we asked munger and buffett their thoughts on some
of the latest headlines in the business world
those that could have a lasting impact on how markets operate
beginning with credit suisse's five and a half billion dollar
loss stemming from its business with arcados capital management
think of how massively stupid that was
and of course
it was the lure of the really easy
money that the idiot was paying you
being the mid bram broker for a jerk
but he was a convicted insider trader that came out of
the craziest part of the hedge fund industry and they
were getting unusual profits by extending unusual credit
it was just the world was shouting at them crook
fool
and they didn't listen
they thought this is where the easy money is
crooks and fools
there's one rule
we've learned a long time ago
is that you can't make a good deal with a bad person
just forget it
now
if you think you can draw up a contract that
is going to work against a bad person
they're going to win
for one thing
they probably enjoy litigation
but
bertram hadaway as an entity or me personally or anything
we don't want to spend our life doing that sort of thing
and besides
the bad guys win that they know more games
they may lose eventually in the way
but it's no way to spend your life
Charlie
it wasn't just credit suisse that got pulled in by that
there were a lot of firms that were
doing business with arcados
and
yes
they were all foolish
but
but credit Swisse has managed to be the biggest fool of all
well
Becky
if you look back
a lot of competition for that order
in nineteen
honor
in nineteen thirty four
after the great crash
well
nineteen thirty two and three
they held these hearings
and they decided that unusual amounts of leverage
were one cause of the problem in the nineteen twenty nine
and that it opposed
it could pose dangers even to the economy
so they gave the federal reserve board
the right to establish how much people could
borrow against stocks margin requirements
which is a very good idea
it was a terrific idea
and they used
totally sound
the federal reserve between nineteen
thirty four and nineteen seventy three
use that power i think twenty three or twenty four times
they even raised margins to a hundred percent
but they were the regulators of determining whether excess
leverage might have systemic problems associated with
and then and and
the rule in nineteen seventy three or four was fifty percent
the rule today is fifty percent
it has in the last
40 plus years
first forty seven years
at twenty three changes
they went to one hundred percent
they went down to twenty
all kind
then it was a signal to the economy and all kinds of things
and essentially
Wall Street figured out how to get around that
they lobbied through changes in the law
yeah
so they could have unlimited leverage and keep
the transactions off the books and subject to
merky accounting
the banks would say we made it through this
we absorbed all the problems ourselves
and many of us you know won't even take a
substantial hit on the balance sheet for it
what do you do
there's an old story about the
all these banks that think they've done so well
these two guys are fighting with razors
one takes a big swipe
and the other guy says you missed me
and the guy says wait until you shake your head
so what would you tell regulators today
what would you do
well
the regulators aren't
but they need to change laws now
but
of course if you're running a gambling parlor
you want the big players to gamble more furiously
and that's what the securities business allowed people to do
it was a big mistake
it created a lot of misery
always
we don't want to suck people into
gambling way more than they can afford and you
get in the clearance there were clearance risks
in the thing the whole market was in chaos
the people who are making money out of
this unreasonable extension of credit
argue for it and nobody's speaking against it
the last time around we got the correct regulation
that came and stayed for a long time on margin debt
only because we had the worst depression in
the history of the English speaking world
that's what it took to get a little sense into the politicians
this time around
it just the total return swap
so what fixes it though
i mean
there have been suggestions that
there needs to be more transparency
there needs to be really a crackdown on
allowing people to lever up like this
what's the correct answer
was never to have allowed most of this stuff to start
you allow the wrong kind of stuff to start and it runs on you
it is tough to be very very very tough to be a regulator
to really go after the big stuff
you're attacking
the profit center of institution after
institution after institution
the prime brokerage thing by its very nature means you're you're
specializing in lending lending to the big swingers
and of course it's dangerous
and the rules they violated
the same guy was doing four or five brokers at once
and of course he was buying stocks to
keep them up to bear margin calls
once you start doing that
you're headed for
ugly ending and of course it happened
but do you think that it would take a systemic
breakdown before changes would actually get implemented
again like you reference with the great depression
the last time it took the worst depression in
the English speaking world in all history
that's what it took to get the last correction
i certainly don't want that
a wise regulator
but a wise regulator stops this stuff before it starts
it's very hard to stop
what interests me in this is that the communist
Chinese behave the way i am talking in favor of
and our own wonderful free enterprise economy is
letting all these crazy people go to this gross excess
the people who are not avoiding it are the communist Chinese
they step in preemptively to stop speculation
Charlie you said communist China is doing all the
things that we should be doing right now and i can't
help but think of what they've done to Jack ma
what about what they've done to Jack ma
he's kind of disappeared as
well yes but Jack ma is one of the swingers
so he just cut his
they said to hell with you
he basically got gave a speech
when he said to a to a one party state
well you guys are bunch of jerks don't know what you're doing
and i know what i'm doing and i want to do it better
and he was gonna wade into banking and no
rules and just do whatever he pleased
he also brought Chinese
a lot of money
the Chinese communists did the right thing
they just called in Jack Mao and
said you are gonna do it Sonny
and and i wish we had a
i don't want all of the Chinese system
but i certainly would like to have
the financial part of it in my own country
although
ant financial was bringing banking to a
huge unbanked population before
i mean
there were things that they were doing that
i know
but you don't want a swing her to run
the banks have the implicit guarantee of the government and
you don't you don't want to let any swinger run a bank
let the swingers do something else
who are the swingers here in this country
well
i don't want to start naming swingers
they'll they'll appear
the way the story has kind of been painted is that it's the
Chinese communists who don't want to lose power and some of the
capitalists who have maybe gained too much power under
under at least what the communists might like to see
both groups want more power not less
but
oh
politicians in this country want more power
the rich want more power
yes
no what's so
it's the same in China
yeah
but the banking system
take shadow banking which we have in this country
people say well it's the unbanked
well a whole leverage buyout lending operation
frankly
left the banks and went to shadow banks in our own country
it hasn't caused any big trouble yet
but i'll be amazed if it doesn't
well
Jamie dimon has said that
and like look out for the some of the
fintech areas that they're not
yes
i agree with Jamie dimon on that
i don't think allowing all these lenders in the world
to act as though they're banks is a good idea
which maybe we should talk about Robin hood
and some of the areas that have come up
Robin hood is beneath contempt
why
what's a gambling parlor
masquerading as a respectable business
and the pushback on that is always this is a way of getting
average people into the market who did not have access
well
you don't want to say you're a gambling parlor
but it is a gambling parlor
it's not incurring people
encouraging people to buy
a very very very low cost index fund
and hold it for fifty years
i will guarantee you that you will
not walk in there get that advice
instead you'll get advice on how you can trade
options and and and and and they'll tell you that
it's telling people they aren't paying commissions when
the commissions are simply disguised in the trading
it's basically a sleazy
disreputable operation
and the interesting thing about it is that some good people you
would be glad to have marry into your family have backed it
when we return
it's one of the biggest companies in the world
but its headquarters is home to just two dozen people
and it has almost none of the conventional
corporate structure found at most public companies
but first Warren Buffett and Charlie Munger
grew up just miles from each other in Omaha
how they met next
both of our wives thought my god another one
before Ben and Jerry Oprah and Gail
or Sergey Brin and Larry page
there was Warren Buffett and Charlie Munger
born and raised in Omaha Nebraska
both worked at Buffett's grandfather's grocery store
but their paths didn't cross until Buffett was
twenty nine years old and munger was thirty five
to understand the most successful couple in business
it's best to start at the beginning and how they first met
well
want to tell us about it
go ahead
there was a a doctor couple very prominent in Miami
and his name was Eddie Davis
her name was Dorothy Davis
and it was Mrs Davis that called me naturally
she did everything
she said we've heard that you manage money
and we'd be kind of interested in listening to your story
about how you how you do it and what we might do with you
so i went over and
i talked to him and i was all for myself and i yeah i was all
now
i couldn't talk fast enough about stocks in those days
and and Dorothy Davis
very smart and she would listen every word
and the doctor was kind of over in the corner
smoking a yo yo or something
and i went out and paid much attention
and the wife looked over the doctor and he said i'm
gonna give him a hundred thousand dollars
and i was managing about five hundred thousand at the time
so it was a big deal
and in a very nice way
i said Dr Davis
i said
you know you really haven't paid much
attention to what i've been saying everything
i kind of like to know why you're
giving me this hundred thousand
i'm much more modest than that
way i edged into it
and Dr Davis looked at me and he said well
he says you remind me of Charlie Munger
i said well i don't know who Charlie munger is but i
like him and he gave me a hundred thousand dollars
and and then they told me about Charlie and
what what that young kid i would be over there asking him
questions on medicine and giving him lectures at all
i mean
they clearly loved him
and it sort of became their mission that that
sometimes they wanted to get me and Charlie together
so Charlie in nineteen fifty nine his dad died
and he came back to Omaha his mother lived there
and the davises really got us together
and so they arranged a dinner
about five minutes into it
Charlie was sort of rolling on the floor laughing at his own
jokes which is exactly the same thing i did so i'm not
going to find anybody like this and we just hit it off
Charlie what did they first tell you about warren
how did they describe him to you
well
the davises were like a second set of parents to me
there were two sets of three children
my father's best friend was Eddie Davis
my mother's best friend was Mrs Davis
i lived in that house back and forth as though
were an alternate house of the mongers
and Mrs Davis gave me the honor of switching my legs
when i misbehaved just as if i were one of her own
you probably gave her plenty of cause too
so anything the davises asked me to do i was gonna do
what did you think of warren when you first met him
we got along fine
both of our wives thought my god another one
what i like about warren is the irreverence
we don't have automatic reverence for the
pompous heads of all civilization
is that something that came with age
or you you were born that way
we were kind of always the way
we were a little more extreme
i've learned to behave a little bit better
Charlie we had learned much better
but you know i just know instantly
Charlie was the kind of guy that i was gonna
like him and i was gonna learn from
but you know it wasn't anything
calculated decision or anything like that
that it was a natural
and and
we have had nothing but fun
fun both as friends and business partners
a few years after meeting munger
buffett
who had grown his investment partnership
into more than a quarter million dollars
found Berkshire Hathaway
he started buying stock in the textile mill in nineteen
sixty two and took ownership of it in nineteen sixty five
around the same time
munger had given up his career as a lawyer and
had been running his own investment firm
that is
until buffett convinced him to
shutter it and join him at Berkshire
so how did the business relationship start
well
warren had scorned for my way of making a living
and he was correct in that
it took me a long time to wise up that he had had
a better way of making a living than i did
but he finally convinced me that
i was wasting my time
as a lawyer
yeah
i thought it was OK as a hobby
but not the real way to spend this time
he more or less decided to duplicate in Los Angeles what i was
doing in Omaha which is great
we just connected
and we talked a long time on the phone when
it was expensive to talk on the phone
i didn't sit there with an hour glass
but with Charlie
i mean
my family could tell when Charlie was calling
we'd go on for a long long time
and we had fun in the early days
cause it was like hunting expeditions
and we had a lot of fun
all right
one of the world's biggest companies started as a textile mill
building an empire from gowns and gloves to stamps
we bought burt's stock and we bought blue chip
stamp stock and eventually put it all together
it looked like a plate of Spaghetti at one time
which was not good
over the sixty six years Warren
Buffett has run Berkshire Hathaway
he's made hundreds of deals
but believe it or not
he says acquiring Berkshire Hathaway
itself was his worst trade ever
the truth is i had now committed a major
amount of money to a terrible business
Berkshire Hathaway became the base for
everything pretty much that i've done since
so in nineteen sixty seven
when a good insurance company came along
i bought it for Berkshire Hathaway
i really should should have bought bought it for a new entity
because birchler Hathaway was carrying
this anchor all these textile assets
so initially it was all textile assets that weren't any good
and then gradually we built more things onto it
but always we were carrying this anchor
and for twenty years i fought the
textile business before i gave up
if instead of putting that money into the textile business
originally we just started out with the insurance company
Berkshire would be worth twice as much as it is now
from that first deal
buffett soon joined by Charlie munger
continued to buy stock in undervalued companies
the two say they often learned more from their
mistakes as was the case from one of buffett and
munger's first deals together blue chip stamps
well
we bought into blue chip stamps together with the third
we had a third friend there
reg garrand
and pretty soon the three of us together had most of the stock
and one thing i do another
blue chip stamps is not part of Berkshire
and of course the trading stamp business has disappeared
all the early businesses that we
owned together have disappeared
they didn't disappear they failed
they failed
yeah
but we took so much out of them before they
failed that we it still worked out fine for us
we evolved them
i mean that
but but but literally the the three base businesses
one by one all ended up disappearing
they went out of business
they didn't
they no longer fitted the society in a sense
and actually the very first deal that
that we joined in on was something called
diversified retailing which was in Baltimore
we bought an apartment store there
and we had Sandy god斯曼had ten percent
Charlie had ten percent
and in his partnership he had ten percent
and i had eighty percent in our partnership
and the three of us
and we always treated it as
you know
we may have had eighty
but we were equal partners
we put six million dollars into that
we called it diversified retailing
but we only had one department store chain
but we had built
and
we had a lot of fun with that
but we also saw after we were in a little while
department
this department store
as the ink dried we realized we'd made a big mistake
didn't take very long
yeah
why
what happened
well
you heard the old story
let me out of this trap
i've decided i don't like the cheese
we just wise up the fact that it was
one tough business we'd bought into
and the sellers had made the good decision
we've made a bad one
we had some terrific people who were running it for us
that were actually related to sandy's wife
and exceptionally honorable people
really honorable people and smart
if you're losing money in a business with a smart decent person
you know
we got a problem
i mean
that's the business
use the smart decent person to move them over some
other place and move the capital some other place
the company was not yet losing money
but we could see
we soon realized it was about to lose money
yeah
and so we we we sold the department store
it went out of business in nineteen eighty three
but huster's which was the silk stocking department store
they went out of business in i don't know
nineteen eighty five or something
they're they're gone
and the people there
quite understandably
wanted to build more branch stores
but you don't want to put more money into
a business that's destined to fail
now we put six million dollars of capital in that
and it was a dumb decision everything
but
that's six million
what would it be worth now
Charlie
they got four tenths of a share
great many billions
oh
it's tens of billions
yeah
now the department store had succeeded
we'd have a nice little business then
send us a little check
but because it failed
we made twenty five
oh
we made more than twenty five billion in that
it didn't look like a tie though
so when you realized it was a mistake
what did you do
how did you address it
we asked sandy
who was the best salesman among us
to go sell it
and we sold it
and we put the money into Berkshire
we got about ninety five percent of our money back
yeah
and we'd borrowed six million dollars in there
so now we had that
we bought Berkshire stock and we bought blue chip stamp stock
and eventually put it all together
look like a plate of Spaghetti at one time
which was not good
as it's complicated
and so we put them all together
and
you know i've still got stock and Charlie still got
stock that came out of diverse retailing as do a
number of my partners at from the old days
best thing that happened to us was that this place failed
obviously was a failure
why
what did you learn
leave quickly
yeah
and and use the capital someplace
Elsa
one thing we've learned is if it's clear that
something is a mistake is to fix it quickly
doesn't get better while you wait
when they built Berkshire
they created a new model
we have created the decentralization
because it suited our nature
absolutely
but first
everything buffett and munger need to know about life
they learned from two men
you want to have certain people in life
that you don't want to disappoint
i learned how hard it is to work for ten hours for two dollars
we shoveled wet concrete
deep heavy snow all around we had these
driveways and everything at the store
i went to my grandfather and he's well
how much should i pay you boys
is the dimes too little and dollars too much
the main thing we learned from the grocery store
was we didn't want to work in a grocery store
Hahaha
Warren Buffett and Charlie Munger agree a lot of their
outlook on life comes from their Midwestern upbringing
they credit their success to a deep sense of values
which have kept them grounded throughout their careers
associating with good people in business and in life
and to taking the high road in business transactions
if the high road is way more profitable
do you deserve a lot of credit for choosing it
people get the credit of the people
take it even when it's painful
both say these values were instilled at a young age
thanks to a key figure in each of their lives
long long ago
people don't even know about this
but we own two small insurance companies in Berlin that both
what broke
except we didn't let them go broke
i mean
in other words
we could have walked away from them and left
money because they were separate companies
and we didn't walk away
we have spent our lifetime
working at things to try and figure out ways to walk away from
debts or have things in indentures then play games like they
have you know with credit default swaps to figure out ways to
take advantage of the lenders
it's just not our game
if we owe money
we're going to pay it back
you said that it's
it would occur to you both that it was the more profitable way
but that's certainly not necessarily how the
majority of people in business think
it's the way our dads thought
in both cases
who the hell knows where you get your values from exactly
but basically
you have a few people that are teachers to you in life
and are not formal teachers
the most important people are generally your parents
i never heard my dad say to me in my life
be sure you pay all your debts
but i just watched how he lived
and you want to have certain people in
life that you don't want to disappoint
you don't want to have people that
that make you a better person than you otherwise would be
and Charlie does that for me now but my dad did it for me
early on i didn't know his dad but from everything i've
heard about his dad he had the same experience
Charlie tell me more about your dad
well
my father was a lawyer
and he was the son of another lawyer who became
the only federal judge in Lincoln Nebraska
which is Nebraska's capital city
and grandfather munger was a marvelous guy
great family man too
i was surrounded by high grade people
and my parents had good friends who are high grade people
so i had a very privileged life in terms of my associations
in fact i had terrible trouble by coming out
to Los Angeles and succeeding in life
i frequently thought
i couldn't ever get a group of friends over
as good as my father
i finally realized that they had a very
unusual bunch of friends in Omaha
and it was just a peculiar accident of history
so i was surrounded by a bunch of high grade people
i deserve no credit at all for
i was just forced to imitate the right people
is it both Charlie and i we like
talking to older people all our lives
i mean i like when i was seven or eight
years old talking to older people
and
now of course the problem is there aren't any older people
so i've run out of a constituency
but if i would go over to the Presbyterian church
singing the kids choir or something walking home i'd drop
in four or five houses where i talked to housewives so i'd
sit and talk to them i've always enjoyed talking to older
people i think Charlie was the same way
of course
when i
married the woman that helped me build this house
one of her relatives said after meeting me
she said
that is the oldest young man i've ever met i've ever known
but i think the
i always behaved like i was a hundred
years old even when i was young
but now we're the youngest old men
that you'll make a lot of money
Charlie just the relationship that you had with your dad too
oh
a marvelous relationship
and it's a great blessing
they have a wonderful mother and a wonderful father
and they have a bunch of wonderful friends
it was just i was very lucky
we've been able to associate with people that we really like
that's one of the luxuries of life
and we're still doing it
we've made a lot of money
but what we really wanted was independence
and we have had the ability since
pretty much little after we met financially
we could associate with people that we want to associate with
and if we just
if we associate with jerks
that was our problem
but we didn't have to
we've had that luxury now for my
you know
six sixty years or close to it
that beats twenty five room houses
and six cars or that stuff is
what really is great is if you can do what you
want to do in life and associate with the
people you want to associate with in life
and it it it's a
and we both had that spirit all the way through
how quickly can you figure out if somebody
is someone you want to associate with
it's amazing how quickly we do it and
how few bad mistakes we've made
so what do you look for
what do you know
i don't know exactly
yeah
how did i know Charlie
you know
i knew when i met Charlie
you know
after a few minutes in the restaurant that that you know
this guy was gonna be my life forever
you know
i mean
we were gonna have fun together
we were gonna make money together
we were gonna get ideas from each other
we were gonna both behave better
than if we didn't know each other
up next working from home and lessons from the pandemic
people don't know as much as they think they know
but the biggest thing you learn is
that a pandemic was bound to occur
and this isn't the worst
on the first Saturday in may from the nineteen seventies
to twenty nineteen Warren Buffett and Charlie Munger
could be found here on stage in Omaha Nebraska
good morning and
welcome to Berks half away
Woodstock is known as a capitalist
The size of Berkshire Hathaway's annual meeting ranges from
About 20 people in the country's indemnity lunchroom
To more than 400,000 people crowded in
The largest convention center in Omaha
until the Covid-19 pandemic forced the meeting like
everything else to go virtual in twenty twenty that
meant buffett ran the meeting without munger
this is the annual meeting of Berkshire Hathaway at
it doesn't look like an annual meeting
it doesn't feel exactly like an annual meeting
but this year
the two were back together on stage at a virtual
meeting held in Munger's hometown of Los Angeles
we sat down with them after the meeting in Munger's backyard
they reflected on the pandemic's impact on business
and on their own experiences working remotely
the last year you both had your lives change
pretty dramatically from the pandemic
Charlie i hear you're you're pretty adept at Zoom
oh
i've fallen in love with Zoom
how often do you talk to people on Zoom
at least three times a day
i made a deal in Australia
i think Zoom is here to stay
it's just
adds so much convenience
well
particularly in ninety seven
getting around
but charlie and i have talked a lot
obviously
this is the pandemic we're in
we haven't talked on zoom yet
i mean
he's a non-zoom guy
why don't you like zoom
today i'm going to invert famous immediately
which is terribly sad and extremely dangerous
the most dangerous thing that a young actor or
actress can do is to believe their own publicity
hmm
because shelf life
Odds changed to probabilities
Iuestisetat changed to ideas displaced
Ark changed to arcade
And changed to and ceo
opitdoesnttakemuchthat changed to screenthattheyarelookinginamirrorabsolutelyinamirrorandit sabeginningofalifelongromanceandthehandisoutunderthemirroroutofshotbecause
that
Yeah that changed to money yeah that
Edea ipatiywea ideaIpatmyself
Hat changed to bad
Hea changed to therapy
beat on the desk and i find the telephone a
very satisfactory instrument i mean
so how does life change post pandemic
how does work change
and how does it's go back to normal
i guess what do you think happens
well i think a lot of business travel will never come back
is corporation after corporation deciding one meeting a year
two meetings a year
in person and the rest zoom
and i think that's here to stay
and of course what's happened to office demand is just
think of the agonies in that field now and a lot of people have
found they don't need to be there i think all kinds of things
are going to happen that we don't go back to what we did before
some of our businesses will change a lot and
some of them won't change hardly at all
it'll be interesting
i would say this in terms of the whole pandemic
in terms of predicting both the
economic and how the virus would behave
you know
it's surprised us in a lot of ways
it's surprised you know at the
and we still don't know
we know a lot about this fire
there's a lot of things we don't know yet
and if you look at the graphs of how it's
hit different countries and everything
it just shows you how a very advanced economically world
can get disrupted by something that in ways that even when
you're in it you can't predict and the economic
impact has been this extremely uneven thing where i don't know
how many but many hundreds of thousands or millions of
small businesses have been hurt in a terrible way
but most of the big companies have
overwhelmingly have done fine
unless they happen to be in cruise lines or hotels
but some people did better than we did
again the Chinese
simply
totalitarian state
they simply shut down the country for six weeks
and that turned out to be exactly the right thing to do
and they didn't like any contact
you picked up your groceries in a box in the apartment
and that's all the contact you had with anybody for six weeks
and it was all over
they kind of went back to work
it happened
they did it exactly right
but there are other cases of shutdowns
and the shutdowns really
they thought they were model examples
and then now they're they're they're
they're experiencing problems
and then you had other countries
you know
yeah
like Sweden Sweden says we're not gonna do it
and it seemed to be working fine for a while
and then this has been very very very
unpredictable
very difficult
yeah
and it's not over
i mean
in terms of the unpredictability
and in terms of the economic
it's been very unpredictable
but it's worked out better than people anticipated
for most people and most businesses
and it's just
for no fault of their own it's just decimated all kinds
of people and their hopes and that and that was we want
to you know the government should be helping
we're prosperous
it didn't create just
a return to normal
it created fabulous success they didn't anticipate
the auto dealers are coining money
they wouldn't have had except for the pandemic
and all of the dealers we have partners in each dealership
they very sincerely felt that they were going to have one
hell of a problem in March and April some might have
wanted to go in for the assistance from the government
that wouldn't let them because they had a rich parent
but but
they honestly believe it
we honestly believed it
we we didn't know what was gonna happen
with that jets in terms of the demand
and it's been just been different than a lot of
people thought the banks were scared
stiff in the middle of March
i mean
they saw everybody taking down their lines of credit
why do people take down their lines of
credit when they don't need it
because they're afraid it won't be there next week
and if you get enough people believing
something won't be there next week in banking
it won't be there next week
absent the federal reserve
one thing that maybe surprised you most
something you learned the last year
well
i learned that people don't know as
much as they think they know
but the biggest thing you learn is that
a pandemic was bound to occur and this isn't
the worst one that's imaginable at all
society has a terrible time preparing for things that are
remote but are possible and will occur sooner or later
there'll be another pandemic
we know that
we know there's a nuclear chemical
biological and now cyber threat
and we know that each one of those has terrible possibilities
and we do some things about it
but it's just not something that society seems
particularly capable when fully coming to grips
with the cyber threat that we've just started and
look at the damage that's already been done
Charlie and i have been ungodly lucky
many ways
but the luckiest thing was actually
being around at this time and place
and we also had these problems on how to
two hundred countries with over seven and a half billion
people and a lot of tensions between them and all sorts of
things and different systems of selected governments and all
that and how do we actually do this so that mankind
fifty and a hundred and two hundred years from
now should enjoy the incredibly better life that
could be enjoyed while not screwing it up
Warren Buffett and Charlie Munger have spent half a
century buying companies and then leaving them alone
the do nothing secret to their success
we have accidentally created a very interesting experiment
in how well a really big place can be run on a very non
bureaucratic basis with extreme decentralization
it's one of the ten biggest companies in
the world by market capitalization
its three hundred and sixty thousand
employees work in offices around the globe
but Berkshire Hathaway's sprawling operations are
headquartered here from two floors leased in a building
in Omaha managed by a staff of just two dozen people it's
different because of the two men at the top Warren Buffett
and Charlie Munger we have accidentally
created a very interesting experiment in how well a
really big place can be run on a very non
bureaucratic basis with extreme decentralization
we're like a test case for how extreme you can make it
and i would say so far
that's worked better
we get more advantages than
disadvantages out of our hands off management
that's true
we get very few people who want to copy us
no no no nobody wants to copy us
and if people study us
they'd find a way we're doing it
it works way better
yeah
it had certain disadvantages
yes
when you did trust people
occasionally trust is is is is misused but net it's worked
it's a useful experiment that we've done
and i confidently predict that someday somebody will find out
that some of this dumb bureaucracy could
be eliminated we'd be better off
just as we found we can eliminate some business travel
we're going to find we can get rid of some dumb bureaucracy
American corporations
it works at large scale
but it doesn't work to produce the kind of returns that me
it is like we've got something that
produces extraordinary returns
but it can be a very decent business at scale
operating in a way
do you think we've done better than we would have been
if we'd copied the centralized management system
i wouldn't have wanted to work there
no
i'd resign or have been fired
no i would i'd rather be in a jail cell than a few people
that were interesting and plenty of reading material than
than what you're saying is we may have done it we may have
created the decentralization because it suited our nature
absolutely but we've accidentally created an experiment we've
demonstrated that can can work on a big scale
that will eventually prove useful i think
you two have been friends for over sixty years
what's one thing that you really admire about the other
well
i like the humor and all that
but dependable is really important
Warren what do you admire about Charlie
really just the kind of person he has been
i mean
he has contributed to given individuals and also to society
he goes
well beyond buying a stock and selling it higher
he's designed dormitories and helped build them
he's worked at hospitals and
to understand how they can be made better and
serve more people and do it at less cost
that's an uphill fight all the time
but Charlie has worked on big
problems and he's and doesn't need to
and Charlie has never shaded anything he's told me
since we met in terms of presenting it to me in a
different way than reality or he's never done
anything i've seen that's self serving in terms of
being a partner any kind of way
he makes me better than i would otherwise be
i don't want to
you had the same thing in reverse
well
it works
it does work that way
i mean
it's better to associate with people
who are better than you are
i mean it really is
it really helps
business partners for more than half a century
Warren Buffett and Charlie Munger are lifelong teachers
corporate executives who lead in an unconventional manner and
who will certainly be studied for generations to come
but with almost one hundred and ninety
years of experience between them
it is the lessons in life that they've shared
through their friendship that may be more lasting