The Berkshire Beat: January 12, 2024
All of the latest Berkshire Hathaway news and my must-reads of the week!
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The latest news and notes out of Omaha…
In a surprising twist, the courtroom showdown between Berkshire Hathaway and the Haslam family — over the contentious use of “pushdown” accounting in determining Pilot’s value — was abruptly canceled on Saturday evening. Shortly thereafter, both companies confirmed that a settlement had been reached.
Berkshire issued a rather terse statement: “Berkshire Hathaway is pleased to announce that it has reached an agreement to fully settle the Delaware litigation, including all claims and counterclaims, between Pilot Corporation and Berkshire Hathaway, Pilot Travel Centers, and National Indemnity.”
We still don’t (and may never) know the full details of this settlement, but it’s probably safe to assume that the two sides agreed upon a specific valuation for the 20% interest in Pilot that remains under the Haslams’ control.
But this saga is not over yet. The Haslam family has until the end of February to exercise its put option, which would compel Berkshire to purchase that last 20% of Pilot. I would expect that to happen sooner rather than later — as both sides are probably eager to draw a line under this whole affair and move on.
Apropos of nothing, I am reminded of this classic Warren Buffett quote: “You can’t make a good deal with a bad person.”
Just as I was putting the finishing touches on last week’s issue of The Berkshire Beat, a couple of new SEC filings popped up which revealed that Berkshire had purchased $82.1 million of Liberty Media SiriusXM tracking stock (Series A & C) over the preceding three days. Back in December, Liberty Media and Sirius XM Holdings agreed to combine into a new public company (“New SiriusXM”) — with holders of the tracking stock set to receive “approximately 8.4 shares in New SiriusXM for each share of LSXM” that they own. At current prices, that comes out to 40-50% upside for the trackers if this combination goes through as planned.
Of course, that discount could disappear if SIRI 0.00%↑ proves to be overvalued and its price drops over the next few months.
Terry Smith mentioned the late Charlie Munger in his annual letter to Fundsmith investors. “Mr. Munger’s demise has led to the inevitable repetition of quotations from him by commentators. (Kingswell: Guilty!) However, none of the commentators has alighted upon the Charlie Munger quote which in my view encapsulates the current state of world affairs: ‘If you’re not a little confused about what’s going on, you don’t understand it.’”
A Slow Read of Poor Charlie’s Almanack — Week 1
For more information on this slow read — including the reading schedule — click here.
This week, we ease into Poor Charlie’s Almanack with four short pieces — forewords by John Collison and Warren Buffett, a rebuttal from Charlie Munger, and an introduction by Peter Kaufman — which set the stage for the meaty speeches and lessons that follow.
(1) Never Stop Learning (Foreword by John Collison)
Stripe co-founder John Collison kicks off the book with a brief foreword that delves into the immeasurable impact that prior editions of Poor Charlie’s Almanack had on his own development as an entrepreneur and business leader. But, more importantly, it’s here that Collison’s personal friendship with Charlie Munger really takes center stage.
Collison was a frequent guest at Munger’s famous lunch clubs — in which big names from the business world gathered at Charlie’s Los Angeles home (or via Zoom) to break bread together and chew the fat over subjects big and small.
An underrated part of what kept Munger’s brain so sharp and inquisitive to the very end is that he never shut himself off from the world and new ideas. Despite his rather curmudgeonly reputation, he chose to surround himself with a multi-generational coterie of independent thinkers that kept him young at heart (and of mind).
This invaluable interplay of young and old, fresh-faced and world-weary, really shines through in the lengthy discussion (released as a special episode of the Invest Like The Best podcast) between Collison and Munger that came out the same day as this new edition of the Almanack.
There’s an obvious and easy rapport between the two men — despite an age gap approaching seven decades. The spirited debate over Bitcoin, in which Collison pushes back on Munger (who, as expected, yields no ground on the subject), makes for one of the podcast’s most memorable moments.
At one point in the foreword, Collison writes: “While the world looks very different today than it did nearly 100 years ago … Charlie has remained a constant.”
And, while no 99-year-old’s death can ever truly be considered a surprise, far too many of us (myself included) took Charlie’s longevity and presence for granted. Many Munger fans feel unmoored after his passing — with this “constant” guide now gone.
For so many years, Charlie was always there. But, more than that, he remained a valuable source of wisdom until the end. Whenever something big happened, my first thought would usually be, “I wonder what Charlie thinks about this?” There aren’t too many other nonagenarians who elicit that kind of response.
A year ago, I wrote:
In the midst of FTX’s epic crypto collapse, everyone wanted to hear from Munger. Not surprisingly, CNBC’s Becky Quick landed an interview with Berkshire’s resident crypto bear and he —respectfully — danced on the grave of this latest example of wretched excess.
Think about that: During a breaking news story about a cutting-edge topic like a failed cryptocurrency exchange, the most coveted interview subject — besides SBF — was a (then) 98-year-old man.
That command of the moment doesn’t happen if Munger had lost a step mentally. But, thankfully, clear thinking and logic/rationality wears well at any age.
I think that Munger remains a trusted authority on so many different subjects because he refuses to stop learning. He reads voraciously, networks with compelling people, stays abreast of current trends (if only to warn against them), and never allows himself to believe that he knows “enough”.
While many older people let the world pass them by, that was never the case with Charlie Munger.
TL;DR
“It’s not just a book about investing; it’s a guide to learning how to think for yourself to understand the world around you.”
“[Charlie’s] essays extol the virtues of free enterprise, yes, but also of doing business the right way, with integrity and rigor. Of taking your work very seriously, but never yourself.”
“As Charlie once said, ‘There is no better teacher than history in determining the future. There are answers worth billions of dollars in a $30 history book.’ The same might be said of Poor Charlie’s Almanack. It is the ultimate value investment.”
(2) A Lesson in Humility (Foreword by Warren Buffett || Rebuttal by Charlie Munger)
Warren Buffett’s foreword — and Charlie’s rebuttal immediately following it — examines what I consider to be the inflection point of Berkshire Hathaway history: Buffett’s Munger-induced shift from a Grahamian cigar butt investor into one that preferred to buy wonderful companies at a fair price.
Here, Buffett happily concedes that he has been able to “enjoy acclaim for the many accomplishments that sprang from [Charlie’s] thoughts and advice” and that his partner was “both wiser and smarter” than himself.
Charlie, though, isn’t having any of it — and volleys the credit for Berkshire’s success back over the net to Buffett. “I think there’s some great mythology in the idea that I’ve been this great enlightener of Warren. He hasn’t needed much enlightenment. I frankly think I get more credit than I deserve.”
“It is true that Warren had a touch of brain block from working under Ben Graham and making a ton of money,” he continues. “It’s hard to switch from something that’s worked so well. But if Charlie Munger had never lived, the Buffett record would still be pretty much what it is.”
LOL
Is there anything more quintessentially Charlie Munger than writing a rebuttal to laudatory comments about yourself? 🤣
Buffett’s foreword reads like a roast at times. For example: “[Charlie] opted to become a living lesson in compounding, eschewing frivolous (defined as ‘any’) expenditures that might sap the power of his example. Consequently, the members of Charlie’s family learned the joys of extended bus trips while their wealthy friends, imprisoned in private jets, missed these enriching experiences.”
(3) Stories Always Teach More Than The Rules (Introduction by Peter Kaufman)
First off, a word of heartfelt gratitude to Peter Kaufman — the founder of this (intellectual) feast. A close friend of Munger’s, he spearheaded the creation of Poor Charlie’s Almanack back in 2005 and — more than any other — deserves credit for bringing this magnificent receptacle of wisdom to the masses.
In his introduction, Kaufman points out that Charlie often drives home his intended point by “using a story-like context instead of abstract statements of theory”.
“He regales his audience with humorous anecdotes and poignant tales rather than with a blizzard of facts and figures. He well knows, and wisely exploits, the traditional role of the storyteller as a purveyor of complex and detailed information.”
This is a topic near and dear to my heart. In fact, it shapes almost everything that you read here at Kingswell. As you may have noticed, I try to focus far more attention on words and stories than on numbers and charts. I’m sure that particular approach is not for everyone, but it has always seemed to me like the best way to teach and learn.
In a recent appearance on FT’s Money Clinic podcast, best-selling author Morgan Housel made much the same point.
When you are forced to memorize formulas, most people will forget them ten minutes after the test … [But] when somebody tells you a good story, you will remember it for life. And not only will you remember it, but it’s much easier to contextualize in your own life.
Or, as George Goodman put it in The Money Game, “Enjoy the stories — they always teach more than the rules.”
TL;DR
“You are about to embark on an extraordinary journey toward better investing and decision-making. You may arrive at a better understanding of life, as well.”
“Charlie places a premium on life decisions over investment decisions.”
“You will probably never find a better opportunity to learn from someone so smart — and so forthright.”
Phew! This ballooned into a much longer entry than I had originally planned. I’ll try to rein it in next week with Chapter 1. Hope everyone has a wonderful weekend!
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More Must-Reads
Other awesome things that I read this week…
Reflections: The Lessons of 2023
“The abundance mindset is particularly important for knowledge, wealth, and relationships, which are not to be hoarded. Learning should lead us to teaching. Gaining wealth should lead us to giving back. Connection should lead us to connecting others. A life of flow is found in surrendering to this subtle dance of giving and receiving.”
Easy Money (Howard Marks)
“In low-return times, investments are made that shouldn’t be made; buildings are built that shouldn’t be built; and risks are borne that shouldn’t be borne. People with money feel they must put it to work, since cash yields little or nothing. They drop their risk aversion and, as discussed below, compete spiritedly for lending or investing opportunities with higher potential returns. The investment process becomes all about flexibility and aggressiveness, rather than thorough diligence, high standards, and appropriate risk aversion.”
“When it comes to consuming content, worthwhile books yield their dopamine hits slowly over a very long period of time. When I read Fyodor Dostoevsky’s The Brothers Karamazov in 2022, it took several days and hundreds of pages before I really gained a sense of the value of what I was consuming. Even today, I know that I did not gain as much from that novel as I would if I choose to read it again. The same is just as true for great works of science, history, and philosophy. What at first looks like a block of stone is eventually revealed to be a beautiful statue, but only if you are able to focus.”
Decoding the Annual Letters: Wisdom from Buffett and Munger
“Buffett dedicates significant respect to his long-time partner, Charlie Munger, emphasizing their shared focus on long-term investing over market froth. Munger’s quote, ‘The world is full of foolish gamblers, and they will not do as well as the patient investor,’ resonates with their investment ethos.”
Awe, Health, and Fear (Brent Beshore)
“This year was the first year in my life that I took my health seriously. The hardest part of compounding is to be around for it. And even if you survive, it doesn’t matter much if you can’t enjoy it. The key is both lifespan and health-span. As I turned 40, contemplated continuing to raise 30-year funds, and figured out the implications of a new baby on the way, it became obvious what I needed to do. Took me long enough!”
Thank you for sharing! "Never stop learning"...love how he never wanted to become stagnant.