On Sept 8, 2009 Phil Terry interviewed Whitney Tilson. The focus is on Tilson’s understanding of Charlie Munger. This is the second part of a 4 part series on that interview.
Part 1 can be found here.
Section 2:Munger, the investor
Tilson reviews various aspects of Munger. These are he highlights.
Patience
Munger emphasizes patience and avoiding mistakes. Sitting and doing nothing is best and when opportunity presents itself, pounce. When no opportunities are present, continue to turn over leaves. Be patient to buy.
Munger has sat for years in treasuries and municipal bonds instead of investing in stocks, just waiting. The big money is not in the buying or selling but in the waiting. Buffett has been described as opportunistic by some. Now you may know how he learned the skill. Munger does not remember a single time that he was in cash where he regretted it.
The big money is made through patience.
Rationality
He was once asked to explain his success. He was ready to give an hour speech on the matter. But then the questioner added that he wanted it explained in one word. His answer was the word “rational”.
The educational (graduate school) system does not teach rationality.
Both Munger and Buffett found extreme irrationality when they left graduate school and entered the business world. There were patterns of extreme irrationality in the business world. And relevant to what they do but never taught to them. So they taught themselves. Correct the errors of your education on your own. If you were not taught something, teach yourself.
Forecasts
On the value of forecasts. There will always be a market for forecasts. That’s why they exist. Kings used to pay people to look at sheep guts to predict the future. This was totally absurd back then and equally so today. Learning about the future is a simple craving of humans. As people are concerned with housing forecasts, remember this today. All forecasts can be wrong. Anyone that has heard enough forecasts on housing has probably realized that there is no consensus opinion. If these things can be predicted, why so many different answers?
It is occasionally possible for a turtle to out run rabbits that repeat their patterns of the past. Understand the obvious and ignore the esoteric. Don’t try to be intelligent, try to not be stupid. Profit from the obvious and don’t spend to much time understanding the esoteric.
Some people do things simply because they don’t want to miss out on what the crowd is succeeding in doing. Anyone who has seen the tech boom should realize that this is true.
It’s amazing how much money can be made in simply not being stupid.
Why haven’t more people imitated Buffett and Munger? Neither of them know why. The have no overhead or quarterly goals. And no budgets and concentrated investments. Look at how much fun they and their investors have. And they are successful at it. It’s not difficult but it looks difficult because their approach to business is not conventional. It’s not how things are normally done. With all the success they have, few try to mimic it.
Honesty:
If you tell the truth, you don’t have to remember your lies. Keep it simple and tell it like it is. With loyal shareholders, you don’t have to give a damn about quarterly earnings. Of course, they want to make money but they don’t care to sugar coat bad quarters. They care about telling the truth. They will not manipulate to make a quarter look better than it was. Wesco tries to be ethical at all times.
With very large companies, one person is bound to do something stupid. Over the long term, Wesco and Berkshire have good records and the shareholders know this. In the long term, Berkshire and Wesco don’t care to get anywhere near legal gray areas. They understand that you can make more money that way. Honesty is the best policy. It’s not complicated.
PART 1, PART 2, PART 3, PART 4
Part 1 can be found here.
Section 2:Munger, the investor
Tilson reviews various aspects of Munger. These are he highlights.
Patience
Munger emphasizes patience and avoiding mistakes. Sitting and doing nothing is best and when opportunity presents itself, pounce. When no opportunities are present, continue to turn over leaves. Be patient to buy.
Munger has sat for years in treasuries and municipal bonds instead of investing in stocks, just waiting. The big money is not in the buying or selling but in the waiting. Buffett has been described as opportunistic by some. Now you may know how he learned the skill. Munger does not remember a single time that he was in cash where he regretted it.
The big money is made through patience.
Rationality
He was once asked to explain his success. He was ready to give an hour speech on the matter. But then the questioner added that he wanted it explained in one word. His answer was the word “rational”.
The educational (graduate school) system does not teach rationality.
Both Munger and Buffett found extreme irrationality when they left graduate school and entered the business world. There were patterns of extreme irrationality in the business world. And relevant to what they do but never taught to them. So they taught themselves. Correct the errors of your education on your own. If you were not taught something, teach yourself.
Forecasts
On the value of forecasts. There will always be a market for forecasts. That’s why they exist. Kings used to pay people to look at sheep guts to predict the future. This was totally absurd back then and equally so today. Learning about the future is a simple craving of humans. As people are concerned with housing forecasts, remember this today. All forecasts can be wrong. Anyone that has heard enough forecasts on housing has probably realized that there is no consensus opinion. If these things can be predicted, why so many different answers?
It is occasionally possible for a turtle to out run rabbits that repeat their patterns of the past. Understand the obvious and ignore the esoteric. Don’t try to be intelligent, try to not be stupid. Profit from the obvious and don’t spend to much time understanding the esoteric.
Some people do things simply because they don’t want to miss out on what the crowd is succeeding in doing. Anyone who has seen the tech boom should realize that this is true.
It’s amazing how much money can be made in simply not being stupid.
Why haven’t more people imitated Buffett and Munger? Neither of them know why. The have no overhead or quarterly goals. And no budgets and concentrated investments. Look at how much fun they and their investors have. And they are successful at it. It’s not difficult but it looks difficult because their approach to business is not conventional. It’s not how things are normally done. With all the success they have, few try to mimic it.
Honesty:
If you tell the truth, you don’t have to remember your lies. Keep it simple and tell it like it is. With loyal shareholders, you don’t have to give a damn about quarterly earnings. Of course, they want to make money but they don’t care to sugar coat bad quarters. They care about telling the truth. They will not manipulate to make a quarter look better than it was. Wesco tries to be ethical at all times.
With very large companies, one person is bound to do something stupid. Over the long term, Wesco and Berkshire have good records and the shareholders know this. In the long term, Berkshire and Wesco don’t care to get anywhere near legal gray areas. They understand that you can make more money that way. Honesty is the best policy. It’s not complicated.
PART 1, PART 2, PART 3, PART 4
