#286 Warren Buffett and Charlie Munger

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Jan 16, 2023

Dive into the timeless wisdom of Warren Buffett and Charlie Munger as they simplify complex investment ideas. Discover the importance of critical thinking and understanding human behavior in market cycles. Uncover the significance of company culture and effective communication in achieving entrepreneurial success. Learn how interest rates affect asset valuations and why continuous learning is vital for sustainable growth. These legendary figures emphasize that making mistakes is part of the journey, urging a balanced approach between passion and profit.

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ADVICE

Surviving Mistakes

Structure your life and business to withstand inevitable mistakes.
Wrong decisions are part of life; making them work is a mark of success.

ADVICE

Gaining Wisdom

To gain wisdom, dedicate yourself to consistent reading and thinking.
Focus on connecting your reading to fundamental ideas.

ADVICE

Schedule Thinking Time

Schedule time for focused thinking, avoiding constant busyness.
Most people overschedule like a dentist, neglecting deep thought.

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Sol Price

Retail Revolutionary and Social Innovator

Robert E. Price

This book details the life and legacy of Sol Price, who transformed the retail industry with innovative concepts such as warehouse shopping and membership-based pricing. Starting with his early life and his transition from a successful lawyer to a retail entrepreneur, the book chronicles the establishment of FedMart in 1954 and later the Price Club, which influenced retail giants like Walmart, Kmart, and Costco. It highlights Sol Price's emphasis on ethical business practices, fair employee treatment, and customer-centric policies, as well as his innovative strategies such as self-service shopping, consolidation of merchandise, and low-margin pricing. The book also explores his impact on the retail landscape and his later contributions to gentrification of dilapidated areas[2][4][5].

The Almanack of Naval Ravikant

A Guide to Wealth and Happiness

Naval Ravikant

Eric Jorgenson

Tim Ferriss

The Almanack of Naval Ravikant is a compilation of Naval's thoughts on fundamental principles for happiness, wealth creation, decision-making, and personal growth. The book distills his insights from the last ten years into practical advice, guiding readers on how to walk their own unique path toward a happier, wealthier life. It emphasizes the importance of compound interest, leveraging resources, and productizing oneself. The book also delves into key aspects of life, including relationships, health, and purpose, offering a holistic approach to wealth and happiness.

Personal history

Katharine Graham

In 'Personal History', Katharine Graham recounts her extraordinary life, from her childhood in a wealthy but emotionally isolated family to her marriage to the charismatic Philip Graham, who struggled with manic-depression and eventually committed suicide. The book chronicles her transformation from a housewife to the chairman of The Washington Post, detailing her involvement in significant historical events such as the Pentagon Papers and the Watergate scandal. Graham's memoir is praised for its frankness, candor, and historical significance, offering insights into her personal struggles, her professional growth, and the evolution of the women's movement and the media industry.

Michael Jordan: The Life

Roland Lazenby

This biography, written by Roland Lazenby, delves into the life of Michael Jordan, from his early days in North Carolina to his rise as a global ambassador for basketball. It covers his growth from a skinny rookie to a legendary player and business icon, highlighting his ruthless competitiveness and insatiable drive. The book draws on Lazenby's personal relationships with Jordan's coaches, friends, teammates, and family members, as well as interviews with Jordan himself, to provide a detailed and compelling portrait of the man behind the myth.

The essays of Warren Buffett

Lessons for Corporate America

Warren Buffett

This book is a comprehensive collection of Warren Buffett's annual letters to Berkshire Hathaway shareholders, edited by Lawrence A. Cunningham. It provides valuable insights into Buffett's investment philosophy, corporate management, and business strategies. The letters are organized into thematic chapters, making it easier for readers to understand Buffett's views on various topics such as value investing, executive compensation, and market fluctuations. The book is praised for its clarity, wisdom, and practical advice, making it a definitive source for understanding Buffett's approach to business and investing.

Bourdain

The Definitive Oral Biography

Laurie Woolever

This book provides an unprecedented behind-the-scenes look into the life of Anthony Bourdain through the stories and recollections of his closest friends, colleagues, and family members. It covers his childhood, early years in New York, the genesis of his memoir 'Kitchen Confidential', and his emergence as a writing and television personality. The narrative is built from interviews with people such as Eric Ripert, José Andrés, Nigella Lawson, W. Kamau Bell, and his brother and late mother, showcasing the many sides of Bourdain—his motivations, ambivalence, vulnerability, blind spots, and brilliance. The book also includes a treasure trove of photos from Bourdain's life and is a testament to his remarkable life and legacy.

Invent and Wander

The Collected Writings of Jeff Bezos

Jeff Bezos

Walter Isaacson

This book provides a rare glimpse into how Jeff Bezos thinks about the world and where the future might take us. It spans topics across business and public policy, from innovation and customer obsession to climate change and outer space. Written in a direct, down-to-earth style, it offers readers a master class in business values, strategy, and execution, covering principles such as the importance of a Day 1 mindset, long-term thinking, customer obsession, and the role of culture and failure in innovation.

Distant Force

A Memoir of the Teledyne Corporation and the Man Who Created It

George A. Roberts

Robert J. McVicker

This book is a detailed account of how Henry Singleton created and built the Teledyne Corporation. Written by George A. Roberts, who was with Singleton every step of the way, it describes the first decade of aggressive acquisitions and diversification, the addition of financial institutions to the company's technical mix, and the controversial program of aggressive stock buy-backs. The memoir also covers the spin-off of certain entities to shareholders, whistle blower suits, hostile takeover attempts, and the friendly merger with Allegheny Steel Company. The book includes a CD with stories intended to explain the company's technologies to non-technical shareholders.

All I Want to Know Is Where I'm Going to Die So I Can Avoid Going There

How to Live a Longer, Healthier Life

James P. O'Shaughnessy

In this book, James O'Shaughnessy applies his analytical skills to the field of health and longevity. He uses data and research to identify common causes of death and provides strategies for avoiding them, aiming to help readers live longer and healthier lives. The book is an extension of his quantitative approach, this time applied to health rather than finance.

What I learned from reading All I Want To Know Is Where I'm Going To Die So I'll Never Go There: Buffett & Munger – A Study in Simplicity and Uncommon, Common Sense by Peter Bevelin.

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Follow one of my favorite podcasts Invest Like The Best and listen to episode Mitch Lasky—The Business of Gaming

Follow the podcast Gamecraft to learn more about the history of the video game industry.

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[2:01] Buffett and Munger have a remarkable ability to eliminate folly, simplify things, boil down issues to their essence, get right to the point, and focus on simple and timeless truths.

[3:00] The Almanack of Naval Ravikant: A Guide to Wealth and Happiness by Naval Ravikant and Eric Jorgenson. (Founders #191)

[4:00] Warren Buffet or Charlie Munger are the very wise grandfather figure that I never had.

[5:00] To try to live your life totally free of mistakes is a life of inaction. —Warren Buffett

[5:00] The sign above the players' entrance to the field at Notre Dame reads ´Play Like a Champion Today.' I sometimes joke that the sign at Nebraska reads 'Remember Your Helmet.' Charlie and I are 'Remember Your Helmet' kind of guys.' We like to keep it simple. (You must structure your life and business to be able to survive the inevitable bad decisions you’re going to make.)

[5:00] Wisdom is prevention. —Charlie Munger

[6:00] We make actual decisions very rapidly, but that's because we've spent so much time preparing ourselves by quietly sitting and reading and thinking. —Charlie Munger

[7:00] If you get into the mental habit of relating what you're reading to the basic underlying ideas being demonstrated, you gradually accumulate some wisdom. —Charlie Munger

[7:00] At Berkshire, we don't have any meetings or committees, and I can think of no better way to become more intelligent than sit down and read. I hate meetings, frankly. I have created something that I enjoy: I happen to enjoy reading a lot, and I happen to enjoy thinking about things. —Warren Buffett

[7:00] We both hate to have too many forward commitments in our schedules. We both insist on a lot of time being available to just sit and think. —Charlie Munger

[8:00] I need eight hours of sleep. I think better. I have more energy. My mood is better. And think about it: As a senior executive, what do you really get paid to do? You get paid to make a small number of high-quality decisions. — Invent and Wander: The Collected Writings of Jeff Bezos, With an Introduction by Walter Isaacson. (Founders #155)

[9:00] I think people that multitask pay a huge price. When you multitask so much, you don't have time to think about anything deeply. You're giving the world an advantage you shouldn't do. Practically everybody is drifting into that mistake. I did not succeed in life by intelligence. I succeeded because I have a long attention span. —Charlie Munger

[9:00] Jony Ive on Steve Jobs: Steve was the most remarkably focused person I’ve ever met. (Video)

[11:00] It is just that simple. We've had enough good sense when something was working well, keep doing it. The fundamental algorithm of life: repeat what works. —Charlie Munger

[13:00] ALL THE BUFFETT AND MUNGER EPISODES:

Berkshire Hathaway Letters to Shareholders 1965-2018 by Warren Buffett. (Founders #88)

The Snowball: Warren Buffett and the Business of Life by Alice Schroeder. (Founders #100)

The Tao of Warren Buffett by Mary Buffett & David Clark. (Founders #101)

Buffett: The Making of an American Capitalist by Roger Lowenstein. (Founders #182)

A Few Lessons for Investors and Managers From Warren Buffett by Warren Buffett and Peter Bevelin. (Founders #202)

The Essays of Warren Buffett by Warren Buffett and Lawrence Cunningham. (Founders #227)

Tao of Charlie Munger by David Clark (Founders #78)

Charlie Munger: The Complete Investor by Tren Griffin. (Founders #79)

Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger. (Founders #90)

Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe. (Founders #221)

[14:00] Buffett: It's an inversion process. Start out with failure, and then engineer its removal.

[15:00] Munger: I figure out what I don't like instead of figuring out what I like in order to get what I like.

[15:00] Repetition is the mother of learning.

[17:00] Munger: You can see the results of not learning from others' mistakes by simply looking about you. How little originality there is in the common disasters of mankind. (Business failures through repetition of obvious mistakes made by predecessors and so on.)

[18:00] Munger: History allows you to keep things in perspective.

[18:00] Everything that needs to be said has already been said. But since no one was listening, everything must be said again.

[19:00] Berkshire was a small business at one time. It just takes time. It is the nature of compound interest. You cannot build it in one day or one week.

[20:00] Pretend that every single person you meet has a sign around his or her neck that says, “Make me feel important.”

[22:00] Buffett: In almost 60 years of investing we found it practically useless to give advice to anyone.

[23:00] Munger: One of my favorite stories is about the little boy in Texas. The teacher asked the class, If there are nine sheep in the pen and one jumps out, how many are left? And everybody got the answer right except this little boy, who said, None of them are left. And the teacher said, You don't understand arithmetic. And he said No, teacher. You don't understand sheep.

[25:00] Quite often Henry simply talked about his philosophy of running a corporation and the various financial strategies that he came up with as he sat in his corner office each day, often working at his Apple computer. He was a brilliant business strategist, just as he was a brilliant chess strategist and he came up with many creative ideas, ideas that were sometimes contrary to the currently accepted methods of managing a large corporation that prevailed in those days.

“He always tries to work out the best moves," Shannon said, "and maybe he doesn't like to talk too much, because when you are playing a game you don't tell anyone else what your strategy is." — Distant Force: A Memoir of the Teledyne Corporation and the Man Who Created It by Dr. George Roberts. (Founders #110)

[28:00] Buffett: The difference between successful people and very successful people is that very successful people say no to almost everything.

[29:00] If you want to know whether you are destined to be a success or a failure in life, you can easily find out. The test is simple and it is infallible: Are you able to save money? If not, drop out. You will lose. You may think not, but you will lose as sure as you live. The seed of success is not in you. — James J. Hill: Empire Builder of the Northwest by Michael P. Malone. (Founders #96)

[31:00] Buffett: Life tends to snap you at your weakest link.

[35:00] Sol Price: Retail Revolutionary & Social Innovator by Robert E. Price (Founders #107)

[38:00] Paul Graham’s essays (Founders #275-277)

[39:00] I'm very suspect of the person who is very good at one business, who starts thinking they should tell the world how to behave on everything. —Warren Buffett

[42:00] The Essays of Warren Buffett by Warren Buffett and Lawrence Cunningham. (Founders #227)

[44:00] This life isn't a greenroom for something else. He went for it. —Bourdain: The Definitive Oral Biography by Laurie Woolever.

[44:00] Buffett: We're here on the earth only one time so you ought to be doing something that you enjoy as you go along and you can be enthusiastic about.

[48:00] Personal History by Katherine Graham. (Founders #152)

[49:00] The problem is not getting rich, it is staying sane. —Charlie Munger

[54:00] Learning is not memorizing information. Learning is changing your behavior. Most people can’t learn from the experiences of other people: Charlie and I don't expect to win you over to our way of thinking—we've observed enough human behavior to know the futility of that, but we do want you to be aware of our personal calculus.

[57:00] We are individual opportunity driven. Our acquisition technique at Berkshire is simplicity itself: We answer the phone.

[1:00:00] A brand is a promise. —Warren Buffett

[1:01:00] Obsess over customers. Buffett said this about Amazon in 2012: Amazon could affect a lot of businesses who don't think they will be affected. For Amazon, it is very hard to find unhappy customers. A business that has millions and millions of happy customers can introduce them to new items, it will be a powerhouse and could affect a lot of businesses.

[1:03:00] Munger: We should make a list of everything that irritates a customer, and then we should eliminate those defects one by one.

[1:04:00] Most companies, when they get rich, get sloppy.

[1:05:00] Munger: One of the models in my head is the 'Northern Pike Model. You have a lake full of trout. But if you throw in a few northern pike, pretty soon there aren't many trout left but a lot of northern pike. Wal-Mart in its early days was the northern pike. It figured out how the customer could be better served and just galloped through the world like Genghis Kahn.

[1:09:00] Practice! Michael Jordan: The Life by Roland Lazenby. (Founders #212)

[1:10:00] Market forecasters will fill your ear, but they will never fill your wallet.

[1:11:00] We don't have any new tricks. We just know the old tricks better.

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