Name: Insights: What Buffett Learned from Munger
Uploaded: 2020-02-07
Duration: 3 min 3 s
Description: Berkshire Hathaway CEO Warren Buffett talks about how his business partner Charlie Munger analyzes business more thoroughly than most investors. (April 2014)

[MUSIC PLAYING] So, Charlie, where did this thinking about investing-- that you don't buy cheap bargains, but you look for really good companies-- come from? Well, I have a habit in life, which is I look at it, and I observe what works and what doesn't. And I'd seen so many idiots get rich in easy business. So, naturally, I wanted to be in an easier business. It was very interesting to me, when I first met Charlie, he had a number of clients. His father had a number of clients. And he had thought about the businesses of each one of those clients probably in a much more perceptive way than most of them had thought about them themselves. I mean, he was incapable of not thinking through what the realities of the situation were, and what could be done about it. And he just analyzed things. What would work, and what wouldn't, and why. It's so simple. So what are a couple of those early investments that were reflective of this new philosophy of buying really good companies? Well, in terms of stocks, something like American Express would have been. They'd gotten in some trouble, but it was a wonderful business. And there were some others. In terms of buying the entire business, I probably didn't realize what a wonderful business our first insurance purchase was. But I know it was a good business. The first real business we bought that way was See's Candy. I mean, it was really an outstanding business. And I still had enough elements from my past that I really didn't want to pay the last few million dollars, and sure-- Few million? You didn't want to pay the last $25,000. Charlie reminded me that I was slipping back into the Stone Age again, and got me to move. So let's talk a little bit about your philosophy of managing companies. Berkshire Hathaway does not buy companies that have bad managers, right? Which is a little bit unusual. I mean, a lot of people like to buy good companies with bad managers, and then replace them. We tried it. You don't do that? We tried it with predictable results. And life is so much more fun this way too. I mean, who wants to spend their life trying to change people from their natural approach to life? If you want to ruin your life, spend it trying to change your spouse. Yeah. It's really stupid. Yeah. Marrying somebody to change them is crazy, and I would say hiring somebody to change them is just as crazy. And becoming partners with them to change them is crazy. Warren always used a phrase I really liked. He said, we make silk purses out of silk. Yeah, forget the sow's ears. We don't know how to make silk purses out of sow's ears. Never will. 

Insights: What Buffett Learned from Munger

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Charlie Munger analyzes businesses thoroughly.

What Buffett Learned from Munger

Berkshire Hathaway CEO Warren Buffett talks about how his business partner Charlie Munger analyzes business more thoroughly than most investors. (April 2014)

So, Charlie, where did this thinking about investing That you don't buy cheap bargains. But you look for really good companies. Well, is it from I have a habit in life, which is I look at it and I observe what works and what doesn't. I've seen so many idiots get rich and easy business. Naturally, I wanted to be an easier bit. Charlie is very interesting to me. When I first met Charlie, he has a number of clients. Father had a number of clients and he had thought about the businesses of each one of those clients, probably in a much more perceptive way than most of them thought about themselves. I mean, it was incapable of not thinking through what the realities of the situation were. You know what could be done about it. And he just analyzed what would work in what wouldn't then why it's so simple. So what are a couple of those early investments that were reflective of this new philosophy of buying really good Cos Well, in terms of in terms of stocks in something like American Express would have been that I've gotten in trouble, but it was a wonderful business and there were some others in terms of buying the entire business. Uh, I probably didn't realize how what a wonderful business. Our first insurance purchased Woz. But I know it was a good business. The first real business we bought that way with See's candy. I mean, it was really an upstanding business, and and I still have enough almost from my past that I really didn't want to pay the last a few $1,000,000. And you mean you didn't want to pay the last 25,000? And Charlie reminded me that I was slipping back in the end of the Stone Age again and got me to move. So let's talk a little bit about your philosophy of managing Cos um, you don't Berkshire Hathaway does not buy companies that have bad managers right, which is a little bit unusual. I mean, a lot of a lot of people like to buy good companies with bad managers and then replace them. We tried, I don't do that. We tried and with predictable results and life is so much more fun this way to what's spend their lives trying to change people from their natural approaches. You want to ruin your life. Changed right to spend that dream that changers Wells. Yeah. It's really stupid. Yeah, you know, it's very somebody to change him is crazy. And I would say hiring somebody to change This is crazy. Yeah. On becoming partners with him changing this crazy warm had always used a phrase I really like you said we make silk versus out of silk. Forget the hausers. We don't know how to make so first, you never will.