In the rear view mirror: Charlie Munger, Warren Buffett, and Berkshire Hathaway
I was not a fan of Warren Buffett's peanut brittle bingeing former sidekick Charlie Munger.
Saw things
Clearer
Clearer
Once you, were in my...
Rear view mirror...
Goodbye old chum
On November 28, 2023 Charlie Munger passed away at the age of 99, just 34 days shy of his 100th birthday.
Those who have been reading me for a while, all the way back to my legacy blog retheauditors.com days, know I am not a fan of Warren Buffett and his peanut brittle bingeing sidekick Charlie Munger.
My writing about Berkshire Hathaway and the Buffett/Munger "corporate governance performance" reached a peak in 2010-2011 when I was writing for Forbes. There was an enormous appetite for anything Buffett. I used to say that a story about Buffett looking at porn on his iPad would blow up the search engines.
It was easy to write about how Berkshire Hathaway was a hotbed of hypocrisy.
Now we have rascals like Elon Musk with companies like Tesla to replace personalities like Buffet and companies like GE — the hottest when I first got to MarketWatch in 2015 —that everyone will read anything about.
On April 30, 2011 I attended the Berkshire Hathaway Annual Meeting in person. I was writing so much about the "Sokol affair" and wanted to see them answer questions about it live.
This year there was more interest than ever in the Berkshire meeting because of the Sokol affair.
The Wall Street Journal, The New York Times, The Motley Fool, and assorted others such as WalletPop Canada’s Neil Jain live-blogged the meeting, which ran from 9:30am until 5:00pm. The most complete transcript of the Q&A I’ve seen can be found here: Notes from the Berkshire Hathaway 2011 Annual Meeting, prepared by a soon-to-be graduate who calls himself The Inoculated Investor.
Not everyone was so thrilled that the meeting would potentially be dominated by the Sokol scandal.
Mario Gabelli wants to know why three major media journalists are controlling the shareholder Q&A at the Berkshire Hathaway Annual Meeting.
Gabelli hosted a dinner and briefing with the Columbia Business School last night, "From Graham To Buffett and Beyond," that was a value investors' visit to optimistic island. Panelists included Charles Brandes of Brandes Investment Partners, Jan Hummel of Paradigm Capital, David Winters of Wintergreen Advisors, and Professors Bruce Greenwald and Tano Santos of the Columbia Business School.
The audience was mostly money managers. Gabelli, a 1967 graduate of Columbia's Business School, led a boisterous panel that was decidedly upbeat. No one, even when prompted, wanted to talk about any stocks to avoid. And they encouraged the audience, as value investors, to look past macro issues like the debt ceiling, the collapse of the European Union, the Arab Spring uprisings, and Tokyo, and focus on company fundamentals.
Gabelli is worried about nuclear and chemical weapons getting in the wrong hands. He joked that if you're worried at all about the under $50,000 a year crowd violently revolting because they're convinced capitalism has ruined their lives, there's always Cabela's.
They sell guns.
So I asked the question, "What about financial services? You haven't mentioned any banks."
The panelists unanimously advised the audience to avoid the big banks. They reminded the audience of the value investor mantra, "Don't invest in what you don't understand."
That's a Buffett aphorism as well. Banks' balance sheets are especially opaque, and panelists expressed frustration at trying to make sense of loan quality and loan loss reserves.
Then Gabelli surprised the crowd with a quick poll, "How many of you are Berkshire shareholders?"
Almost every hand went up.
"How many of you resent the fact that three journalists, who shall remain nameless, are controlling the shareholder Q&A? Do you really want to spend all our time on what they're interested in - Sokol?"
The response was nearly unanimous. Gabelli was kind enough to exempt present company - that nice Forbes reporter - from his indictment of journalists' priorities. But the mood was decidedly tense. These shareholders want to forget the Sokol affair and focus on the Berkshire fundamentals.
It may not that easy. And it may not be that easy to quell their anger over the selection of CNBC's Becky Quick, Fortune's Carol Loomis, and The New York Times' Andrew Ross Sorkin to screen shareholders' questions in advance. Those questions were submitted to their personal email addresses since Buffett's Annual Letter to Shareholders went out on February 22nd. They will choose the ones they've decided are, "most interesting and important."
At that 2011 Annual Meeting I saw Charlie Munger — an irascible 87 at the time — fall asleep at 4:30pm, live on the big screen, towards the end of the Q&A. Suddenly there was only Buffett and not everyone knew what had happened.
Understand… The formal Annual Meeting with a legal recording of the votes on resolutions in the proxy, election of the slate of Board of Directors and confirmation of the auditor – Deloitte – was conducted during the last half hour of the day.
The rest of the meeting was a Q&A session with Buffett and Munger, the two of them alone on a bare stage in front of 40,000 people. It was an example of high performance art, including Buffett playing straight man to Munger’s snappy jokes until Munger finally nodded off about 4:30pm – or, more accurately, carbo-crashed on stage, after munching constantly all day on See’s peanut brittle.
I wrote about Charlie Munger's disdain for auditors at MarketWatch.
Charlie Munger, the vice chairman of Berkshire Hathaway Inc., and chairman of Daily Journal Co., is hailed for speaking his mind. But that openness may be at odds with what’s considered sound corporate-governance practice.
Munger’s role at the Daily Journal, a legal publisher, can tend to mimic that of Berkshire BRK.B, 0.41% boss Warren Buffett, with more time spent investing in the shares of other companies than in running them. Fans cheer Munger and Buffett for a folksy style and, more importantly, their investing prowess. But experts are raising eyebrows over how Munger deals with auditors at the Daily Journal DJCO, -0.96%, where he has fired two audit firms in less than three years. The auditors, in part, are reacting to the expanded businesses that take Daily Journal beyond publishing legal notices into technology and investing.
After dismissing Big Four global audit firm EY in June 2014, Munger’s company in February fired the successor, BDO USA, less than two years later. The Daily Journal has now turned to a California regional firm, Squar Milner, for auditing.
Corporate governance expert Nell Minow, the vice chair of ValueEdge Advisors, says multiple auditor changes can be a red flag. “It puts the burden of proof on the board to explain what’s going on,” said Minow.
And then there were the college dorm designing fiascos.
After a Billionaire Designed a Dorm, an Architect Resigned in Protest, NYT
“Absolutely stunning” is how the University of California, Santa Barbara, described plans for Munger Hall, a towering residence hall for more than 4,500 students that was designed by Charles T. Munger, a billionaire and an executive of Berkshire Hathaway.
But Dennis McFadden, an architect who served as a consultant on the university’s design review committee, did not agree. On Oct. 24, in a scathing letter to the chairwomen of the committee, he announced that he was resigning over the university’s decision to approve a design he likened to “a social and psychological experiment.”
He said he was “disturbed” by a design that would cram the students into a 1.7-million-square-foot, 11-story building and make the vast majority of them live in small rooms without windows, “wholly dependent on artificial light and mechanical ventilation.”
“In the nearly fifteen years I served as a consulting architect to the DRC, no project was brought before the committee that is larger, more transformational and potentially more destructive to the campus as a place than Munger Hall,” he wrote in the letter. “The basic concept of Munger Hall as a place for students to live is unsupportable from my perspective as an architect, a parent and a human being.”
Plans were rightfully scrapped. (NY Mayor Eric Adams shows up in favor of the plan!)
University of California abandons plans to build “windowless dorm” Munger Hall, Daniel Roche, The Architect's Newspaper, August 9, 2023
For many, Munger Hall embodied the bottom-line driven ethos of corporate philanthropism that often prioritizes quantity over quality; and the sad state of academia where, thanks to funding shortfalls, universities must bow to whoever can pick up the tab.
As previously reported by AN, windowless dormitories are proven to have serious mental health consequences for students, but they’re not illegal.
To address the city’s housing crisis, New York Mayor Eric Adams floated a similar idea to Munger, calling for stripping legislation that promises each city citizen window access this past March. “Why can’t we do a real examination of the rules that state every bedroom must have a window?” Adams asked in a group conversation at The Green Space. “You don’t need no window where you’re sleeping, it should be dark!”
I will just leave it here with one of Munger's pearls of wisdom. He was Silicon Valley before Silicon Valley!
In a democracy, everyone takes turns. But if you really want a lot of wisdom, it’s better to concentrate decisions and process in one person. It’s no accident that Singapore has a much better record, given where it started, than the United States. There, power was concentrated in an enormously talented person, Lee Kuan Yew, who was the Warren Buffett of Singapore.