B000U5KFIC EBOK (42 page)

The eyes of the judge, the attorneys and the jury were riveted on
Munger as he writhed and struggled with some sort of pain.

"I've got a cramp in my leg," he finally explained. "It's the beauty of
getting old."

The opposing attorney demanded-in vain-that the judge call a
break in the proceedings, no doubt worried that Munger's plight would
make the jury more sympathetic to his newspaper's cause. The judge
allowed the witness to stand up for a moment and work out the cramp. Finally Charlie declared the pain gone and himself ready to continue.

"When you get as old as I am, it will happen to you," he proclaimed
to everyone present in the courtroom.'

IT WAS JUST ANOTHER DAY in court for the Daily Journal Corporation, and an
all too familiar experience for Munger.

"Berkshire has practically no litigation," said Munger. "But if you
take our legal newspapers, I don't think a year passes without litigation.
Discrimination, sex, old age, race. It is very litigious. The Metropolitan News is suing us now regarding the foreclosure business. It gets to be a bit
of a sewer."

Munger's interest in journalism and the business of newspapers goes
back to his childhood in Omaha when his father was the chief outside
counsel to the Omaha World Herald. Among the Munger family friends
were both the managing editor and city editor of the newspaper.

"He loves newspapers," said Molly Munger of her father. "He loves to
read the newspapers in Minnesota. Getting daddy's newspaper (at Star
Island) is a big deal."

A passion for print media is something that Munger and Buffett share.
That fascination, along with the good economics that once existed in the industry, prompted their investments in the Washington Post and the Buffalo
News. But Berkshire only has a partial ownership in the Washington Post.
Actual control of the newspaper is in the hands of Katharine Graham's family. When the small Los Angeles legal publication, the Daily Journal, came
on the market, Munger saw a chance to own his own newspaper and expressed interest immediately. Here would be a newspaper where he could
have a vastly greater influence, and one in his own city to boot.

In 1977, Munger asked Stan Lipsey, who ran the Buffalo News for
Berkshire, to take a look at the Daily Journal and give him an appraisal.
Lipsey told Charlie that the Daily journal, which was then printed on
newsprint that was even broader than a broadsheet, was sadly outdated in
its style and content and needed modernizing.

Munger had heard that the newspaper was for sale from a member
of his breakfast group at the Pacific Coast Stock Exchange. Chuck
Rickershauser, one of Munger's former law partners, had been hired by
the Daily Journal's prior owners to sell the paper as part of a settlement
of an antitrust case.

"Because I was having breakfast with Charlie daily and wanted to
pick his brain, I asked him how to conduct the sale. He said, `I would like
to be a bidder.' We had some connection, so I got him another lawyer."

As it turned out, Munger was the high bidder for the newspaper. The
Daily Journal was bought for about $2.5 million through the New America Fund. In May of 1986, when Munger and Guerin liquidated the New
America Fund, the Daily Journal Corporation became an over-the-counter
public company with several thousand shareholders.

The newspaper's stock was distributed to New America Fund shareholders in proportion to their holdings in the fund. Among those getting
stock were Otis Booth and some of Charlie's old Omaha friends such as
Lee and Willa Davis Seemann. Munger and Guerin ended up the largest
shareholders, with exactly the same amount of ownership held within
their respective families.

"But since I had this legal-judicial background that he didn't, I was
the logical one to be chairman," said Munger. "And we made him the vice
chairman."'

Al Marshall, Munger's partner at Wheeler, Munger, became secretary
of the corporation.

Munger owns about 6 percent, his children have another 6 percent,
and his grandchildren hold an additional 6 percent of the shares, giving
the family control of about 18 percent of the .6 The shares are
held within a limited partnership called Munger, Marshall & Co., which
also includes stock held by Marshall, Booth, the Seemanns, and a few other
original New America Fund investors. In all, Munger, Marshall & Co. controls 34.5 percent of the Daily Journal Corporation, Guerin interests hold
almost 18 percent and the general public owns the remaining 48 percent.

Gerald Salzman, president of the company, says there are approximately
1,700 shareholders of record, though the shareholder pool gradually declines.
"The board has a policy of buying on the open market from time to time. One
year we bought 12 shares, another year we bought several thousand."

Over the years, Munger and Guerin's investing interests have diverged and though they remain friends, The only thing we're in together
now is the Daily Journal Corporation," said Guerin.

After acquiring the newspaper, prompted in some cases by opportunity and in other cases by a need to protect their territory, Munger and
Guerin began building a chain of legal publications and businesses related
to legal publishing. In time, the Daily Journal Corporation became more
than a big city legal rag, it turned into an empire-a small regional empire,
to be sure, but an empire nonetheless.

"Charlie was always an aspiring media mogul. He didn't get very
big," said Al Marshall.

In 1988, the Daily Journal Corporation bought the San Jose PostRecord, the San Jose Advocate Journal, and the Santa Cruz Record. The acquisitions continued and by 1997 the company owned 18 newspapers
with a total paid circulation of about 35,000. The flagship newspaper, the
Los Angeles Daily journal had a circulation of 15,000.7 The company acquired the California Lawyer from the California State Bar. The publication has about 700 paid subscribers and the magazine is sent free to
California attorneys. In addition to California, the company now has operations in Arizona, Colorado, Nevada, and Washington state. Counting all
its publications, the company has 100 reporters and 350 total employees.

California is one of the better venues in which to be engaged in the
legal publishing business. With more than 105,000 lawyers, the state is
home to one-seventh of all U.S. attorneys.

Guerin and Munger feel the 112-year-old newspaper has improved
from being weak to a paper that now sometimes scoops the respected Los
Angeles Times on stories.

Munger says he is particularly proud of the paper's daily profiles of
judges: "The truth of the matter is I like judges. If judges don't do their
work well, then civilization doesn't work well."'

Despite the improvements, the Daily Journal remains a paper that
only an attorney could love. Even at that, many attorneys complain that too
few resources are allocated to the paper and its news coverage is skimpy.
Another small Los Angeles newspaper, the New Times, described the
paper as "the embodiment of journalist sobriety. It prides itself on being a
local newspaper of record, even if, to some, that also means being hopelessly dull. Indeed, the Journal seems permanently stuck in safe mode."'
The newspaper, groused the New Times, doesn't even write its own editorials, but rather reprints editorial material from other publications."'

A reporter who jumped ship to join a competing paper described
Munger and Salzman as aloof, and wanting to forge closer relationships
between advertising and editorial, an alarming prospect to dedicated
journalists. "They have a trade rag mentality. They don't want to publish
anything controversial or anything negative about law firms."''

Compared to the mainstream Los Angeles Times or the entertainmentoriented alternative newspapers in its circulation areas, the Daily Journal
and its sister newspapers do on many days seem bland. The news stories
are wrapped around pages and pages of court dockets and other information upon which attorneys rely. Yet among legal newspapers in California,
the Daily Journal is the one against which most legal publications measure
themselves. Other legals have tried to imitate the Daily Journal's court calendars, descriptions of court rules, and its daily appellate reports.

If the Los Angeles Daily journal is more of a tool for lawyers than
a journalistic lollapalooza blockbuster, the California Lawyer is livelier
than it's sedate name implies. When the Daily Journal Corporation first
bought the magazine, it was published in cooperation with the State Bar.
In 1993 some lawyers complained that the news of their professional organization was being printed along with stories that were critical of
lawyers and their behavior. The joint-publishing arrangement was terminated and the State Bar again began publishing its own magazine.

The California Lawyer prints stories related to all aspects of law and
law enforcement in California, a state in which there are plenty of knockyour-socks-off stories. The magazine's cover frequently splashes titles
such as "Bienvenidos, Felons: It's a good time to be a fugitive in Mexico,"
a page-turner about the crackdown on U.S. bounty hunters across the Mexico-California border, accompanied by an eye-popping photo essay of
Tijuana's notorious La Mesa prison. Another 1999 issue recapped a sexand-favors-for-testimony scandal in the San Diego District Attorney's
much heralded gang unit. A writer of lurid true-crime tales would be wise
to subscribe to the California Lawyer for story leads.

As far as the business aspects of the Daily Journal Corporation go, Al
Marshall, the corporate secretary, says they are frightful. "Nobody else
could stand the heat. It's not that profitable, and he's always being sued."
Marshall pointed out that neither Munger nor Buffett like investing in
newspapers as much as they once did.

While the Daily Journal has been a source of satisfaction, it continues
to be an irritation. Competition among the legal newspapers in California
is intense for the lucrative legal advertisement business, and, as noted earlier, the Daily Journal has had to defend itself in one lawsuit after another.
While Munger concedes that he is in the newspaper business more for personal satisfaction than for profit, he is keenly competitive and hangs on
tenaciously when he thinks his company's economic base is threatened or
being unjustly attacked.

CHALLENGES HAVE COME FROM EVERY direction for Munger's chain of newspapers. One of the most alarming threats came in 1986, shortly after the Daily
Journal Corporation became public. That fall Steven Brill, a chubby, suspendered young man who had accumulated a group of eastern legal publications, thus earning the title of "the Rupert Murdoch of the legal
publishing world," called at the offices of the Daily Journal Corporation.12
Brill, who later made a national name for himself in television and magazine publishing, sauntered into the business offices and asked if the business was for sale. He'd like to buy it. "We have no intention of selling at any
price," declared Munger.'3

Brill, who was 36 at the time, moved north and acquired the stodgy
3,200-circulation San Francisco Recorder for around $9 million. Since 25
percent of the Daily Journal's subscribers were in the Bay Area, the move
brought Munger to full attention. Brill then began raiding the Daily journal's newsroom. After pumping up his writing staff, Brill sent them
out to dig up stories of dissatisfaction and misconduct, or other juicy tidbits in the legal community. He also promised readers he would expand
coverage to Los Angeles and the southern regions, and hinted that he might
start a Southern California paper within three years "so that you won't
have to look anywhere else for all the California legal news you can use."14

A newspaper war was underway. The Daily Journal Corporation garnered forces by snapping up smaller San Francisco-area legal newspapers, redesigning popular features and shoring up coverage in the northern part
of the state. Working with Daily Journal President Gerald Salzman, Munger
bought the San Francisco Banner and the Marin County Reporter, which
together had a circulation of only 800. The journal already owned the
Sacramento Daily Recorder and the Oakland-based Inter-City Express.

When asked if the Daily Journal's expansion in the Bay Area was a response to Brill's arrival, Munger said, "It's always hard to know what your
motivations are when they are mixed. We had been thinking for a long
time of doing a better job in San Francisco."''

Munger added that he was not worried about Brill, "because we've
coexisted with the Recorder with respectable profits for many decades. I
don't expect the whole thing to escalate into insanity."

"STEVEN BRILL-HE'S BRAVE, EGOCENTRIC, brilliant, and has done a yeoman's service for good journalism," said Charlie Munger more than a
decade later. "There's a lot of competition in San Francisco. He sold out
and is gone."

Brill told the Wall Street Journal in 1997 that it had been maddening
to go up against someone too rich to care if he lost "bales of money." Brill
added, "If Charlie spent even 20 percent of his time running his legal papers, we probably would have been crushed.""

Munger's reply no doubt was delivered with a chuckle, but in print, it
sounded harsh. "Why would I want to crush a gnat?"'_

Steve Brill's company had been predominantly owned by Time
Warner Inc., and eventually Brill and a Time Warner subsidiary jointly
created Court TV. When Ted Turner merged Cable News Network into
Time Warner, Turner, who once had come up against Brill as a cable television competitor, began to play a role in Time Warner activities. Soon afterward Time Warner bought Brill out.'s

Brill sold his shares of his legal publishing empire and his interest in
Court TV to Time Warner for about $20 million. His next project was the
$20 million 1998 launch of Brill's Content a print and online magazine
covering and critiquing the news media. Brill's first issue contained a
controversial story claiming that independent counsel Kenneth Starr had
admitted leaking information about the presidential Whitewater investigation to reporters."