The Berkshire Beat: December 8, 2023
All of the latest Berkshire Hathaway news and my must-reads of the week!
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Heartfelt tributes and remembrances continue to pour in from the people who knew Charlie Munger best:
Ron Olson: “Today, the world has lost a giant, and our firm has lost one of its founders, a man whose name we proudly bear. While Charlie’s vision, philanthropy, and ability to tell it like it is are known to all, he was to us a dear and generous friend. He will be missed, but his values will live on, and that is great comfort at this time.”
Li Lu: “[Charlie] insisted on making money in the most morally sound way, entering transactions only when, if positions were reversed, he would comfortably take the other side. He sought worldly wisdom through life-long learning. He guided life with rationality devoid of mental deficiencies such as envy, resentment, and self-pity. He faced and persevered through countless adversities with stoicism and equanimity. As he gained in wealth and stature, he showed little appetite for the trappings of that success, and instead spent his wealth on worthy causes and tirelessly spread his worldly wisdom to those who would listen, often with humor. He remained deeply engaged with family, friends, partners, and the broader world with loving assiduousness through his last days.”
Joseph Grundfest (Stanford Law School): “Charlie was a real character and could be a force of nature: a magnitude 9.0 earthquake, category 5 hurricane, and 1,000-year flood all rolled into one. He was also generous and thoughtful beyond belief. The dormitories he contributed to Stanford, now affectionately known as Mungerville, transformed the culture of Stanford’s graduate community in a profound and very beneficial way.”
Mohnish Pabrai: “Berkshire Hathaway owns NetJets, but Charlie liked to travel economy. He did that because he said he did not want to lose the common touch. He wanted to keep interacting with Joe Public. Sometimes, he would go for a Costco board meeting and he’d be on a Southwest Airlines flight — back of the plane, middle seat. He’s a big guy [and would be] squished in. He had a book with him, [so] he didn’t care. It was irrelevant. He would take an interest in the people on both sides [of him].”
And, now, for the latest news and notes out of Omaha…
The Stripe Press re-release of Poor Charlie’s Almanack came out on Tuesday (print and digital) and provides us with another excellent chance to immerse ourselves in the wit and wisdom of the late Charlie Munger. Best of all, it’s free to read on the Stripe Press website — and even offers a “Berkshire Mode” that mimics the spartan simplicity of the Berkshire homepage.
Last week, we learned that Occidental Petroleum is reportedly in talks to acquire CrownRock (a Permian Basin oil producer) for $10+ billion. That led some to speculate that Berkshire might provide financing for the deal. Well, here’s some fuel to throw on that fire: Oxy’s private plane landed in Omaha on November 27 and remained there for about three hours. Interesting timing, to say the least.
Despite Oxy dropping under $60 for much of the past week, Berkshire has not reported any further purchases. One possible explanation is that Warren Buffett knows non-public information about the potential CrownRock deal — and, therefore, cannot legally snap up any more shares at the current time.
PacifiCorp, a Berkshire Hathaway Energy subsidiary, announced on Tuesday that it will pay $299 million to settle claims stemming from the deadly Oregon wildfires in 2020. You may remember that mounting litigation against PacifiCorp really battered BHE’s earnings in Q3 2023. Now, Berkshire will avoid a jury trial that could have cost the company billions of dollars in damages.
Mikal Watts, the plaintiffs’ co-lead counsel: “I want to congratulate the new CEO and the general counsel of PacifiCorp for stepping up and doing the right thing by their ratepayers who lost their homes during the Labor Day 2020 fires. Today’s settlement is the result of one thing — good lawyers and good corporate leadership.”
Apple, once again, reclaimed a $3 trillion market cap this week — which, all things considered, is quite the comeback after a big drop in August.
And, in more good news for the Cupertino-based tech giant, the iPhone’s moat looks just as strong as ever. At least, according to the consumer sentiment indicators of Washington D.C. carjackers. “[The victim] said the robbers were bold taking her husband’s phone, but then giving it back because it wasn’t to their liking,” the local ABC affiliate reported. “They basically looked at the phone and was like, ‘Oh, that’s an Android. We don’t want this. I thought it was an iPhone.’”
Paramount Global shot up nearly 10% last week on rumors of a possible streaming bundle with Apple. Bundling the two streaming services (Paramount+ and Apple TV+) together — at a discounted price — should help both companies combat month-to-month churn, which spiked above 7% in October.
Charlie Munger on Invest Like the Best
Tuesday, December 5, was a pretty big day for Charlie Munger fans. Not only did we finally get our hands on the new edition of Poor Charlie’s Almanack, but two lengthy interviews with Munger were released posthumously.
One of which was the full, uncut video of Munger’s final sit-down with Becky Quick. And, happily, it turned out to be significantly longer than expected. (I’ll write more about this interview next Friday.)
Today, though, I’d like to take a closer look at the second interview — in which Stripe co-founder John Collison spoke with Munger for over ninety minutes at his home in Los Angeles. (This lively discussion, recorded in 2022, became a special episode of the Invest Like the Best podcast and came out on Tuesday to coincide with the release of Poor Charlie’s Almanack.)
Collison was, reportedly, a regular guest at Munger’s famous “Friday lunch club” — where business leaders and thinkers broke bread with (and picked the brain of) the Berkshire Hathaway vice chairman.
Obviously, it’s well worth your time to listen to the whole thing. But, in the interests of saving time, I’ve pulled out a few of Charlie’s most interesting Berkshire-centric observations down below…
On Berkshire’s ethos of decentralization:
Berkshire is pretty extreme in culture. We are deeply aware of how bureaucracies tend to create their own internal dynamics so that … nobody changes anything or ruffles any feathers. And the net result is that a lot of bureaucracies make some very stupid decisions.
The way we’ve done it, mostly, is by not having anybody around. They can’t be bureaucratic if they’re not there. There is nobody in the head office — so we avoided the bureaucracy … Nobody else is as extreme as we are in that. It’s a huge advantage to us.
On Berkshire’s search for win-win businesses:
How much better if you have a voluntary transaction where both sides are happy on a win-win basis? That’s perfect. Capitalism, in such a system, causes this flourishing civilization. Of course that’s the way to go.
Everything [we do] is win-win. Take Dairy Queen … All the parents come and get their cheap hot dogs and ice cream cones and so forth — and the people running the little shack make pretty good money in the summertime. It’s win-win.
Customers are getting something they want. The people who are manning the store get something they want. [And], of course, the Berkshire shareholders get some capital returns that they like. It’s all win-win.
On Berkshire’s culture of trust:
We like very trustworthy people. I’d rather have a brief telephone [call] with somebody I trust than I would a 40-page contract prepared by the finest law firm in the world with somebody I don’t trust. We like to deal with trustworthy people and to be able to count on oral promises.
We want all the Berkshire people to trust one another internally — and we also want the customers to trust us. We’re all for trust. Trust is one of the greatest economic forces on Earth.
On the BNSF railroad:
There are just two big transcontinental [railroad] systems — and we’ve got one of them. Of course, that’s a less competitive market than existed earlier when there were 100 different railroads. Early railroads were terribly competitive. They were terrible places to invest money.
[Railroads] are one of the most efficient ways of transferring assets all over the country. It’s way more efficient than trucking. They have a system that just accidentally happened. Nobody anticipated you’d be able to double the capacity of the railroad just by shoving containers one on top of the other.
Now, they’re so efficient. They’re more efficient than anything else. And, of course, they do well.
On knowing the limits of your circle of competence:
By and large, we haven’t invested in pharmaceuticals because we’ve got no edge. I don’t know enough about biology and medicine and chemistry to have any edge in guessing which new pharmaceutical attempt is likely to succeed.
Why in the hell would I play against other people in a game where they’re much better at it than I am when I’m playing for something desperately important like a way of feeding my family. So, of course, we don’t go near it.
Warren and I pretty much know what we know and what we don’t know — what we’re good at and what we’re not good at. One of the things we’re not good at is guessing which new pharmaceuticals [will succeed], so we don’t even look at it.
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More Must-Reads
Other awesome things that I read this week…
“For so many of us, the image of Munger, seated to the left of Warren Buffett at the Berkshire Hathaway annual meeting, or holding court at the Daily Journal meeting, is akin to the feeling of returning home after a long journey. Because no matter how crazy or irrational the world may have become, Charlie and Warren were always there to remind us of the fundamental things that remain true.”
“Munger was not infallible, but he was genuine. And in a public sphere drowning in signaling, his authentic wisdom and acerbic wit stood out like a lighthouse in the storm. People listened not just because of the wisdom offered, but because Munger was the rare person who could afford to speak without an agenda.”
“In 1736, Benjamin Franklin’s four-year-old son died of smallpox, an event that Franklin forever regretted since he could have given his son an early version of a smallpox inoculation. I suspect that Franklin’s ability to move on after the death of his son provided comfort and inspiration [to Charlie Munger]. The loss of a child was a common experience throughout most of human history. Having an understanding of this reality of the human experience does not eliminate personal pain, but can help deal with it.”
These “Basic Rules” Made Me Successful in Life (Charlie Munger || CNBC)
“I spent many successful years at the [law] firm, but I wasn’t satisfied practicing law. I liked the independence of a capitalist. I liked figuring things out and making bets. I preferred making the decisions and gambling my own money. I usually thought I knew better than the client anyway, so why should I have to do it his way?”
Kraft Heinz’s Incoming North American President Dishes on Innovation, M&A (Food Dive)
“When it comes to challenges, inflation and ingredient costs will continue to be headwinds next year. While inflation is cooling in some areas, we’re still feeling the effects. Some ingredient costs are also coming down, while others like tomatoes and sugar are still high. Our teams have done a great job predicting and adapting to this new normal and we’re doing everything possible to find efficiencies across our business to offset and mitigate higher costs.”
Excellent. Thank you!
Wonderful content as always!
Thank you!