Buffett's Sidekick Has Sage Advice Of His Own

There are two great shareholder meetings in May: the love-in at Omaha at which Warren Buffett, the legendary head of Berkshire Hathaway Inc., entertains and explains his investment philosophy; and a session in Pasadena, Calif., at which Charlie Munger, Buffett’s 83-year old sidekick (he is vice-chairman at Berkshire), regales the troops from Wesco Financial Corp., an 80.1%-owned subsidiary of Berkshire Hathaway. Munger is Wesco’s chairman.


“Munger’s meetings are nearly as legendary in the investment community as those he co-hosts with Buffett in Omaha,” says a note on Wikipedia.


Wesco started life as a savings and loan association and now has four major subsidiaries: Wesco-Financial Insurance Co., The Kansas Bankers Surety Co., CORT Business Services, and Precision Steel Warehouse.


Sanjay Sen, a Toronto-based portfolio manager and Buffett admirer, has attended both sessions. (Berkshire’s AGM was on May 5 this year, Wesco’s four days later.)


He put his thoughts on this year’s three-and-a-half hour session at the Berkshire meeting (the questions took three hours) with Munger and sent them to this columnist. Sen’s assessment: “I found the knowledge dispensed in this year’s meeting to be even greater than that in last year’s.”


Munger kicked off the session with a speech titled “Why was Warren Buffett & Berkshire Hathaway so successful?” He listed three main factors: – Mental aptitude: “WB [Buffett] is one of the smartest people I know. WB has been extremely interested in investing since he was 10. There is no substitute for having a very intense interest in something you’re trying to succeed at; WB started very early. When you are in a field like investing, which requires long compounding periods, this is an important factor; WB is one of the best learning machines on Earth. Extremely high-IQ people don’t need to keep learning throughout life (they can coast), but people with less intelligence need to keep learning. WB had both — very high intelligence and continuous learning. WB’s skills have increased markedly since he turned 65! If he had stopped learning earlier in life, his record would be much less impressive.” – Focus: “The work at BRK [Berkshire Hathaway] was concentrated in one mind. Great committees are unsuccessful in most fields (such as investing and physics). WB maximizes objectivity. A lot of very bright people make continually bad decisions because they have bad character traits and, worse, they encourage them. Don’t be an extreme ideologue — whether right or left.” – Positive Reinforcement: “As WB succeeded more with his approach and as more people knew of him, this was a form of positive reinforcement to keep doing what he was doing, and do it better. Positive reinforcement is a very important force in life; give positive reinforcement to people you care about when they do good things.”


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