Chit Chat Stocks - IPH #87: Celebrating the Life of Charlie Munger

Episode Date: December 3, 2023

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Welcome to Chitchat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts and riff on the world of investing. As a quick reminder, Chitchat Money is a CCM Media Group podcast. Anything discussed on Chitchat Money by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. this is chit chat money the investing power hour number 87 only 13 or i guess 12 away maybe depending how you calculate it from hitting triple digits here and we have two special guests today jason hall and jeff santoro formerly of the smattering podcast but it's a little tease you guys have this new venture or not made on it's not a new venture you've started this podcast but

we're doing a little name change and maybe you guys can explain why yeah the people that the people that ran the smattering frankly they were kind of hard to deal with yeah very big divas um we had a falling out with them yep so we broke up and decided to start a new podcast called investing unscripted which is exactly the same podcast and we're working for exactly the same people because those people are me jason hall and jeff santoro we're the people yes so thank Thank you for having us on, guys. We did change the podcast name. We loved the name The Smattering, but what we learned over time was that even though

it is an actual word in the English dictionary, not everybody knows what it is or what it means. We also were not doing ourselves any favor with organic search results when people just type in investing podcast. It's not intuitive that that's what it was. So nothing should change. For anyone watching this or listening to this later who is a subscriber to our podcast, nothing should change the logo looks almost the same it's the same feed uh it's just called

something different now so if you see anything come across your feeds under the name investing unscripted that is us that is the smattering just rebranded so uh this is the the world premiere announcement of that so you guys you guys got some exclusive content here on on the power hour yeah and we've talked about this as well we might i don't know depends we haven't had any formal decision but we've talked about having doing doing a little tweak as well because chit-chat money we actually don't talk about money that much we just talk about stocks but uh i think for any listeners you might we're maybe going to do a cross run on one of the smattering episodes actually excuse me investing unscripted episodes soon so watch out for that

in the ccm feed uh you'll see that pop up and uh if you like this episode today give them a little shout and follow them on spotify youtube or apple or wherever you get your podcast but we got a big topic today i think this could take the whole time but we'll see we'll get some other stuff loaded up as well it is the passing of charlie munger uh we all shed a tear i think was it yesterday at this point maybe two days ago yesterday uh one month from turning 100 which is sad, but I think he would probably not care too much about round numbers. Maybe we'll just kind of go through to kick things off. Jason, I know you were excited to, you said he could talk longer a lot. He's one of your favorite investors ever, maybe your favorite.

So maybe we talk with you or kick things out with you and we'll kind of go around the circle of what he meant to you as an investor. Yeah. So it's kind of funny because he's renowned for having said multiple times that his influence on Warren Buffett was overstated. I think that's a lie. I think it's an absolute lie. I think one thing he worked really hard at was kind of playing the part of the lieutenant, of the second, you know, because he was a pretty private guy. And I think he liked, Buffett likes being out there. Like, he loves it.

He loves doing the interviews, going on CNBC. He really thoroughly enjoys that. And I think Munger enjoys it, enjoyed it far less. Um, all accounts say that he loved in-person meeting was very generous with his time, uh, one-on-one, um, which might be surprising to a lot of people because he comes across as kind of gruff and brusque. I think to a certain extent, that was a combination of both a little bit of a shtick, um, cause Buffett kind of has that all shucks thing to him.

and i think kind of um being the foil was something that he developed over time and they played off of one another so so well at the at the annual meetings but i think there's also a little bit of one of the things that he's was so well known for is his ability basically to turn his brain entirely on one thing right and be so intently focused on it and to not tune everything else out, he could kind of come across as a little bit of a jerk, right? Because there were stories about him finishing up a deal. He and a partner were working on a deal with the CEO of that company and they're walking out together and Charlie just gets on the elevator, presses the button and it goes down.

Doesn't say a word, doesn't shake a hand, doesn't know, just nothing, just literally just walks out throwing it in the elevator. And there's a lot of stories of him doing that. And a lot of things I take away from that is as an investor, particularly now, it's so easy to be distracted. It's so easy to be distracted. And being able to be incredibly focused, it can be troublesome at times, but I think for the most part, it's a net benefit kind of thing that lets you really focus on what's important. I also think he lived a more interesting life than Buffett, too. This is somebody that spent a lot of his life doing other things. In 1962, I believe it was, Brett, he founded, started a law firm. Yeah. I think it was in the 50s. Maybe a little earlier, but it's still there. Munger Tolles. Munger Tolles. It's still one of the most prominent law firms in the US. One of his co-founders, by the way, still on the Berkshire Board of Directors.

So just a little piece of interesting trivia there. Ronald Olson, one of his founders there, is still part of the Berkshire family. So I could talk a lot more, but it's just really interesting some of the path that he took with his life. Again, that law firm is still around. He was an amateur architect. There's been a little bit of controversy about it, but he designed a number of buildings on school properties that he basically paid for. and there was a dormitory i believe it's a uc santa barbara that doesn't have any windows in any of the actual housing spaces themselves and it was very controversial

but apparently like the design's actually really smart in the way that it was done so yeah that's a good point he also designed uh i think over maybe five years or 10 years the custom catamaran so that was pretty cool when reading his biography but ryan go ahead Yeah, I just want to go around because we're going to talk Munger, I think, pretty much all day today and talk lessons and stuff like that. But when you saw the news, I guess we can maybe, Jason, you kind of already talked about it, but how did you guys see the news and what was kind of your initial reaction? Jeff, do you want to go on this one? Yeah, actually, I found out from Brett, I think, because we were chatting about planning for this, and he chimed in that we should probably do a Munger thing. So I quick went to Twitter and saw that it happened. And so I was kind of bummed out, but I guess when someone's 99 years old, it's not like it's a complete surprise. And I know this is going to sound morbid, but it's sort of been on my mind for a while

now because I made it out to the Berkshire meeting just this past May, and I missed some kind of big moments with my kids that weekend, but I felt like I just needed to get out there because when the two people who you go to see are in their mid to late 90s, you just don't know how many years they're both going to be around. And we still have Warren, so that's great. But I'm really glad I got to do that. I'm glad I got to go out and see their shtick in real life and how they play off each other at the meeting. And even at his advanced age, it took Charlie a little while to get rolling that day. We were commenting on that as we were sitting there. But, you know, I mean, and, and by the way, it's like an eight hour day. They sit on stage and talk for pretty much the whole day. But after about, I don't know, 45 minutes to an hour, you know, he, he clearly kind of got warmed up and you could see his pace picking up and, you know, the speech is slow and things like that. But man, he was sharp as a tack. Everything he said, you know, made perfect sense. He was responding to the questions. He was making jokes with, with Buffett.

so you know i that's how i found out and and i was i was pretty bummed but happy that i made it out to to omaha one time before before he passed i want to point out too that it's he was kind of slow and measured in his responses but this is a dude that's been falling asleep in the berkshire annual meetings for 30 years this was like it's it's he's kind of he gets bored he'll take a nap like that's just he would he would do it it's it was not not out of the ordinary it's a long meeting yeah even for even for the audience it's long i can't imagine being the one actually speaking for eight hours yeah i was falling asleep i was falling asleep when they did the the geico highlight videos uh i was like all right another one of these but yeah i mean i found out i guess

from probably a tweet from unusual whales or something one of those aggregators that just do with all cap stuff from walter bloomberg something like that uh yeah but yeah there's a good point it kind of reminds me of one of my grandpas where he might not talk for eight hours he might just sit there like you're like is that guy gonna say anything but then you get him on a topic he's interested in he'll talk for three hours straight and you can't you can't get a word in um what ryan i guess maybe you you want to do your intro kind of thoughts here yeah the other i mean i kind of saw it i think pretty much the same as as you brett scrolled twitter and it was disappointing and the other my other reaction was kind of that even though he's 99

years old people have been saying for probably the last 20 years like we got to make it out to the annual meeting you never know when it's going to be the last or for for some of these guys so you kind of i kind of got the feeling that it just the day wouldn't come i maybe it's just been so long where people are talking about their age it just you kind of got the sense that they would just keep on going so it was a little bit surprising disappointing but i did see this quote that i thought was really good and we're probably gonna be sharing quotes all day but the rational walk substack said because he actually munger did like two podcasts recently like public speaking yeah he's promoting a book he's got coming out is it actually yeah oh i had

no idea um anyway so so the rational walk he says based on recent interviews those of us who have admired mr munger can be grateful for the fact that he clearly remained mentally sharp up to the very end the coolest outcome for a man of mr munger's intellect would involve cognitive decline and it's a blessing that he avoided that fate so even though it was a surprise i think that's a really good point which is everyone remembers him at his really his absolute peak because he just kept getting smarter and smarter and so uh i think it was just uh maybe yeah wiser and wiser wiser yeah he was if you go a little slower but still yeah a little slower yeah yeah no i mean that's look that i was gonna say like that's that's the way you want to go you know really

you don't want to live you want to live a really long life and have it just end versus like some slow decline and suffering and all that kind of stuff so but yeah i agree with you ryan i think for someone of his intellect who, you know, just, you know, one of the quotes, I didn't pull it, but I'd seen it a bunch of times in the last couple of days is he's talked often about just leaving time in his life to think, you know, and building time into his day to just read and think, which is something you can do when you're a billionaire, I guess. So, you know, we don't all have that luxury, but for someone whose superpower was kind of thinking and using his brain yeah i agree it's it is it was very nice to see that he he had that fastball so to speak

right up into the end and because i i listened to that one uh the podcast i forget which podcast it is actually it's not one i listen to normally but i downloaded that episode to listen to the to the munger interview and uh you guys talked about it just a few weeks ago and the acquired was it the acquired one i know he did yeah yeah yeah i think it was that one it was like two guys who had dinner dinner with them and recorded the conversation like during the night um anyway yeah i i was you know impressed with how how quick and you know sharp he was even you know just several weeks or months ago whenever that was recorded yeah yeah all right well i think we want to do kind of maybe lessons or any sort of the topics you like to talk about

a lot and we pulled a ton of quotes i did at least and it looks like you guys did as well maybe we can alternate i can i think i can start with one and we can kind of talk about some of these lessons i think there's just a ton of investing lessons you can go through uh i like to pull from my my favorite speech of his there's a ton of them out there which is his usc speech in 1994 i think he's in multiple at usc but this is the 1994 one which i think he was at his top top level there uh the first quote is quote what is elementary worldly wisdom well the full First rule is that you can't really know anything if you just remember isolated facts and try and bang them back. If the facts don't hang together on a latticework of theory, you don't have them

in usable form. I think there's a lot of examples here with investing. You can't just say, oh, PE ratio low, I'm going to buy. Or, oh, this sector typically trades at X multiple, or this stock has typically done this, it's going to be good in the future. You can't just like memorize the facts about a sector, a stock, an industry, a management team, and say that the future is going to be the same. What are your guys' thoughts? I guess, maybe Jason, I saw you unmute yourself. Maybe you can go first here. Yeah. What it ties into me, it makes me think about is mental models, something that he used a tremendous amount with investing that, you know, something we talk about, Jeff and I talk about on our podcast a lot is frameworks, not rules,

building mechanisms to help you process and think. And I think he used mental models in the same way so that you don't fall into that kind of that rote thinking about just trying to buy the stock, like you were saying, like on a cheap price to earnings ratio, right? You need to dig in a little more. You need to understand the industry, the competitors, what are the returns that the business can generate right profitability levels cash flows about like getting beyond just looking at a price on a screen or a number and and the the his use of mental models i think is something that a lot of investors would serve themselves very well to study yeah it's also it's it's the kind of thing that can give you or maybe it's one of the is the only

thing that can give you an advantage over computers. To your point, Brad, if it's as simple as looking at a ratio or some other financial metric, then you could build an algorithm that would know exactly what to buy and when to buy it. The fact that, to my knowledge, there is no supercomputer that has crushed the market over the long term, there is some sort of innate human element. Maybe it's the whole investing is more art than science kind of a thing. But I'll get to the quotes that I pulled later. But what I like about the one you just read is it, maybe this is my educator point of view coming at this, but he talks a lot about how you learn and what's the right thing to learn. And it's basically, you don't just memorize facts,

you have to learn how to think about the facts. And so I think that quote speaks to that. And I think that's part of the success that they've had is being able to think and not just regurgitate information yeah i i definitely agree with that i don't know i think it goes a lot further than investing where it's like if you're just remembering isolated facts you're probably doing it for like sound bites in a dialogue or to you know use it for winning some argument whereas if you're really trying to what did he call it the lattice work of or to justify it to yourself yeah if you're really trying to internalize whatever it is you're learning like you have to go beyond remembering just a couple of facts and you really want to get a

sense of like the the real roots and the of whatever the concept is you're learning and so i don't know it's just i think it speaks to him and the fact that he wasn't he was never smart just to please people or smart just to impress people he was smart because he was like truly passionate about learning and wanting to kind of better himself so it goes beyond investing but yeah that was kind of my takeaway i in general when we looked back at a lot of these quotes and everyone's posting tons of quotes from munger you know following his passing he was a very like i didn't really remember him as this but he was a very motivational guy like he really inspired a lot of like habits around learning beyond just actually being like a great investor and a really

smart person himself. I thought he was really quite inspiring. Yeah. And that does remind me, Ryan, of what he liked to talk about again. And I won't do the quote on this, but it was from that he did mention it multiple times, but he had mentioned in this 1984 USC speech is that to be a good investor, you have to know at least the basics, or this is his belief. I know some people may debate this of a lot of different things or you might not need to know but it can be extremely helpful to know the basics of physics statistics psychology the list goes on and on and on history a lot of you know stuff like that and i think another example of like the as you mentioned the internalizing stuff versus memorizing facts can be so helpful i mean the best professor i had

in college was in this thermodynamics class and he basically told us we're not gonna learn uh any of the memorize any of these equations i'm going to tell you how thermodynamics works which is just energy in equals energy out plus energy stored and that can do every single thermodynamics problem you can ever do and i kind of think it's similar to investing where uh it's all about like at the core the free cash flow per share that the company produces and i don't know that's a separate tangent but that's it's like for him munger would say okay you can memorize all these accounting things you could be an expert on thousands and thousands of accounting stuff tax rates blah blah blah but at the end of the day what matters is the moat growth and free

cash flow per share trusting the management team and that's what's actually going to drive stuff at the end of the day that's gonna like you don't need to memorize that but you just have to use all of this information and try to i don't know it's kind of hard to explain he would be much better at explaining it, but Jeff, feel free. I know what you mean because let's just use accounting as an example. Let's say you're a trained accountant and you understand balance sheets and cashflow statements and statements of operations inside and out, and you know what all the different things are. By the time that information's public, everyone has it. So you don't really have an advantage over someone like Munger who's, yes, looking at those things and

understands those things but is thinking at a different level so like that's kind of how i think about it like it it's kind of like i said earlier it just knowing the things is not enough of an advantage and as time goes on and computers can do more and algorithms can do more not just knowing things is going to become you know less and less helpful i think you know you're still going to have to know the basics like you said but i just think that that if there ever was an advantage there it's just going to erode over time yeah that's a good point one thing one thing he I can't remember the exact numbers, so I'm going to paraphrase a little bit. But he also, I think he advocated for simplicity too, which I think is really important.

One thing he talked about was just the idea of if a business generates, I think the number he used was 6% return, that's what it generates over the long term. Over 30 years, you're probably going to get a 6% annualized rate of return. even if you bought it incredibly cheaply, right? Even if you bought it incredibly cheaply, that's what you're going to get. However, if you can buy a business that generates a 15% rate of return over 30 years, you're probably going to get an annualized 15% rate of return, right? So again, not overcomplicating things, working too hard to try to get the perfect deal on the best price. Just really thinking about those three things you talked

about, right? So the cash flows per share over time, paying a reasonable valuation and a business ability to grow its earnings. And having a moat, having a good defensible moat. Yeah, that's- Yeah. Keep it simple. Yeah. At the end of the day, I think someone jokes like, oh yeah, I learned so much from Charlie Munger, but let me go check and confirm this alternative data from this weird source for the third time today. You guys have a lot of quotes as well, but I think maybe a question we have from tyler one of the uh the core who i think doesn't join every time but thank you to tyler for for joining live and asking the questions from time to time uh he says what is a good lesson

each of you learned from munger i think that can probably you know we can use some of these quotes here um anyone have one at top of mind who wants to go first he also says here favorite munger one-liner i'll start with that one as well yeah they've been showing up all over my twitter feed and pretty much all over the news lately they've kind of been resurfacing and i i thought this one was just funny there was also like a five minute just like charlie highlight reel that i that got pretty popular on twitter i'd really recommend watching it because that's i don't know it kind of puts a smile on your face i like this one he says i think i'd rather throw a viper down my shirt than hire a compensation consultant he was never that's when i fell in love with him

i know that's my least favorite he never really minced words i thought that was a good one um lesson that i take away i think kind of speaking to my earlier point is that like it's kind of internal scorecard felt like most of what he did was not like it wasn't to impress anyone even though, you know, they were kind of forced to be public by running this public company. He lived his life in a way that just made him happy and he did what he liked to do. And another quote that kind of speaks to that, it says, to get what you want, you have to deserve what you want. The world is not yet a crazy enough place to reward a whole bunch of undeserving people. Brett, you kind of resurfaced this snippet from

early in Charlie's life, but he had a pretty difficult life early on. I think in his late 20s, a lot of stuff was impacting him personally and he just worked through it. I think a lot of people maybe wouldn't have gotten past that, but to his point, he got a great life because he totally deserved one. Being the best person possible, being a perpetual learner, constantly reading it's it's not only stuff he said but he you know kind of lived it so i think just sitting down and doing the work and creating a life that you think you deserve uh or building a life that's great through you deserving it is kind of the takeaways i got from him overall real canadian superstore has everything you need this back to school season save on lunchbox savers like ziggy

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And today I'm still figuring it out. Somehow things usually get worse before they get better. Apparently, that's how I roll. So bundle up and come along for the bumpy ride. I'll jump in here because I have a good one-liner, I think. The two quotes I pulled sort of line up exactly with what you were just talking about, Ryan, and also what we talked about earlier. The quote that I love that I came across like my social media feed, just like we've all

seen all these over the last couple of days. One of the meetings, he said, if people weren't so often wrong, we wouldn't be so rich, which It's just a funny line, but I think it encapsulates, again, that whole idea that it's a market. You're not buying something unless someone's selling it and vice versa. So disagreement and seeing things differently is what makes this whole thing work. And in a world where there's so many hot takes, especially on social media, you could post your thoughts on whatever, this company or that company, positive or negative. and if you have enough people who follow you,

you'll get everyone yelling at you from both perspectives. And the reality is some of those people are going to be wrong and some of those people are going to be right. And so I just like that one liner of like, basically we're rich because people were wrong. But the two quotes I pulled

were both about learning, right? So I think a life properly lived is just learn, learn, learn all the time. That's one of them. Um, and then the other one, something that's more important than what they teach you in college, learn the method of learning, which we already sort of spoke about earlier. And, you know, I think this, these two jump out to me again, I have a background in education, but also as someone who didn't buy an individual stock for the first time until I was 40, um,

and sort of learned, well, as much as I could have in the last almost four years, uh, learned as much as I could in the last four years about something that I literally knew nothing about prior to that. I'm sort of hypersensitive right now at this point in my life to the fact that you not only can keep learning in whatever field you've always been working in, like I keep learning in my day job of education, but you can learn a whole new thing if you want to and you want to put your mind to it and spend the time on it. And he's lived twice as long. He lived more than twice as long as I've lived. So it's sort of, to Jason's point about him, or to Ryan's point about him being sort of motivational too, I think we can all kind of think about like, wow, what might we know

that we don't know now in five or 10 or 15 or 20 or 40 years from now? So all these learning quotes, I think are really interesting because I don't think we talk as much about Munger from that lens as we do about picking the right stocks and becoming wealthy and all that kind of stuff. So I have nothing to add. Yeah, someone was going to say it. Someone was going to say it. I had to sneak it in first. No, there's a, and this is a number of years ago he said that, but he said this, but he was asked in an interview who, what person was most responsible for his happiness in life?

And he said, my wife's first husband, you've been able to have this wonderful life partner for 50 years, I believe, 60 years. She died maybe five or six years ago. And he said, because by only being a slightly worse husband than the one she had first. That was a very Charlie thing to say. Yeah. He's not wrong. Yeah. Yeah. For the biography, he does seem to spend a lot of time with the family up in Minnesota,

but that is a fantastic quote. Yeah. I mean, that shows how funny he is in general. But I would say for me, the lesson I've learned is maybe I'll pull it more towards investing is the importance of psychology and kind of the subconscious for why people do things or why people make the decision to buy a certain product his classic example is coca-cola you can have endless copycats of a cola product at the supermarket but if coca-cola only costs 10 cents more than the rc cola or whatever one it is well i mean what's 10 cents to you like the subconscious stuff there especially with advertising and all that stuff i think was just so important for myself as someone was much more analytical kind of had a you know stem engineering background of okay like this

stuff isn't very very important for consumer habits business choice chose choices and uh and it kind of also leads into the you know show me the incentives show me the outcome type of type of stuff too all right we've got another question here from tyler he says what do you believe was the most important characteristic that buffett and munger had which made their partnership so strong it's rare to see even marriages which last as long as their partnership any thoughts here well it is he he said specifically that they didn't uh like they never festered on anything like for an arc like he he was like we never actually argued about anything i'm sure he's kind of exaggerating because i'm they definitely debated things

and i remember from the buffett biography munger was really strongly against the solomon acquisition or investment not acquisition uh but like he basically said like look okay buffa was basically wrong with solomon and if i told him he was wrong and if he didn't invest in solomon he would have made much more money in something else even though the solomon position worked out after multiple years of frustration but he's not going to hold that like against him and he's just going to be like look yeah sometimes people are wrong sometimes i'm wrong we're going to disagree But I'm not going to let it fester, and I'm not going to turn into this whole thing, holding a grudge. I think that's the big thing, is they never held a grudge against each other.

And it also helps that they're both pretty smart. Munger said something along the lines of never letting a disagreement become disagreeable. And that's, I mean, that's right at the core of what you're talking about. Jeff, I know you had something to say. Well, I mean, so I think two things. None of us know what they were like, you know, not in front of a camera or at a meeting, right? So, you know, to your point, Brett, like they might be covering up more arguments that they had than we might ever know. But just taking things at face value, one thing that stuck out to me in that interview he did recently on the Acquirers podcast, I think one of the questions I asked him near the end was, when was the time in your partnership with Warren that you had the most amount of fun? and his answer was like always like basically he's having as much fun with with warren now at age 99 as he did when they you know first teamed up decades ago so to me like because

that was his answer it says to me they probably just enjoyed you know being around each other i mean you know i think if you like the people you work with that goes a long way i think it helps that they were both incredibly wealthy. It's a lot easier to have fun when you know you have an enormous margin of safety in the sense that you're- Financial security. Yeah. You're incredibly rich. Wallpapers over a lot of disagreements. I mean, they could have really had a bad time for a couple of decades and still been fine from a financial standpoint. So that probably helps too. But I think too, When you have a good thing going, if you're smart, you'll recognize that and try to not

jeopardize it. And then the last thing I think, and this goes to what you were saying earlier, Jason, I do think they both found their end of their shtick when they were in public, when they were at the meetings. And I think they both have a good onstage presence to sort of stay in their roles. And Charlie does the one-liners and Warren's a little bit more offshocks, like you said, jason um you know i i think they're both a little more showman than than maybe both of them want to exist uh want to admit and i think that that added to the fund and i think that helped the partnership

one thing i want to add to this i think's really i think maybe critical especially for for younger generations to really be mindful of warren buffett is a lifelong democrat charlie Munger was a lifelong Republican. They had very, very different political views, yet they've had inarguably the most successful investing partnership in the history of the world, right? These two men, there's no doubt about that. And I think a lot of people in this current moment can learn a lot about not letting someone's political persuasion get in the way of cause. you have any sort of bias against whether or not they could be a valuable person to have in your life. I just think it's toxic. It's like putting a viper down your shirt, frankly. And it's a

powerful reminder what people can do when we work together and look for reasons. These are two guys that obviously found things they shared in common and that it was far more valuable to focus on those things to let the things that they disagreed with keep them from working together. Yeah, and I think even though they did, it sounds like based on what they've said, vote differently on a couple of occasions, they probably saw certain issues differently, but I think they judged people in a very similar way. The politicians themselves, I bet they agreed on judging their characteristics and judging them as people. I bet they agreed most of the time. The other thing I was going to say is to Tyler's question, what allowed them to be such a good partnership, I think he's – they've probably been asked that a number of times at the meetings. But he kind of answers it where he's like, in order to have a good partner, you got to deserve a good partner. I think really both of them were benefited by each other in a big way. I mean, I don't think Warren would have – if Charlie weren't as smart as he really was, he would have sniffed that out pretty early on and probably wouldn't have needed to work with them.

but because he benefited from Charlie's wisdom and Charlie benefited from Warren's work ethic and wisdom, I think it really was, they deserved each other and they both benefited from the partnership. All right. Yeah. Thank you, Tyler, for the great questions. We'll still chug along here. Any, for me, any of you guys' notes, anything you guys want to pull up? I know we kind of got a mishmash here in the document, but anything that comes to mind from any of you guys? I mean, I just want to go ahead. Okay. Well, no, I mean, it was just, there's a few quotes. What's interesting is looking through this whole shared doc that we have with the different quotes we all pulled. And I think the thing we haven't talked as much about yet is the times he's talked

about, well, we did a little bit just now, but the times he's talked about being a good person, you know, like the other quote that I pulled, and I think you guys have found similar things was something he actually said from this past meeting in May that I wrote it down then, in the moment. I've never known anyone who is basically kind who died without friends. I've known plenty of people with lots of money who died without friends, even their family. And as I look through our doc here, we all seem to have found one or two quotes about life and being a good person. And we were just hinting on it a little bit in terms of being a good partner. And I saw another quote somewhere about being the kind of person who deserves to have a good

life or deserves to have good luck, you know, that kind of thing. So I think he also was very conscious of just kind of being a good person as well. And I think that's worth mentioning. Yeah. Related to that is he mentions in the HBO documentary, or I think it was the HBO documentary, you can find this on YouTube. Yeah. There's kind of a highlight video that someone's mashed together of all of his stuff from that. And he says, I constantly talk of Berkshire as a seamless web of deserved trust. So I think it's not just in the personal life, but in your business endeavors, you have to be deserving of the trust from others. And then that's how you should look at for people you're going to partner with. And I think the easiest example and the most

important for people in our shoes, and I think most of the listeners here, is looking at management teams and yes a lot of this is going to be qualitative but do you trust the management team and that it's it's so so important and he talks about how there are trends of and we'll use another one of his quotes inverting the situation uh and finding the manage it's pretty easy to find the traits of management teams executives ceos cfos that are untrustworthy there's kind of a you know pattern matching you can do there and i think that's a big lesson i've taken away from his talking on that from an investment perspective i liked his like he always talked about how much he appreciates people in the past and how he tries

to learn from people in the past he was like a huge fan of ben franklin and he was so fixated on learning from not only other living people, but the dead. And he had a quote praising his grandpa, which I think is now so applicable to him where he says, the best armor, I believe this was him that said it, the best armor of old age is a well-spent life preceding it. I mean, he was talking about someone else yet, or maybe he was just talking generally, but it's so applicable to him and i don't know all this all the wisdom that he poured out you can look back and say like he exemplified it really well well integrity was another big thing i think if you look at a lot of the deals that that berkshire did especially the in the in the earlier years they were doing deals

with people they knew and trusted right and that was important not just from the perspective of trying to get a fair deal but if you're dealing with somebody you trust you can trust what they're telling you about the business and what you're looking at with the business is going to prove to be true, right? Which gets back to Munger's point about 6% returns. You're going to get 6% returns over 30 years, right? If you're buying a business with the understanding you're getting better returns, part of it is you have to trust the partner that you're buying from. And I think that's important. And there was an interesting thing with Munger. He never signed the giving pledge. I'm not sure if a lot of people know that, which is something that Warren Buffett was

a big advocate of. Bill Gates started the giving pledge. So this is the whole thing where billionaires are encouraged to sign on that they're committing to giving away at least half of their wealth during their lifetime. Munger didn't sign it. He said he didn't sign it because he had already given away more than half of his wealth to his kids. So signing it would be disingenuous. I think he said, it would be like trying to come back from the dead. You can't do it. So I think integrity was something that was really, really important to Munger. There was another quote I want to share too, that talks about, I think it's about a little bit of that integrity, but also kind of humility and temperament. And it's, if you think your IQ is

160, but it's 150, you're a disaster. It's much better to have 130 IQ and think it's 120. right so um i thought that was just kind of really insightful too no yeah it's like it's insane looking back at all the quotes how he's able to just pour out such wisdom and been doing it for so long and you if you read that whole script of the speech at usc in 94 i remember just being blown away by his ability to think rationally and and convert it into such fluid like easy to digest language so yeah early 90s was he was probably at like maybe not as wise as because he wasn't getting you know he still learned more but he was definitely at maybe the best combination of wisdom plus ability to think at an extremely quick pace

yeah all right do we do do we want to do quotes all day what do we want to do with the rest of show here um i mean is there anything else you guys have listed here i i would add i would add he's warren buffett is the second best capital allocator i think i heard someone else describe this way i think warren buffett is the second best capital allocator of all time charlie's number one because he gave all his money to warren and let him do the work and yeah i think that was ultimately the best investment that's pretty good maybe do we want to try to focus on we talked a little bit about it but less maybe more specific investing kind of lessons because everyone knows the classic going from deep value to quality i don't think we can need to hop on that a ton

but i think for me the inverting quote which is i think essentially just and maybe even wasn't his but it's when he talked about a lot inversion principle yeah yep it's invert always invert you know that's how you'll find it uh and i think that's been super helpful for for me for me ryan uh you can't look at a stock you look at the industry and you say okay well what would cause the opposite of what i think is going to happen to happen stuff like that but i'm curious if you guys have used that invert inverting quote and how it's helped you yeah it was when i first started thinking through that concept. It was definitely a fundamental moment in my investing career because I think the reason that's the case is that it is the ultimate antidote to confirmation bias

because we're humans, we're wired to look for things that confirm what we think to be true. And throughout our history as a species, it's proven to be a good adaptation, right? It's one of the reasons that humans have thrived, but it doesn't always work out really well in the modern world. You can have a great investment idea and you can come up with 99 perfect reasons why you're right. All it takes is one reason you're wrong, right? And following the inversion principle to pursue reasons you're wrong is incredibly powerful because it forces you to do the most important thing as an investor, and that's to get it right, right? I mean, that's the bottom line. And if you go into it, assuming you're right, and instead of assuming maybe you're wrong

and looking for reasons why you're wrong, you're going to lose more money than you would otherwise. So, which is of course, inverting, you're going to make more money, right? That's the inversion of that. So, one other, well, there's so many investing lessons to take away. One that I think about is, and it comes from his investment, BYD, where just the ability to not corner yourself as an investor and be able to be agile. Because I remember, I think it was during the Acquired interview where they asked, did you think BYD was a good business? And he's like, no, absolutely not.

I mean, it's incredibly complicated. It's very difficult. And the fact that they made it is like a miracle. He's like, but the CEO or the founder was the smartest man I've ever met. That was my investment thesis, basically. That was his investment thesis of Buffett too, I should say. Same thing. He could have done all the work around the business.

He could have said that, smart guy, but the business isn't going to work out. And he's just, I don't know, he was so flexible, constantly changed. I think the See's Candy, that's kind of the example most people think of. but he holds Costco at 40 times earnings or whatever. Most investors don't do that. He also will buy stuff. He also bought cigar butts when he was younger. He was always pretty flexible and willing to find a good investment wherever he saw it. He didn't really put parameters around what qualified. What always impressed me, and I think this is a Warren Buffett thing too, is how remarkably consistent and disciplined they both are and have remained

through decades of being prominent, well-scrutinized investors, but also still able to evolve and see and do new things. The example I think of a lot is, and I know the stories are that it wasn't Warren's initial investment, but Berkshire buying Apple. You know, like Warren constantly saying that technology is out of his circle of competence, and then they buy Apple, you know, and then more recently they bought Snowflake. Now, again, probably, you know, his lieutenants are probably initiating, you know, those ideas, but he's still saying yes to them. And I think, you know, that and same thing with, I think, to some degree, Charlie buying BYD. I think if you had 20, 30 years earlier said like, oh, would this guy be interested in this high-tech, like you said, a miracle thing that they were able to develop in the future,

you'd be like, no, he's a value investor. That's out of his circle of competence. So I don't know. It's hard to kind of explain, but I feel like they've done such a remarkable job of keeping those two things balanced in their lives, right? Remarkable consistency, not giving into fads, not thinking this time. it's different. I think when you've lived through so much of market history, it's easy to see that things come and go, but then also still evolving enough that you can open your mind to new investing

ideas and new sectors and new industries and that kind of a thing. So I thought that was an interesting balance that they're both have been able to keep over time. All right. We got about 12 minutes left here. Let me check if we have any questions. No more questions. Someone reminded me of the Randy O'Fall I can't remember what exactly the quote was but in that acquired interview he basically said something around

I was looking for it while Jeff was talking there and I couldn't find it he said something around you're only going to get five really home run chances and I don't think that's the exact terminology used in your life

don't try to blow it early on And a lot of people think they found one early on, but it's really, really quite rare and you might not figure it out until you're five years into owning something. You're not going to find that many wonderful investments. And I don't know, it just made me a little more, I think, choosy and kind of putting it in perspective of, all right, even though I love my portfolio and I think all mine are the perfect investments, chances are none of them are the home runs he's talking about and that maybe they will be at some point down the road but uh just being more

selective and like i don't know i kind of took it away as like i should be more diversified until i i really see something and i know it's really easy to convince yourself that you see something but kind of maybe i'll just equal weight until something right like if you found if you found four fat pitches in the past 18 months you probably didn't find four fat pitches yeah yeah probably zero the exact kind of idea yeah well it's one of my one of my favorite quotes um that kind of sums it sums a lot of that up the the money's not in the buying or the selling but the waiting yeah that's a great one yeah it is yeah with a lot with a lot of this stuff um i mean with them and so i was big of a part of the portfolio today but coca-cola and american

express they just bought and waited okay so i sent you guys in the chat a list of his famous psychology of human misjudgment uh speech and it's hard this kind of lists all of them out here and i think it would be kind of interesting i'll go first so you guys can kind of 25 tendencies yeah yeah um we can kind of maybe choose one because i think there's so many in lessons here and again he talks about really the importance of psychology and yeah he talks about kind of the worldly wisdom stuff of kind of knowing a little bit of everything but psychology was probably one of his main focuses he just loved talking about that learning about that and that's why the speech is so informative because he has just he's just well known about it and i think one

of that is important in investing and i don't know if we can ever defeat it but it's maybe helpful to be aware of is what he calls the doubt avoidance tendency and here's the quote that i think sums it up quote the brain of man is programmed with a tendency to quickly remove doubt by reaching some decision so essentially like if you like something if you like this company you're going to be like okay yeah everything every news that comes out every partnership oh this is great this is great this is great and then you're not looking as objectively at stuff i've known i know i've made mistakes about that before i'm sure we all have i think that's an important one to try to consider when analyzing companies and their decisions

yeah over over optimism tendency ties ties right into that go ahead jeff that that one jumped out to me also, Brett, partially because I think if you're someone who's trying to buy stocks regularly because it's coming out of your paycheck twice a month or you're just making contributions to a retirement account, like we're all doing as we try to get through our working lives and get to retirement, you're sometimes driven to a decision. This is one of the reasons I've recently changed my framework for investing away from buying something every week to now buying something way less frequently than that. And it's partially related to this. I found myself rushing to make

decisions because in my mind, I was the guy who bought something every week, little bits of something. I'm not like, it's just taking the money I have to invest and dividing it by the four weeks of the month and spreading it out that way. But I think that's exactly what I was doing, was removing doubt by making some decision every Wednesday for no reason other than I wanted to. So that's a learning I've had just in the last couple months. Yeah, I haven't gotten a chance to pick one through this list, but what was the one that talks about Pavlov's dogs? Do you remember that one? I think that might be the first one on this list.

It's just a reward and punishment super response. Never, ever think about something else when you should be thinking about the power of incentives, subconscious stuff, right? yeah i mean that's the good ones here i think that's the advertising angle as well people are like well why does apple do these advertisements why does coca-cola do this advertisement that people's just smiling and why does this american express just do these things like that it's like well maybe because they understand what monk understands here yeah i mean and then the the quote below the the bolded quote that we're all looking at here you know uh if you if you would persuade appeal to interest and not to reason right from a ben

franklin quote from poor richard's almanac but that's basically what i would say most advertising is built around right it's appealing to interest and not reason so that's interesting yeah and then all even broader than advertising these lessons they were like they probably what formulated with buffett and munger maybe more specifically with munger you know probably later in their life like 80s 90s is kind of when they really got into this type of stuff especially when it relates to quality businesses but they made the most money in it in apple 30 years after so it kind of is an example of the oh what he i don't he didn't say this but the the abc always be compounding that's kind of something that he you know keeps trying to learn keeps trying to get better keeps

trying to compounding everything in his life and i just want to hit on the two i want to hit on the two before we've still got a few minutes here so make sure we'll have a few more minutes after i mention it but um the two the two charlie munger books that i think are absolute must must reads um the first one it's been around for a while it's called damn right um who wrote that i gotta sorry i gotta look it up real quick here uh janet lowe i mean this book's been around for a while but it's a wonderful wonderful book i'm a huge fan of it i encourage people to check it out um there's a million books about warren right what was it damn right damn right yeah it's a little unknown yeah i think i've read it yep yep damn right behind the scenes with berkshire hathaway

billionaire charlie munger i it's it's it's on my kindle i don't know if you can really see that very well um it's a it's a great book um and of course poor charlie's almanac so the december 5th there's a new edition of poor charlie's almanac that's coming out so that's Is that what he was referring to? That's why he was out kind of a little bit of a little more public than he usually is. So that's, again, that's coming out on December 5th. I'm going to be buying the print version of that one if I can get it. So that's, yeah.

Doesn't that book, the damn right book, it really makes you want to go fishing up on that island in northern Minnesota, right? Yeah. Yep. Yeah. I think he still went this past year. Really? Yeah, because they have the whole family compound here that he made, right? Yeah, it seemed pretty cool. Kind of their own private island, not in Hawaii or the Caribbean, but nope, in Northern Minnesota with all the mosquitoes. Seems very mongeresque.

Peak of mosquito season too. Yeah, yeah. I know. That's what I was thinking the whole time. Looks like we may have got some other questions here, but we got a couple of minutes left. So, Any last thoughts on the top of your mind for many of you guys, and then we can maybe talk about, I got to get the name right, Undescripted Investing, little tease too at the end. I guess something I've been thinking about a little bit is what does the annual meeting look like this year? I kind of would like to go, it's a bummer we weren't able to go last year, but I don't

know. Do you think it changes the meeting in a big way? do you think it people will still continue to even maybe when you know hopefully it's not for a long time but when both of them are gone do you think this is something where people will continuously choose to come out to omaha every year yeah probably when they both are gone probably not but probably smaller it seems like the the guy that's going to take over is pretty rational but doesn't old and you know they obviously chose him for a reason

he's very corporate speak very corporate speak he's not a big it doesn't seem like this is his sort of thing and neither does the other guy who's also a little bit older the insurance guy let Todd and Ted talk

that'd be fun that'd be fun they're both private too though I kind of wonder if maybe we don't see more people try to go this year this may yeah yeah because of the whole what we were talking about before 20 25 years of people saying how much longer how much longer it sounds like yeah if you want to see if you want to see warren you know you 2024 maybe is your your year i got i got i bought i got one of these annual meetings i forgot to get mine

sure shareholders yeah yeah oh boy right i've thought a lot about that too ryan like what it'll look like you know post one or both of them and if they're smart they'll continue to do it but differently i think the biggest mistake they could make is to try to put you know someone up there with warren or or two new people and then try to replicate exactly what they've done in the past with you know audience questions and becky quick and you know like all all that stuff. That's not fair. You couldn't- Is it going to be like a Tupac Shakur concert where it's going to be hologram? This is what OpenAI needs to be focused on, is replicating Buffett. I think people will still go. I just think it needs to be something

different. They're smart. I think you're right, Jeff. Yeah. Yeah. We don't need the CMBC Yahoo Finance spectacle, which is great now, but it just wouldn't be the same. All right. We're running up on time so let's talk about unscripted investing a little bit more uh we got always invert always invert the title brett it's uh investing okay all right i did i should say the listeners i just learned about this name change right before we click record so it's fine we're gonna say it backwards at some point as well so don't don't sweat it yeah so we do yeah we do uh you know our podcast work together we do a little cross promotion stuff like that so you might see some of these episodes on our feed. I will say again, check them out, give them a try and start listening

there. But yeah, what do you guys talk about on that show? It's a lot of honest conversations about investing, almost like we're having right now. We do one of a few things. We have some episodes where it's just me and Jason talking about a topic and it's a lot of asking each other what we think about stuff. Our tagline is we ask the important questions about investing, But the, the, the tagline to that is we, we only give our answers. So the whole idea of the show is to, you know, share what we think, but not sound like this is what everyone should think. We're not trying to be experts.

It's not an answers podcast. It's more of a questions podcast. Um, we also do interviews. We've had a bunch of interviews over the past, you know, year, year plus, uh, you guys have been on, um, and you know, then we, we'll, we'll do whenever. So those drop every Saturday. We'll do occasional, uh, shorter pop podcasts that we call rough cuts that have a ridiculously silly opening music.

Uh, we'll record them and just drop them whenever we have something extra to say. Um, so yeah, that's, that's the podcast. Uh, it, it has been called the smattering up until about three hours ago. And now it is now, uh, now it is called, uh, investing unscripted. So anyone who has been subscribed to it on their podcast feeds, it will remain there. You probably won't even notice the difference. The logo is very similar. it's just going to have a different title.

So yeah, there's one more thing. There's one more thing, Jeff, you're forgetting. This is the most important thing for people to listen. We make fun of each other a lot. Constantly. That makes sense. That's true. Sign up for that.

Yeah, it's worth it just for that. So investing for middle-aged dads didn't make the cut, I take it? Top three. We kicked around a lot of ideas. I know that was your favorite, Ryan, yeah. I liked that one. Yeah, I will say as a little tease

for the 2024 ending or not ending prediction show yeah reckless predictions i'm excited about that we're going to have both of you guys on you're going to be on with us we're going to have some other guests are going to be joining us too we're pretty excited about it yeah our last two episodes of the year will be fun we're going to do a reckless prediction show that'll go out the second to last saturday of the year and on the very last saturday of the year we're uh we did a fun portfolio contest this year we're going to do a new one next year just a one-year stock picking contest with a bunch of guest portfolios. I'm kicking the crap out of Jeff, by the way. All right, slow down. But anyway, so that'll be fun to listen to as well. And I think you

guys are going to play along this year. We'll have some other people too, but that'll be a fun thing to kind of track over the course of 2024. Yep. I sent in my picks for that. So that will be exciting. All right. That's going to do it, everyone. Thank you to Jason and Jeff. Let me hit the disclosure. We are not financial advisors. Anything we say on the show is not formal advice or recommendation uh ryan i jason jeff and any guests on the show may own securities discussed in this podcast thank you everyone again for tuning in and we'll see you next do you wish you could just hit skip on the worst parts of your life you know the same way you can skip an ad i get it i'm siaya and i live in ice cove i've made some questionable decisions that

didn't end up the way i planned and today i'm still figuring it out somehow things usually get worse before they get better. Apparently that's how I roll. So bundle up and come along for the bumpy ride. Stream a new episode of North of North Tuesdays on CBC Gem.