B000U5KFIC EBOK (3 page)
Authors: Janet Lowe
ONE An Extraordinary Combination of Minds
1
TWO The Lake-A Place That Defines Munger
9
FIVE Putting Together a New Life
47
SIX Munger Makes His First Million
60
SEVEN A Combination of Big Ideas
72
EIGHT Pound-for-Pound, the Best Law Firm
80
NINE Operating Wheeler, Munger Out of a Utility Room
92
ELEVEN See's Candy Teaches a Lesson
123
THIRTEEN The Buffalo Evening News
141
FOURTEEN Charlie Munger Goes to War with the Savings and Loan Industry
149
FIFTEEN The Blossoming of Berkshire Hathaway
164
SIXTEEN Berkshire in the 1990s-Power Building
176
EIGHTEEN The Daily Journal Corporation-A Modest Media Empire
203
NINETEEN Doing Good at Good Samaritan Hospital
215
TWENTY Elder Statesman and Conscience of the Investment World
227
TWENTY-ONE A Time to Reap Rewards
240
APPENDIX A Wheeler, Munger Partnership
251
APPENDIX C Time Line-The Life and Career of Charles T. Munger
253
APPENDIX D Charles T. Munger's Speeches
257
Notes
277
Index
289
COMBINATION
OF MINDS
I've been associated with Warren (Buffett) so long, I thought
I'd be just a footnote.'
Charles T. Munger, when he was first named to the
Forbes magazine list of richest Americans in 1993
y CLOSEST AFFILIATION WITH CHARLIE MUNGER is a strange one,"
said Katharine Graham, retired publisher of the Washington
Post. "At first I consulted him because I found myself in charge of not only
a company, but in charge of children's and grandchildren's trusts, and
with no experience. I asked Warren's advice, and he did what he very typically does. `This is what I think, but talk to my partner Charlie. He agrees
with my position in most things.'"
"So I went to talk to Charlie in Los Angeles in his office. I thought he
was interesting and rather brilliant, of course. I took out a yellow legal
pad and started taking notes. This made Warren laugh. To this day he
teases me about how I took notes of Charlie's words of wisdom."
After Warren Buffett, the billionaire financier from Omaha, set up a
meeting between Graham and Munger, she said, "Charlie and I had a
lively, long correspondence. It was too strange."
Graham kept a file folder of the letters and reviewed it when preparing her Pulitzer prize-winning autobiography, Personal History. "I looked
over the correspondence which was the main, very close contact I had. I
can't make out from it why we started writing. This went on for about 10
years, both of us riding bicycles without using our hands, showing off to
each other, making jokes."
Graham, who in her shy, retiring way, always worried that her best
efforts weren't good enough, finally realized that for the most part, "He
was reassuring me that I was doing better than I thought."
"The thing that strikes me is how strongly alike Warren and Charlie
sound. The voice, the manner, and the humor," said Graham. "They play
off each other and tease each other. And they do make, to my mind, a
most extraordinary combination of minds."
"I HEARD ABOUT CHARLIE MUNGER IN 1957," explained Buffett, who years
later would become America's wealthiest citizen. "I was managing money
on a very small scale, in Omaha, about $300,000. Dorothy Davis was the
wife of Edwin Davis, the most prominent doctor in town. I knew about
them and they knew about my family. I went over to their apartment,
Mrs. Davis was very sharp. I explained how I ran money. Dr. Davis paid
no attention. When I was done, they conferred-then agreed to invest
$100,000. I said to Dr. Davis, `You weren't paying any attention. Why did
you put money in?' He said, `You remind me of Charlie Munger.' I said I
didn't know Charlie Munger but I like him already."
When Munger was growing up in Omaha in the 1920s and 1930s, the
Davis family were both neighbors and close friends. The doctor was a little unusual, but "a very talented odd fellow. And certainly the Buffett
investment worked out very well for the Davis family," said Charlie.
The money the Davises placed with Warren represented most of their
net worth.
"Eddie Davis was a little odd and he got odder as he got older," concurred Buffett. "He finally got a little senile. Later, when he was adding to
his investment with me, he started making the checks out to Charlie
Munger. I told Eddie, `I don't mind you confusing the two of us under
many circumstances, but make the checks out to Warren Buffett.'"
Two years after Buffett first heard Charlie's name, the two men met.
"In 1959, when Charlie's dad died, he came back to help settle up. The
Davises arranged a dinner. We hit it off immediately," said Buffett.
The Davises that Warren now referred to were not the doctor and his
wife, but rather the Davis children, who had been Charlie's childhood
playmates. Both Davis boys, Eddie and Neil, became doctors and by
then the daughter, Willa Davis, was married to Omaha businessman Lee
Seemann. It was Neil who arranged dinner at the old Omaha Club. The
party included Willa and Lee Seemann, Joan and Neil Davis, Charlie and
Warren. "It was electric in a really nice way," recalled Willa.
Munger had heard other people mention Warren as well, but he did
not have particularly high expectations about meeting him. "I knew everyone in the Buffett family except Warren," said Charlie. Munger noticed
a few things about the bespectacled young man right away. "He had a
crew cut. Warren was working out of a sunporch at his house, and his dietary habits were toward Pepsi, salted nuts, and no vegetables."' Charlie,
who considers himself fairly tolerant about such matters said, "Even I get
surprised watching Warren eat breakfast."
His minimal expectations of the meeting were unjustified. Munger,
who is reserved in his judgments, was floored. "I would have to say that
I recognized almost instantly what a remarkable person Warren is."3
Charlie began asking questions immediately about what Buffett did
for a living and how he did it and was fascinated by what he heard. The
following evening another mutual friend, Dick Holland, invited both to
dinner. Warren, who was then 29, and Charlie, 35 years old, again fell
into deep conversation. Charlie was so wrapped up in what he was saying
that when he raised his glass to sip his drink, he held his other hand up to
stop anyone else from interrupting the conversation.
The timing was propitious for the two to meet. Charlie's beloved father had died, and Buffett's mentor, Benjamin Graham, had retired from
investing and moved from New York to Los Angeles. As Graham became
less interested in investment problems, Warren felt the loss. He needed a
new sounding board. It may be precisely because Munger was so similar
to Graham in his thought processes-honest, realistic, profoundly curious, and unfettered by conventional thinking-that he captured Buffett's
attention in the first place.
"I think Charlie is a lot more like Ben Graham than Charlie knows,"
explained Louis Simpson, co-chairman of GEICO and the man believed
to stand second in line should Buffett or Munger become unable to run
Berkshire Hathaway. "Charlie takes the academic approach, but also
has interests in a lot of different things. In his reading, his tastes are
eclectic."
Buffett, who is known for his single-minded focus on investing,
agreed that Munger is like Graham in his wide range of interests.
"Charlie's mind has a greater span than I do. He has read more biographies, hundreds per year. He soaks them up and remembers [them]."
By the time Fidel Castro seized power in Cuba and the youthful John
F. Kennedy was elected U.S. president, Buffett and Munger had become
"mental partners," a relationship that involved no contract or titles-at
least in the beginning.
It was more like a "brother act" than a business arrangement, Buffett
said. Based on mutual trust and confidence, it grew discussion by discussion, meeting by meeting, deal by deal.'
Though Charlie had lived only blocks from the Buffett home in
Omaha and had worked in the Buffett family store as a teenager, the six
years difference in their ages kept them in separate circles. Yet it was the
common threads that allowed the two to make an immediate connection.
"If you think of Charlie and Warren as boys, they were very similar,"
observed Munger's oldest daughter, Molly. "Similar parents, values, same
town. One of those alone would make a friendship."
Munger and Buffett had something else in common. "Like Warren, I
had a considerable passion to get rich," said Charlie, who early on earned
his living as a lawyer. "Not because I wanted Ferraris-I wanted the independence. I desperately wanted it. I thought it was undignified to have to
send invoices to other people. I don't know where I got that notion from,
but I had it."5
CHARLES T. MUNGER IS VICE CHAIRMAN and the second-largest shareholder in
one of the world's most renowned holding companies, Berkshire Hath
away Inc. He also is head of the Daily Journal Corporation, the largestcirculation legal newspaper group in California and of Wesco Financial
Corporation, an 80 percent-owned subsidiary of Berkshire. Additionally,
Munger is an indefatigable participant in the philanthropic life of Los
Angeles. When his image appeared on the cover of a 1996 issue of Forbes
magazine, the general public began to realize Munger was more than Warren Buffett's straight man at the Berkshire Hathaway annual meetings.
One of the most elusive, intriguing, and independent business leaders in America, the 76-year-old Munger said it was his goal to stay just
below the wealth-level required to be named to the Forbes richest Americans list. It would help him stand just outside the limelight. The strategy
didn't work.
In 1998, Munger's fortune was calculated at more than $1.2 billion.
On the richest Americans list, Munger ranked just below the family heirs
to the Levi Strauss fortune. He ranked just above Michael Eisner, head of
the Walt Disney Company; hotel heir William Barron Hilton, and most
surprisingly, higher than Silicon Valley computer nabob Steven Jobs.'
Like Warren Buffett, Munger inherited no wealth. He built his fortune on the sheer power of his will and his business acumen.
"While no real money came down, my family gave me a good education and a marvelous example of how people should behave, and in the end that was more valuable than money," explained Munger. "Being
surrounded by right values from the beginning is an immense treasure.
Warren had that. It even has a financial advantage. People touted Warren
partly because he was a Buffett and people trusted the Buffetts."