Nearly 250 investors converge on Los Angeles this past week
to hear Charles T. Munger — Warren Buffett's right-hand man—address
the annual meeting of a tiny legal-publishing and software company. Since
1977, Mr. Munger, the vice chairman of Berkshire
Hathaway, has been the chairman of a little-known firm called Daily
Journal. His public appearances are so rare and his remarks so entertaining and
illuminating that investors came from as far away as Alabama, Massachusetts,
Minnesota and Ontario to hear him speak.
Mr. Munger talked almost nonstop for two hours, lambasting
the financial industry, hailing the economic potential of China and, above all,
dispensing common-sense advice that anyone can benefit from. His central
message: Investors can reach their fullest potential only by thinking for
He regards 3G Capital, the Brazilian firm with which
Berkshire took over H.J. Heinz last year and which is seeking to merge Burger
King Worldwide with Tim Hortons of Canada, as "probably the
best in the world" at making "companies function better at lower
Fifty years ago next year, Mr. Buffett took control at
Berkshire. For that anniversary, Mr. Buffett is asking Mr. Munger to answer two
questions: "Why did it work? And will it continue?"
First, he said, other companies like GE long had a history
of moving [division leaders] around internally, and that's like asking an oboe
player in the symphony to perform on the piano and expecting the quality of the
music not to suffer. At Berkshire, great managers stay put.
Second, he stated that people chronically misappraise the
limits of their own knowledge; that's one of the most basic parts of human
nature. Knowing the edge of your circle of competence is one of the most
difficult things for a human being to do. Knowing what you don't know is much more
useful in life and business than being brilliant.
Mr. Munger had mentioned during the annual meeting that some
$120,000, apparently from a retirement-account distribution, had
"floated" into his account earlier in the week. He says he sees
nothing worth investing it in right now and hasn't bought an investment in his
personal accounts in at least two years. He is waiting for an irresistible
According to Mr. Munger, successful investing requires crazy
combination of gumption and patience, and then being ready to pounce when the
opportunity presents itself, because in this world opportunities just don't last
very long. Mr. Munger showed that in March 2009, when he bought 1.6 million
shares of Wells Fargo for Daily Journal at an average cost he estimates at
$8.58 per share. The stock was trading at around $51.50 this week.
Mr. Munger said after speaking to investors for two hours
nonstop, then presiding over a board meeting that ran for at least three hours
after that. Men half his age would have been ready for a nap, but he shows no
signs of slowing down.
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