On Sept 8, 2009 Phil Terry interviewed Whitney Tilson. The focus is on Tilson’s understanding of Charlie Munger. This is the first of a 4 part series on that interview.
Whitney Tilson is an influential investor. He is the founder and managing partner at T2 Partners. Co-founder, chairman and co-editor of Value Investor and Insight). His resume goes on and on and on. More relevant to this article, he is a contributing author to Poor Charlie’s Almanack.
Charlie Munger is best known as Warren Buffett’s right hand man. More specific to Berkshire Hathaway, he is the acting Vice-Chairman of Berkshire Hathaway. Munger is also the chairman of Wesco Financial Corporation, an 80.1%-owned subsidiary of Berkshire Hathaway. Munger has an estimated net worth of several billion.
The audio from the interview can be streamed here:
http://www.valueplays.net/2009/09/free-post-whitney-tilson-on-charlie-munger/
And can be downloaded here:
http://www.simoleonsense.com/whitney-tilson-talks-about-charlie-munger-with-phil-terry/
For those that do listen to the audio, note that the actual interview starts at the 5:50 mark.
Section 1: Whitney talks about Munger
Tilson starts by giving a 20 minute talk about Munger. This section will provide highlights from this talk.
Everyone digs into who Warren Buffett is, but few look into Munger who is not as public of a person. Munger is 85 and Buffett is 79. Both grew up in Omaha and did not know each other due to the age difference. Coincidentally, Munger at one time worked at Warren’s grandfather’s grocery store.
Munger attended the University of Michigan then Cal Tech. He never did get a bachelors degree due to his service during world war 2. Munger’s father was a lawyer however and managed to pull some strings at Harvard law school to get Charlie into Harvard. He ended up graduating from Harvard near the top of his class. He worked at a law firm coming out of Harvard but did not want to make money based on billable hours. He wanted more than this and decided to start the Munger partnership which was an investment fund. His investment fund did mostly real estate deals during a boom time in California. In 1962 through 1975 he set up The Munger partnership which did about 20% annually versus 5% of the Dow for those 14 years. In the early 1960s, he also started a law firm. Charlie has not been active there for many decades, but it turned out to be a prominent law firm.
Charlie’s relationship with Buffett started in 1959 when one of Warren’s first clients (a doctor) introduced the two thinking that they would hit it off. They eventually met at a dinner party and did in fact hit it off. Warren viewed Charlie to be the smartest person that he ever met. And Charlie viewed Warren as the smartest person he ever met. They had an admiration for each other and it turned out to be a perfect fit.
Munger is credited with getting Buffett to look beyond investing in cigar butts. Buffett used to buy what are known as net-nets with disregard for the underlying company. Net nets are companies that you can buy for less than current assets minus liabilities. PP&E was not taken into account. Typically, you buy these for less than 2/3 of the net value. Then you find a lot of these companies that are statistically undervalued and buy them in a basket. Even if a company ended up liquidating, you still made money. This is all that Buffett used to do (for about 20 years of his career).
Munger is credited with changing Buffett’s thinking. Buffett never studied competitive advantage and quality of management. Things of this sort were never important to Buffett. Munger has influenced Buffett in making him look for higher quality businesses.
Tilson goes on to quote Poor Charlie’s Almanack. There is an important takeaway from the passage that Tilson quotes. It is that when Warren Buffet no longer runs Berkshire Hathaway, whoever takes over will not be as good. People should not assume otherwise when that day comes. Charlie already refers to the future head of Berkshire as “that poor bastard” in light of what he has to do as a follow up act to Buffett.
PART 1, PART 2, PART 3, PART 4
Whitney Tilson is an influential investor. He is the founder and managing partner at T2 Partners. Co-founder, chairman and co-editor of Value Investor and Insight). His resume goes on and on and on. More relevant to this article, he is a contributing author to Poor Charlie’s Almanack.
Charlie Munger is best known as Warren Buffett’s right hand man. More specific to Berkshire Hathaway, he is the acting Vice-Chairman of Berkshire Hathaway. Munger is also the chairman of Wesco Financial Corporation, an 80.1%-owned subsidiary of Berkshire Hathaway. Munger has an estimated net worth of several billion.
The audio from the interview can be streamed here:
http://www.valueplays.net/2009/09/free-post-whitney-tilson-on-charlie-munger/
And can be downloaded here:
http://www.simoleonsense.com/whitney-tilson-talks-about-charlie-munger-with-phil-terry/
For those that do listen to the audio, note that the actual interview starts at the 5:50 mark.
Section 1: Whitney talks about Munger
Tilson starts by giving a 20 minute talk about Munger. This section will provide highlights from this talk.
Everyone digs into who Warren Buffett is, but few look into Munger who is not as public of a person. Munger is 85 and Buffett is 79. Both grew up in Omaha and did not know each other due to the age difference. Coincidentally, Munger at one time worked at Warren’s grandfather’s grocery store.
Munger attended the University of Michigan then Cal Tech. He never did get a bachelors degree due to his service during world war 2. Munger’s father was a lawyer however and managed to pull some strings at Harvard law school to get Charlie into Harvard. He ended up graduating from Harvard near the top of his class. He worked at a law firm coming out of Harvard but did not want to make money based on billable hours. He wanted more than this and decided to start the Munger partnership which was an investment fund. His investment fund did mostly real estate deals during a boom time in California. In 1962 through 1975 he set up The Munger partnership which did about 20% annually versus 5% of the Dow for those 14 years. In the early 1960s, he also started a law firm. Charlie has not been active there for many decades, but it turned out to be a prominent law firm.
Charlie’s relationship with Buffett started in 1959 when one of Warren’s first clients (a doctor) introduced the two thinking that they would hit it off. They eventually met at a dinner party and did in fact hit it off. Warren viewed Charlie to be the smartest person that he ever met. And Charlie viewed Warren as the smartest person he ever met. They had an admiration for each other and it turned out to be a perfect fit.
Munger is credited with getting Buffett to look beyond investing in cigar butts. Buffett used to buy what are known as net-nets with disregard for the underlying company. Net nets are companies that you can buy for less than current assets minus liabilities. PP&E was not taken into account. Typically, you buy these for less than 2/3 of the net value. Then you find a lot of these companies that are statistically undervalued and buy them in a basket. Even if a company ended up liquidating, you still made money. This is all that Buffett used to do (for about 20 years of his career).
Munger is credited with changing Buffett’s thinking. Buffett never studied competitive advantage and quality of management. Things of this sort were never important to Buffett. Munger has influenced Buffett in making him look for higher quality businesses.
Tilson goes on to quote Poor Charlie’s Almanack. There is an important takeaway from the passage that Tilson quotes. It is that when Warren Buffet no longer runs Berkshire Hathaway, whoever takes over will not be as good. People should not assume otherwise when that day comes. Charlie already refers to the future head of Berkshire as “that poor bastard” in light of what he has to do as a follow up act to Buffett.
PART 1, PART 2, PART 3, PART 4
