forward to today and thanks to Tiny's success, this opportunity is no longer a secret.
Many people have caught on to the idea that this can really work.
But just like Berkshire itself.
No one else has the combination of experience, temperament, access to capital, and frankly reputation that Andrew and Chris have built over the past two decades.
We're investors in Tiny ourselves, alongside Bill Ackman and Howard Marks. And just like the two of them, Tiny is really the long term buyer of choice in their niche.
Anyone who's looking for a permanent home for their profitable internet business
Or who needs a capital partner for a co founder or V C captable bio.
Would be lucky with Tiny.
Yep.
For instance, they just bought the premier social network for film buffs, Letterboxed, which has been the founder's baby for 12 years and will stay so within Tiny. And this really reflects Tiny's whole ethos. Work with only the best internet businesses, commit to simple diligence, 30 day deals.
and leave the business alone, either for you to operate or bring in new long-term oriented management. Up to you.
So thanks to Tiny, this is the only sponsor, as Ben said, that you'll hear on this episode. And just like Berkshire, it'll be here in perpetuity.
Tiny just became a public company earlier this year, and they can now do deals ranging anywhere from one million all the way up to two hundred and fifty million. So if you want to get in touch, just shoot them a note at high at tiny.com.
And just tell them that Ben and David sent you.
Oh, and one more thing.
The bronze Charlie Busts.
the perfect daily reminder in your workspace to ask what would Charlie do?
Just head on over to Berkshore Nerds dot store.
to buy your own. And they also have plenty of some guy named Warren, too.
Okay, now without further ado, this is not investment advice. David and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes only.
And on to Charlie Munger.
Charlie, w I was watching the NFL games last weekend and it seems like every advertisement now is
A sports betting advertisement. Is this good for America? No, of course not.

Are the dog tracks and race tracks?
Of America's.
Good for America, of course not.
They're just very popular.
That's how Warren got his start though, right? At the racetrack?
Well, but Warren never gambled.
Every as a patron of the
Why one are the odds in his favor, not somebody else.
Right. It's just so simple if you're warren.
You want the house, you gotta be the house, not the potter.
Listeners, the next topic that came up was retail stock trading and the idea that for many Americans, this is akin to gambling.
Well, that's the way it's organized. They don't really know anything about the companies or anything. They just
Gamble on going up and down price.
Mm.
If I were running the world I would have a tax on short term gains.
With no offset for losses on anything.
And I would just drive this whole car business.
What do you think about the algorithms like Renaissance and stuff like that?
Well, of course, Renaissance.
F first algorithm.
It's so simple.
It shifts all his data for the past.
And what did they decide?
Up up for two closing prices.
And down down were more common than down up or
Yeah.
Once they realize that's the way it was for various
reasons deep in the psychology of man is that man is a natural trend follower.
Gambling short term.
And they they just he's
program the computers to automatically
Well, buy on one thing at the first up day and then
And sell before the end of the second day.
And you didn't have any
It's every day the ma machine with you know the the central agent.
Say your check today is
Eight million five hundred thousand dollars.
Crazy.
Well what happens is the the ones
The easiest trade is to front run what you know what the average is.
But the index funds have to buy.
You know what it is, exactly. They all know that.
And the way they get their returns year after year.
It's taking the leverage.
Midday leverage up higher and higher and higher and higher.
They're making smaller and smaller profits on more and more volume.
Which gives them this big
peak leverage risk.
Which I would not run myself.
And that's the only way they make these big returns.

It would make you crazy if you were already rich.
I had the good fortune of speaking with someone you know well, Richard Galante, at Costco and spending a few hours a lot about it. He's been there all his life. It's crazy. I mean, it seems like that's everyone on the executive. They've all been there all.
I'm curious, how did you first come across Costco or or a price club at the time?
Rod Hill's somehow new soil price.
And what he was doing. He said, You have to unmade him, he said.
So I drove down and went through his store and
Talk about so.
And Carson was a very intelligent man.
Saw was an ordinary lawyer until I was thirty nine years of age.
Yeah, without informed government employees.
Was this in the Fedco days?
He was no longer with eagle.
Um
He sold fed gold to the Germans.
Uh Fedmart to the uh the Hugo Man. Hugo Man. Yeah. Yeah. Yeah.
And did you get to invest in Price Club before it merged with Costco?
Yes, I did.
But I just bought my stock on the market. I wasn't I got any favor.
And so how did you eventually meet Jim Senegal?
Well.
Sigo.
Asked Warren to become a director of
Cos'h.
He was looking for somebody with a financial reputation. As an independent.
Yes, and Warren wouldn't do it, he said she would get Charlie to do it.
I want shorter plane rides to
Directors meetings and so on.
So that's how that happened.
And did Berkshire ever try to become a shareholder or acquire costume? I tried to get warned to buy out the French.
When they left, careful.
Warren wouldn't do it. Warren doesn't like retailing.
Was it just that he doesn't like retail, or what was the big objection? He's really retail.
Practically everything that was Montmarian retail is gone.
Says rubber is gone, the big barbers are gone, you know.
It's just too damn difficult, as far as he's concerned.
And he had a bad experience with diversified retail, right?
No, we made nothing but money at the birthway.
We didn't exactly make it in retailing.
But we made a lot of money.
Wow. And with diversified, most of the money was not on the retailing operation. You made a lot of that money through. What happened was very simple.
We bought this little pissant.
Department store chain in Baltimore.
Big mistake to compare it.
Is the ink dried on the closing papers.
We realize we've made a terrible mistake.
So we decided just to reverse it and take the answer.
Look foolish rather than go broke.
Yes, all time.
Get us out of this.
By that time we'd already financed half of a
Covenant free debt and so forth.
And all us extra cash.
And our own stocks got down to
Shell's
Yeah.
We just in the middle of one of those sessions, we just butt, but
Oh
Money went by to those docks.
Of course we trouble it just sitting on our uh
And that led to Blue Chip yeah, but yeah, it was part of the early success of Blue Chip.
Wow.
And so, you know, you mentioned Warren doesn't like retailers. Something else that people don't know about.
Yeah we bought a little pizza savings alone company.
Sure, maybe twenty million dollars.
And
We left that thing.
We had taken out of our little twenty million dollar investment.
Over two billion dollars.
In marketable securities.
Which went into Nebraska insurance companies as part of their bedrock capital.
So we we had some wonderful early years.
That's what everybody needs is wonderful over the years.
Wow.
So
In our Costco episode, we started with the joke at one of the Brickshire meetings probably ten years ago.
Warren told the joke about
You were on a plane being hijacked.
And the hijackers gave you
One final request and
You said you'd like to give your speech on the virtues. Yeah, yeah. And he said, Shoot me first. We were hoping
Could you give us your speech on the virtues of Costco?
No, uh Warren's kidding me for being so repetitive on the subject.
What?
There aren't many times in a lifetime.
When you know you're right and you know you have one that's really gonna work wonderfully.
Maybe five, six times in a lifetime you get a chance to do it.
Mm.
Yeah.
You do it two or three times early.
All go broke'cause I think it's easy.
It's fact it's very hard and rare.
What was it about Costco that made you realize this is one of those few moments in a lifetime?
Well
They really did sell cheaper than anybody else in America.
And they did it in big efficient stores.
All the parking spaces were
Ten feet wide zone.
Eight feet nine or where they normally are.
Yeah, they did all right.
Yeah.
And they had a lot of parking spaces.

All these you all didn't do big volumes, you see.
And they gave special benefits to the people who did.
Come to the stores in the way of
Word points.
The executive membership. Yeah.
Oh work.
And uh
Capital light business model. I mean
When we were studying it, the difference between price clear no investment in that
They make the suppliers wait until they've been paid.
They're scheduled to pay only
After they're scheduled to sell.
They've got nine hundred warehouses around the world full of
High quality merchandise.
None of which
They have sitting on their books. That's correct.
Yeah.
Our understanding is that
Price Club went public initially before the merger.
They just listed. They didn't raise any capital. They didn't need any capital.
Who knows?
It's all kind of like it was kind of a fancy.
Hm he likes deals, you like this miscellaneous real estate. Like
Yeah, but it doesn't make sense. You don't want
You got an enterprise as big as Costco.
You know what you're parking out again other people.
We're clogged up your
Parking a lot permanently and stuff is not gonna pay you very much.
Right.
You don't want'em is the answer.
Have you ever seen another business that takes advantage of the virtue of the low skew count the way that Costco does?
Well, there are lots of them.
That little grocery store chain.
Here in Los Angeles.
Gelson Brothers.
Mm.
They wanted a high turnovers and low capital costs.
And they never made the least effort to earn any money or have they wanted to show their breaking out with anybody.
Hm.
As you reflect back on
You know, one of these
few great companies in a lifetime that you should bet big on.
What advice would you have for David and I as
young partners looking for a few of these in our lifetime, things to look out for.
Well you find well you may you may find it.
Five years after you bought it, you know.
These things may work into it or you may your under own understanding may get better.
But when you know you have an edge.
You should.
That heavily.
Hm.
You know you're right.
And
Most people they don't they don't teach that business school.
It's insane.
Course you gotta bet heavily on your best bets.
And how do you develop that level of conviction to know You work at it. You do a lot of reading and thinking.
And visiting.
I'm curious to we wanted to ask you
Yeah, you've had this beautiful partnership.
With Warren for
Half a century.
Yeah. We're a dedicated to our partnership. It was a lot of low hanging fruit.
In the early days of our operation.
You don't have any unhanging fruit.
Yeah.
It's easy to recognize.
You mean in investment opportunities. Right.
But your relationship with Warren, like
How have you kind of similar and we were both one?
Keep our family safe and
Take a good job for investors and so on.
Yeah, it's similar attitudes.
Yeah.
Del
Change over the decades? No, Warren still cares more about the safety of his bursters' shoulders than he cares about anything else.
We used a little bit more leverage throughout
We have three times as much now.
Yeah, it wouldn't have been that much more of a risk either.
And we just do we never wanted to give them at least
Chance of
Screwing up our basic shelter position.
If you had used more leverage, do you think there's some chance that we would have done a little better, sure.
Do you think there's some chance that it wouldn't exist at all that it would have cost you the franchise?
No, I think it would work fine.
Does Morgan make that?
If you were intelligent, uh just milk it out.
When you leverage them, so


You open a news store with no capital.
Of course it's leverage.
Who wouldn't want a business with it?
No inventories.
Right, that's a good point.
by the virtue of you owe a whole bunch of people money on day one.
For these goods that we've got.
Right.
It's interesting. I mean that's leverage.
It's not
That
Leverage.
I mean, how do you think about debt? Like after we did our Berkshire series
A lot of you do it now. A lot of you now do it.
Oh.
Man, you ask her something.
It is terribly strong.
And they're just
Force you know the
Suppliers to carry all the inventory.
Isn't like we're the only ones that do that.
Back to the point on partnership.
David and I are coming up on 10 years as partners in this podcast we do together. Different than the investing business, but a compounding one nonetheless.
After a fifty year partnership with Warren.
What advice would you have for us interpersonally to make for a an enduring partnership?
Well
It helps if you like one another and enjoy working together.
We do. Yeah.
Mm-hmm.
But
I don't use any one formula.
A lot of partnerships that work well for a long time.
Happen'cause one's good at one thing and one's good at another.
They just naturally divide it.
And each one likes what he's doing.
No, and
Costco's case. They had Jeff Broadman, who's very smart.
But not a retailer.
And Jim said.
And
They had originally agreed that Robin would be the chairman and CEO.
'Cause he was his idea, he founded the whole thing.
But
So he was uh No, I have to be the CEO.
Those are big unfortunate.
Or meeting it would be a neural struggle.
And Broughtman move aside.
Was that after you joined the board?
No, before.
Do you think you and Warren not living in the same city?
helped your partnership last so long?
Well, it may have helped.
But Warren has very close relations with all those people.
Yeah.
Yeah.
Lunch every Saturday.
Burger headquarters. It's like he hasn't have a
Little quarter of people there who are kinda
Fells when ground up.
Do you think it helps that when you do spend the time together it's special rather than being
Common.
Well, of course we used to spend a lot of time together when we were young and we didn't have that much to do.
Now we've got more to do in that.
It's just the other minute of life.
So
It's different.
Yeah.
It's funny. I feel like we have
A lot to do now. But it's very difficult to invest money. Well
And I think it's almost impossible to do.
Time after time after time in venture capital.
Yeah, we really wanted to ask
Your thoughts on venture calm. You have to decide so quickly.
Yeah, you're all just sort of gambling.
Yeah.
Do you think the role of venture capital is being properly accomplished in society? No, I think it's very poorly done.
Charlie elaborated on this point with a few things that we can't air, but the topic did turn to Bitcoin.
I've heard many comments you've made on Bitcoin.
I'm curious if you have a thought on this particular angle.
An easy way to transfer money.
in between countries, especially when those countries don't have a stable store of value within that country.
Is it good to have a
independent store of value that is not pegged to nation.
As a whole they have a way of
Having some currency.
The way that was solved is
For a long time the British pound was the national currency of the
Investment world.
That shift to the dollar.
Yeah, it's still a dollar.
Yeah.
And people like China have these enormous reserves of dollars.
The money we make, but
Uh.
Money we will give us for we always just print up these
Piece of paper.
Yeah.
And what about the common person in some of these less fortunate countries who don't have access to US dollars?
Oh.
They do if they ever get any money.
Dollar's very fungible. You can always buy one.
Anywhere.
I'm curious back to this point of uh the role of venture capital in a society. If you could design a perfect system
To fund animation.
If you do it right.
Yeah.
Wanna give the right people the power and
Nurture them. Help them.
You know a lot about
The tricks to the game so you can help them.
Run their business, yet not interfere with them so much as they hate you.
By and large.
I I mean
Bumped into a lot of people in the businesses.
With venture capital financing.
I would say the ordinary rule is that people
And no business doing the work.
They're more than not the heat of Engineering Apples.
They don't feel like
Is their partner trying to help them to become
They're only taking care of themselves and so on and so on.
Yeah, um.
How could it work differently?
Yeah, well uh I but that's not true in Berkshire.
See Army they know we're not trying to discard them to the highest bid.
See if someone has all the best maker offers us.
twenty times earnings or some.
Lousy business.
We also.
Hm.
If it's rowing boots we've never been able to fix.
Well but
It's a halfway decent business. We never saw anything.
And that gives us this reputation of staying with things.
Which helps us.
And do you think that
Buy and hold.
Not only mentality, but demonstration is the key.
thing that aligns investors with managers.
Well, it's rare, you see.
Everybody else has a standard way of doing things.
The lawyers have their standard forms.
And everybody just has the same standard for him.
They get the same standard results.
Subject to the vicitude of
It doesn't lie.
You don't wanna make money by screwing your investors.
And that's what a lot of venture capitals do.
The world is full of X G
Caltman's sex partners that formed a private fund. Hey, manage a billion dollars or something like that.
And
They charge.
Two points off the top plus the sp
And that enables them to make very handsome movies themselves.
But the endowments are not getting returned.
And do you think it's specifically the fee aspect of fund structures? The way it works.
And of course.
You really shouldn't be in the business of charging extra.
Well, unless you really are gonna achieve very unusual results.
And of course it's more
Easy ear.
Pretend that you can get good results of this to actually get them.
And so it it attracts the wrong people.
With an investment capital turn of mine.
And the people who make the most money out of venture capital.
Are a lot like investment bankers deciding which hot new area they're gonna get in.
They're not
Great investors are great.
What do you think?
Endowments and large pools of capital should do then.
Well, they're starting to do it. The endowments have started to say to the
All these people.
Yeah.
Judge.
Three and thirty or whatever like J.
There's it.
We'll pay your three and thirty.
We're gonna put in twice as much money in the next half you'll get nothing on it.

Right, Perry Pass who went somewhere in Besma.
So the V's go down by thirty percent.
That'll take a lot of the fun out of it.

Fees down fifty percent.
And that's happening all over America.
They feel.
Had misled.
Irritated.
They've looked foolish to their own trustees.
One of the issues I think in investing right now
You mentioned it about venture capital, but I think it's true everywhere. It's like there's just so much
Capital and so much competition.
We're so far removed from the cigar butt era.
We're in the opposite of the cigar butt era these days.
Are there
Tell me somebody will find a few things.
But
It gets harder and harder.
I would argue one of the easiest ones.
Was when?
They decided a little group around Home Depot.
They would copy the Costco medal.
And home improvements.
That was basically a good idea.
And think of the money they made doing it.
Yeah.
Bernie Marcus.
Yeah.
It was a direct copy of Costco.
Do you think there are more opportunities to copy Costco?
Flor and decor.
Is the current.
Yeah, but
Yeah, it's just it's in
Final.
Wood emanating vinyl flooring.
They're they're running a Costco model.
Huh.
And they keep adding miscellaneous stuff to it, too.
It's the miscellaneous stuff that'll eventually kill you, though.
Well.

Yeah, it's like the vertical.
Home Depot works so well.
But it w I don't know that it was totally obvious. Like part of the appeal of Costco was
It was horizontal. It was everything. Consumers could come, they could make a trip, bring their big wagon, bring their big truck.
They cover everything.
And famous Bernie Marcus came out to visit Saul before I started. They copied everything.
Saul was like
Happy to share the playbook with everybody, right? How did Jim and you feel about that?
So was a
Not crazy.
It was
Domineering and so on.
But he was also very intelligent.
Hm.
But there aren't many opportunities like
Only bone.
Classical. There aren't very many.
Why do you think Walmart hasn't been successful once they saw Costco in competing?
They were too wettered by the ideas they already had. That's everybody's trouble.
You can't accept a new idea'cause the place space is occupied by an old idea.
They got in the habit of getting the real estate price given nothing because they went in little towns.
Where nothing was valuable.
So they're always their occupancy costs to like zero. They knew how to make big division stores.
That was their formula.
So it offended them to go against the rich suburbs and have to pay up for the good locations.
And Costco just
Specialised in the good locations for the issue.
And well we're just let him do it year after year. It was a terrible mistake.
Did you know Sam?
Martin.
No.
Never ready.
I knew the sun, one of the sons.
Yeah.
They divided it up, you know, in about six parts very early.
Yeah, Malton Enterprises. Never paid much gift taxes, or anything.
The topic then turned to the automakers and the future of the car industry.
Look how hard it would be.
You go into the oil business and have some big
Killing.
Who's going to win?
Who knows?
The whole thing's been thrown way up in the air by all these electric cars.
Yeah, big new capital requirements.
Different ways of selling cars.
And plus they got these tough unions.
See I just don't even look at the oil industry.
Do you think it's more investable today than it was fifty years ago because of the disruptive innovation of electric?
Well, for maybe for one or two.
Oh, I think.
Cars are really good at
Maybe.
But certainly nobody else.
So you think BYD in the true stuff.
BYD it was a miracle.
But that guy works seventy hours a week.
And it has a very high IQ.
You can do things you can't do.
You can look at somebody else's auto bar and you need to figure out how to make the goddamn thing.
You can't do that, you see.
Charlie, you messed in a Honda.
Yes, but they're they're clever two.
How was that investment for you?
They lost money.
Not much,'cause I was stubborn. I held out until I got back to almost what I paid for it. Then I sold it.
There's been a lot of discussion about
Berkshire's investments in the Japanese trading.
Houses.
Well
But that is a no brainer.
Something like that.
If you're as smart as Warren Buffett.
Maybe two, three times a century.
You get an idea like that.
The interest rates in Japan were half a percent per year for ten years.
And
These training companies were really entrenched old companies.
And they had all these cheap copper mines and rubber foundations.
And so you could
Bar over.
Years.
Ahead.
Oh money, you can buy the stocks and the stocks we had five percent dividends.
So a huge flow of cash.
With no investment, no thought, no anything.
Oh, I wouldn't do that.
You'll be lucky if you get one or two a century.
We could do that, nobody else could.
It looked attractive at half version, but y you couldn't get it.
But Berkshire with this crit could.
And the only way you could get it was be very patient and just take away at little pieces of the time.
Took forever to get ten billion dollars invested.
But it was like
Yeah.
God just opening it up.
Just on just pouring money into it.
Yeah, well.
It's awfully easy money.
It's so interesting that it's paradoxial. You need
Berkshire's credit.
But at Berkshire scale, it's actually hard to put enough money to work. That's true, but why shouldn't it be hard to make money?
Why should it be easy?
Japanese trading companies reminds me, we studied another company recently, Nike.
That is that's surprising to me.
Yeah. Did you ever look at it?
Of course I've looked I've looked at it, but I don't like style comedy.
Hm. Too fad driven?
Yeah.
I suppose if the RB Hermes is an achievement of price, I'd buy it, but short of that, I'm gonna buy these stuff company. Ooh, that's a good pick.
To the style point. Another one that they covered.
It's L VMH.
What air Arnold has done.
Has been amazing.
So what do you make of that company? Well, if you're as good as they are as they've done, you have a lifetime to do it in, or an hour lifetime really.
Three or four lifetimes to do it in.
You can create another, but it's not easy.
Hermes is on the eighth generation, I think, now.
The family running it.
It's not a bit easy.
They have meetings every day where they make policy decisions.
They choose the locations one at the time and
Work.
It's definitely work.
What do you think the durable value is in these, as you say, style companies of the very best one in the world, the Aramez or the L VMH? What makes them enduring?
Well, they just gotta brand people just so much.
Mm.
It took'em.
Century to do it.
Our conversation then turned to comparing Kirkland signature as a brand with
To Air Mez.
Curtain is a brand the way Tide is a brand.
Yeah.
Hermes is a different kind of a brand.
Yeah, Ferrari doesn't make law uh detergent.
No.
We've spent a lot of time studying these brands.
How do you
look at the value of brand.
Well.
It's hard for us not to love brands.
Since we were lucky enough to buy this candy for twenty million dollars. That's our first acquisition.
And we found out.
Fairly quickly.
But
We could raise the price every year.
Like ten percent, and nobody cared.
We didn't make the volumes go up or anything like that.
Just made the
Providence go up.
So we've been raising the price by ten percent a year for
All these forty years or so.
Wow.
It's been a very satisfactory company.
It didn't require any new capital. What was what was so good about it?
Very little new capital.
We had two big kitchens.
And a bunch of rental stores when we bought it.
No, it's got two big kitchens.
A bunch of rental stores.
Well
Charles he was a playboy.
And he his brother ran the company, his older brother.
And dominated it completely.
But when he died, Charlie made his brother his executor.
And now he needs a lot of money to pay death taxes.
He doesn't have it.
It's due, you know, eight months or something later.
And so
They really wanted to sell so they could pay the death taxes.
And see he was only making four million pre tax when he bought it.
And so that buying opportunity only came about because the family needed liquidity to pay the death taxes.
We only found out about it because
Charlie C was on his cruise to Hawaii or something.
Well this
Okay, it was a client of
It doesn't counter also work for
No chip stamps, which is the company that bought it.
Yeah.
Anyway, that's how we found out about
We paid that gas finders for even.
So it was worth it.
Of course, but
You don't want to be a re reputation for paying fighters. These are in the world to be bothering you all day long.
Yeah.
So what do you think so there are categories
Like.
C's or
My camera is.
where brands lead to pricing power.
I think your chances of buying one of them.
So
Well, I wouldn't even look.
I only believe in looking at things that I might find. You're not gonna get a chance to buy it. No curiosity.
But why do you think they're extremely well known?
brands and other categories, maybe packaged food or something where there are a lot there are a lot of original investors.
By nothing with branded goods. And the one they usually start with is Nestling.
And
Just fill her over there.
They've done two or three points better than average.
But it's not a bonanza.
After that, our conversation turned to Kraft Heinz and why Heinz is able to have pricing power while Kraft is not.
Very interesting.
There's a
Flavor of ketchup on a goddamn fried potato.

They want the hindsight.
And so we could raise the price of range.
Pretty much.
Hey, but you try to raise the craft cheese.
Yeah, it already goes in about yeah.
Including the finally final customer of the housewife.
They don't care that much about whether Jesus craft or not.
Why do you think that is that some sauce flavor.
It's happened elsewhere in Korea, one guy some Chinese guy.
Throw sauces.
Every single major sauce he controls not at least ninety five percent of
And it's because sauces have such a particular flavor that no one can imitate the trade secret.
Yeah.
Huh. And that gives pricing. We'll get used to it.
Is that Coca Cola as well?
Yeah, sure.
Charlie, I'm curious
At age ninety nine, what is something that you believe today
that seventy year old Charlie would have disagreed with.
I think I I I knew when I was seventy that was
Plenty hard, but it is just so hard. I know how hard it is now.
And all these people.
We're getting us
Two and twenty or
Three and thirty or whatever.
They all talk as oh it was easy and they had to believe it in their own bullshit.
Of course.
It's not a bit easy.
It's very hard.
If you were back thirty or forty years old again today.
Would you decide to go into the investment business again?
Probably'cause it suits my nature.
But I didn't really enjoy
Yeah.
Three and thirty business. Once I had enough money of my own.
I'd rather just operate with my own money.
That is a much better way of doing it.
Mm. Yeah.
Because of the force, we forced to deal with investment bankers.
Be forced to deal with
investment consultants be forced to deal with venture capital.
Hell well who wants to you don't wanna need other people.
Point of getting rich is you don't have to need uh you don't have to get one.
Charlie, if you started with warm
Today, and you're both thirty years old.
Do you think you guys would build anything close to what a Berkshire is today?
Yeah. No, we would.
We had
Everybody that has an unusually good result.
Almost everything is.
Three things.
They're very intelligent. They worked very hard.
They were very lucky.
It takes all three to get them on this list to successful.
How can you arrange to have to be good luck?
I guess you can start early and keep trying a long time.
And maybe you'll get one or two.
If you were starting again today, do you think insurance would still be the vehicle?
Depends on your temperament.
Insurance would be ideal for a certain kind of a temperament.
Mm.
And
Takes a very patient
person to get rigid insurance.
Takes forever to get anything in takes forever to push anybody aside.
It's very hard to make money.
I've heard you say
As soon as you're wealthy enough to self insure you should. Is there any insurance thing?
Think of all
combums of the world that
Drink too much and then file big claims with the insurance company. But
It's on fire or something.
Why would you want to pay the
Your share of their stupidity.
Not to mention the overhead. Of course the insurance company needs to pay all the people that work there. Yeah, yeah, I know, no, I
It's crazy. Is there any insurance that you carry today?
I carry no fire insurance anywhere.
Do you carry auto insurance?
Yeah, I have to. Yeah, yeah. I don't know, Charlie could
No, I have to and I do.
I'm curious being that
Since these guys are
Very tech focused. I'm curious, not being a tech person, how did you think about the Apple investment? And what gave you
The conviction to be so big.
Whatever he's learned is that
Everybody needs some significant participation in the
twelve companies to do better than everybody else.
Yeah.
You need two or three of them at least.
And
If you have that mindset.
Apple was the logical candidate to be
I'm a list of which you're gonna select your companies.
And it's not very hard to come up with the idea that
It may be okay.
Making the list doesn't sound too hard. In fact there are these acronyms FANG or MAMA, you know, Microsoft, Apple, Google, Facebook.
But selecting the one
And putting
hundreds of billions of dollars into it.
We didn't button the baby.
To create hundreds of billions of value.
That to me sounds hard to pick the one.
How did you guys pick the one?
We couldn't find anything else.
Was it valuation or Yeah, well it got cheap. It got it about ten times or anything more, but yeah.
Twenty fifteen, I believe, was the first. Yeah.
It's fascinating to me this concept of if you look at distressed debt or you look at I think Warren in the last Berkshire letter pointed out it's been a handful of really good decisions.
Or you look at venture capital that's classically power law distributed.
Any of these asset classes comes down to a few really good decisions with high conviction over an entire career.
Yeah, that's exactly what I that's exactly the way it worked.
It's not smooth. There's no asset class where you can
repeatedly just do the the hanging for for the idiot is
It's not gone, but it's very small.
You mentioned this idea that when we were talking about Apple
There's
A few
companies that it's just really important to be in.
Do you think these big tech companies being the winners where
all of the pensions and Berkshire and University Endowments and everyone's four hundred one K is being concentrated in these companies.
Do you think that was the natural outcome?
Did we have to end up this way? Yeah, it was natural.
That's why it happened. It was
What causes that?
Well it just it's just
That's what human nature and
Competition, that's what it causes.
Will we eventually have one?
Eventually this craziness in venture capital when they're all gone stupid.
That's a natural outcome.
Will we have one
twenty trillion dollar companies and then the n the next biggest company is gonna I know we're gonna ever mind we did.
It just they just happened.
Would you s continue investing in China?
What's your position on that? Well my position in China has been
Chinese
economy has better future prospects.
For the next twenty years than almost any other big economy.
That's number one.
Number two.
The leading companies of China are stronger and better.
than practically any other.
Leading companies anywhere.
And they're well at a much cheaper price.
So naturally I'm willing to have some
China risk in the Munker Portfolio.
How much sci well that's not a scientific subject. But I don't mind whatever it is, eighteen percent or something. Whatever whatever's worked out in the bunker family.
It's okay with me.
What about other geopolitical considerations? Like would you hold T SMC at this point?
Well, I don't like that as well as I like something with a real consistent brand of its own, like well.
I'm curious what major companies that
haven't been mentioned, do you think people would do well to study the virtues of like studying the virtues of Costco? Well I only study two kinds of companies.
Well, I'm enough of a Ben Graham.
Follower.
If something is really cheap, even though it's a crappy company, I'm I'm I'm I'm gonna consider buying it for a while anyway.
Yeah.
Uh, I do that occasionally.
And I've done it with great success a time or two, but I might hard mark that once or twice in my lifetime for
Big gigs, and that's it.
It's not like
I can do I've done a hundred times.
So it isn't a bit easy.
Yeah, a hundred times easy money is almost non existent.
One type of company is the cigar bud.
What's the other type of company?
The companies that people would do well to un to study the virtues. Companies of course are good.
Get'em at the right price. The whole trick is getting at'em on the few rare occasions.
And really cheap.
But buying Costco at its present price.
It may work out all right, but that's
Again, it's getting hard.
Yeah. Forgetting the prospects of the stock, how do you think about the next ten years for the business?
I can do pretty well.
One more question for you.
In this area.
What is your favorite advice?
To give to young people.
Well I don't
Give advice to just any young people. I give it a sum. I pick my spots.
I don't want to be more of a guru. Yeah.
It's getting hard out there.
And there's all this bullshit and craziness.
Of course it's gonna be hard.
Where do the attractive opportunities hang out anymore? It sounds like everything in the whole world is overpriced. Is could that be possible?
Damn near. Of course it could be possible.
It's not only possible, it's likely it's actually happened.
How did the world get so rich if we have all this capital for so few opportunities? It's the nature of things.
Okay, biology produces a very advanced creature like us.
You can sit around and talk intelligently on all these objects.
But it does it by killing everybody off in brutal conversation one with the other.
All right.
Hundreds of thousands of years.
In other words, the system that nature uses to get smart.
It's kind of unpleasant to the people who are losing.
So over the last hundred years, we've brutally shifted all this value from labor to capital, and now capital is all competing to get into a very small set of opportunities.
Well, Campbell never
Yeah, you would
It wasn't that it was all that easy, you're back along that.
It just was a lot easier.
And if it continues to get harder, the natural end is that you have Yes, an unpleasant blow up of some kind.
And God knows what happens after an unpleasant blow up.
With our modern democracy.
You can get see your lot like Europe, which is quite dysfunctional.
Is it too pessimistic of a view to say that
the world seems to be out of good ideas to match the amount of capital out there looking for good ideas.
It was never easy.
Thoroughly understood it was never easy.
It's harder now.
Those are the two right well.
And you pay attention to not your handling the people you deal with.
You want a good reputation when you're old out and not a bad one.
And I don't think you're saying there are no opportunities whatsoever. I think you're just saying low low expectations and fewer bananzas.
You only have to get rich once.
You don't have to climb this mountain four times. Just have to do it once. Well, that's sort of your philosophy on both sides is you gotta be patient for the great opportunities, but when they you gotta recognize them when they come and
And pounce.
We turned off the mics to have dinner and then recorded a little bit more later in the evening about Costco and some life advice from Charlie.
So one Costco question that I've been wanting to ask you is all the puzzle pieces of
the low SKU count and the high inventory turnover.
And there's just so many things that fit together so beautifully. They're pretty obvious, though.
But how come no one else can pull it off if they're so obvious? It takes a lot of good execution to do it.
You really have to set out to do it and then do it with geneticism every day, every week, every year for
Forty years.
It's not so damned easy.
So you think the success is the magic of the business model and culture.
Yes, yes, cultural plus model, yes, absolutely.
And very reliable.
Hard working.
Determined execution for forty years.
I mean they talk about the story of the catch up, the
You could increase
The price of catch up by three percent, and nobody would notice.
But that would destroy everything if you did that, right?
I would say the the central norm was
Don't raise the mark.
Get it low and keep it there forever.
Which brings us
To the hot dogs.
Is it true?
The story.
That when Craig took over as CEO
He did try to raise the price of the hot dogs.
I don't know. I had no conversations with him on that subject.
And Jim forbade him.
Well, I sure Jem would have forbade it.
Absolutely.
There was no board level discussion.
No of the hot dog.
Those two would not have thought it was a work matter to discuss the price of hot dogs.
The one thing that fascinates me about Costco is they seem to only be able to grow ten percent per year because they're not capital constrained.
No amount of money.
If they were to access it for free, could help them.
To open too many stores a year.
New store, new manager, new this, new politics, knew it.
It's hard.
Plus a lot of stuff has to be learned and taught and put in place.
And so they didn't want to do more than they can comfortably handle.
store openings, you mentioned China earlier.
Was it twelve?
To twenty years.
That Costco had the license to operate in China and didn't know.
The first store.
They tried to open in China.
The first or somebody wanted a thirty thousand dollar bribe.
No Chinese culture.
And they just wouldn't buy it.
Yeah, that made such a bad impression on Jim Seneca.
He wouldn't even talk to going into China for about thirty years thereafter.
Mm.
So what changed why finally go in?
Well finally the board started making enough noises. You started agitating. Yeah, yeah.
Yeah, but um who on the board could be excited about the Chinese market? Yeah, uh who can't who knows?
Oh, that's so great.
One thing I found fascinating about Costco was the fact that
Even though they're a
You know, the lowest possible prices.
their audience skews wealthy.
Was that an accident that they figured out
Over time or did they know that it's out.
All the way back in the price club days. Yes.
He always wanted the rich man trying to save money.
Well, and it's not just that they're the wealthiest customers.
There.
Smart well customers.
Yeah, they're picky wealthy customers.
On some topics that are outside of Costco
You mentioned in the Daily Journal annual meeting this year that
A young man knows the rules and an old man knows the exceptions. Yeah, that's an old saying of Peters.
Oh, is that a Peter Kaufman? Yeah.
What are some of the exceptions that you've found the most useful in life?
Well, take those goddamn Costco hot dogs.
That's an exception. Anybody else want to raise the price of hot dogs a long time ago.
They just don't do it.
Yeah. No, it's like
Yeah, famous, man.
You'll bring your kids in. Yeah, but they they know they've got something going there.
Worth extra money to they just don't destroy it.
A thing that I've never fully understood. I know you're a big fan of the company BYD, that of course makes the the the Chinese company that makes batteries and electric vehicles.
I may be a big fan, but I'm sure.
Hang out by hat. Well, he lurched around the track.

And they make me nervous.
It's so aggressive.
Is that dangerous in a company? No, that's what makes me nervous across the stage.
So do you think that companies should
Try to grow
at a lower rate than their
capable of in order to be more durable.
Well of it's
Of course you do that if it's safer.
And easier and so forth.
But
I would know you Costco where they
Done some of these things that are extreme like that, but
It's been a plus and w it's smart to not to change their ways.
On one item or two.
And it seems like there's a spectrum where
On
the one side there's Costco that is just not a fast growing company'cause it's very difficult to and on VYD, like you're saying, they grew like crazy. I mean you turned
This year or so at least two and a half million cars.
Most of'em electric. That's unheard of.
Well I never heard of they're they're also way more than Mercedes, for instance.
More than Tesla, right? Yeah, more than everybody. Yeah.
Lots of troubles and losses.
He ran into terrible trouble.
They create the wrong kind they made lots of mistakes.
They were lucky they could be on the
cutting edge of this electric car business.
It's way more acceleration than most people.
She had a car with more oats than most fields with a young macho male.
Why we car.
There are a lot of things where well I really
Works in some ways that is better.
They're making a ninety degree turn.
Right opposite of parallel party, your boys just move that sweet.
Turn the wheels ninety degrees and go in.
Yeah.
Well, nobody's ever done that.
If your cargoes flat.
You can run a hundred miles on three other wheels or something.
And do they have better economics because they don't have nearly as many parts?
It's simpler.
Have you ever had an investment like that before? I think you've invested something like two hundred and seventy million that's now worth something like eight billion in BYD.
Well
Very good we will have a investment job.
That's a venture capital type investment. It happened to be a thinly traded public company and we bought it instead of a venture capital type company.
It was a venture capital type play.
And they just went put the foot right to the floorboard and played it hard.
Had they manufacture.
And we
Tell you out of going into the car business.
They're gonna buy a bank of a car business and go into the car business.
So that's
A graveyard for you and why would you want to do that?
And
He paid no attention to us and read it.
Had you invested already when he told you this plan? Yes.
And it worked.
Found they were.
After uh huge mistakes, it they were almost went broke with their f early dealership building.
System.
Almost broke.
What captivated you about BY?
He was had a PhD in engineering and he could look at somebody party.
He could make that part, you know, uh look at the morning and look at it after he could make it.
I never seen anybody like that.
He can do anything. He is a natural engineer and
Good done type.
Production exactly.
And that's a big thing. It's a big lot of talent to happen in one place.
It's very useful.
They've solved all these problems on these
I like the cars and the motors and the acceleration.
Breaking and so on.
How would you compare him and BYD to Elon and Tesla?
Well, he's a fanatic that knows how to actually make things with his hands, so he has to.
He's closer to ground zero, in other words.
The guy at Be Ready is better.
At actually making things and
Charlie, you turn a hundred.
Which is an unbelievable statement on January first of next year.
Do you have any plans?
I'm doing a party.
Yeah.
Where's the party gonna be?
California goes.
But I I've totally maxed out the room. I can't squeeze another book.
What captivates you these days? What's fun?
Well partially everything is.
Even politics, bad as it is, is kind of interesting.
When you look back at your your and Warren's time together, when did you have the most fun?
You had about the same amount of fun all the way through.
Where we found now.
Is there a particular era that you remember the most fondly that feels like the good old days?
Well, I we remember we were sweating blood in some of those good old days.
Oh, I mean Solomon Brothers. Solman Brothers. Yeah. Yeah. Oh a lot of close misses with
We've got our big problem to solve, but we could have had a big loss.
We could have had
more problems than just a loss with Solomon, right? Well actually that's it on on our when we examined Berkshire Hathaway on our podcast
Our takeaway was that
The whole franchise was at risk.
During Solomon Brothers, the entire Berkshire Hathaway name and future.
Would you agree with that?
Not so much.
If you had let the whole investment in Solomon go to zero, it would have been if it all blown up and went to zero.
We were gone.
And done pretty well.
What do you consider it to be your finest hour?
Well.
We like to remember the
Close message for real terrible problems.
Yeah, terrible problem with the Buffalo News.
The Buffalo Evening News. Yeah, yeah, but it was there are two newspapers in that town. We started a Sunday.
And that started a holy war and the other guy went broke.
Well we g we could have a lot of bad to deal with that.
And you were you were both pretty young and enterprising at that point. I mean you weren't the worried entirely of
No, but I was very aggressive about wanting to
Have a good Sunday edition.
I didn't want it on the paper for fifty years, there's no Sunday edition in the other he had one.
What made the newspaper business so attractive at that point in history? Well gold mine.
That's a track. That's a total goal.
Well, and the play in particular with the Buffalo Evening News and the Sunday edition was
playing for the local monopoly, right? To
That's be the game the game in town. And with newspapers you could do that. Sure.
I mean newspapers
For decades had EBIT.margins in the
fifty, sixty percent range, right? No, only the little ones.
Only the little ones. Oh. Yeah, the big ones are less.
Thirty or forty or twenty five or
I'm s I s I said Ebita in your presence, I apologize. Cash flow margins. Actually, do you still feel as uh
That EBA does uh
A criminal the way that you've demonized it in the past.
Yeah, I do. I so you got my big truck company and
Take the depreciation out of the trucks out of the
Earnings you're lying about the earnings.
I mean.
You witnessed its rise with Malone and
T C I and Liberty Like
when Ibada was invented as a concept, right? Like w what were you thinking?
Oh, I've never liked double owned extreme.
Manipulations.
I don't want to be known as the great manipulator like John Malone is.
He paid less income taxes than anybody. He just pushed everything to the drive on to the thing.
In many ways Ebita was the uh community adjusted
earnings of its era. Are you familiar with the community adjustment of the from We Work? We were We Work. Oh boy.
Maybe um
Final question to wrap up.
What are the set of companies that you think are the greatest
That you've ever seen, either that you've owned or that you've not owned.
Well, there are a lot of great companies.
Her maze is a great company.
In its heyday, General Motors was a great company.
It just gradually went to hell one contract at a time.
What do you think about the predictability of
There were a number of companies back when you started where you could have said this business will be the same in ten years.
You think that number is
The same today, or do you think it's much harder than it's like? I think most places have a lot of changing.
Thread of American.
Do you think most places had a lot of change and threat in their future even fifty years ago and this story is over? I call a specialized industrial company and Burger has a lot of them.
We have a lot of companies that are quite insulated from really tough competition.
Just because they've been so long and they're so good at what they do and they have a good reputation and high value and so on and so on.
What companies can you see today where you can confidently say
Berkshire aside.
Costco aside, you can confidently say the business will be
As good as it is today in ten years.
Well, I think a lot of companies are pretty good, but you can't kind of really say what's gonna happen.
Because
You may get some guy like I am that just wants to push everything and do the right public relations.
So no matter how good the business is, it'll be kind of phony.
Hm.
Charlie
I have a personal question for you. David has a two year old.
And I'm gonna have my first child in a month.
What
advice do you have for us about building families?
Well
Of course you gotta get along with everybody. You gotta
Help them through their tough times and they help you and so forth.
Yeah.
But I think it's not as hard as
I think half of the marriages in America work pretty damn well.
And would it work just as well if both of them marry somebody else, by the way.

Well you've said that the uh best way to have a great spouse is to deserve one.
Yeah. As long as both parties feel that way, then it's a recipe for success.
Of course it is.
Yeah.
You gotta have trust with your spouse and I guess things like education of the children and so forth.
Yeah.
I love that. Well, Charlie, thank you.
Yeah. Thank you, Charlie.
Well good luck to you. This has been
Uh a lot of people are gonna benefit a lot from hearing this and your your wisdom and they're gonna learn so much. It's very you know if you start thinking about it, it's pretty hard. It doesn't look so damn easy just to go up.
If you go to the ordinary person trying to promote himself as an investment advisor of some kind.
He just thinks he knows everything about everything and
Oh, the Federal Reserve should be run and so on.
We don't feel that way.
I will say with the
People we get to talk to who've built great things.
Every single one of them says it was so hard.
It's so hard. You can't build something great without it being so hard.
Charlie, thanks so much for doing this with us. Glad to do it.
It'll be an interesting life, your lady. You'll do pretty well, uh.
But it's not gonna be that damn easy.
David, total life experience and complete boondoggle.
I can't believe we got to do this. I'm still pinching myself it's now a couple of weeks after it actually happened.
I know, with autograph copies of Poor Charlie's Almanac to prove it. As if the podcast wasn't enough.
And
Actually, for those of you who haven't listened back what
In twenty twenty one, so two ish years ago.
We did a whole three part series just us covering the whole history of
Breaks or Hathaway.
Part one is on Warren, part two is on Charlie, part three is on Berkshire and Ted and Todd all the way up through
Two today.
I assume many of you have listened to that, but there probably are a bunch of folks
So if you want another
Nine or ten hours of acquired content on Berkshire. I really think it's some of if not our best work.
Go check those out.
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