Charlie Munger

Ben, when we teased this episode in the email about the Jensen episode that we just released, the guesses that we were getting from folks were amazing. I mean, people are like, it's Charlie, it's Warren, or it's Taylor Swift, and a lot of people are right. Hey, Taylor, you know where to find us, acquiredfm at Gmail.com. If you are looking to get more publicity, we're open. Have Travis get in touch.

All right, let's do it. Who got the truth? Is it you? Is it you? Is it you?

Is it you? Is it you? Is it you? City down? Stay straight.

Another story on the way. Who got the truth? Welcome to this episode of acquired the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert. I'm David Risenball.

And we are your hosts. This episode is a very unique one for David and I. Good friend of the show, Andrew Marks, organized a little dinner for us with Charlie Munger and a few other folks at Charlie's home in Los Angeles. You can hear Andrew a few times in the background asking Charlie questions. We are pretty sure that this is the only podcast that Charlie has ever done.

Charlie, aside from being one of the most prolific investors of all time alongside his partner, Warren Buffett, is 99 years old. He will turn 100 on January 1st. Of course, our conversation was interesting because he's freaking Charlie Munger. But also because it was interesting to get the perspective of someone who has seen the last 99 years of human history. We talked with Charlie, of course, about Costco, his history, investing in retailers over the last 50 years.

We also got to hear his views on what it takes to build a great partnership. What's gone wrong in the global securities markets these days? The concept of investing versus gambling and where investment opportunities remain in the world today. Yeah. Ben, this was such a special life experience for you and me and you and me together to do this.

And the fact that we got to record it and now share it with the world for posterity, just icing on the cake and the whole thing was unbelievable. Yeah. Listeners, we knew we were going to have dinner. We were going to be able to record it and now we get to share it with all of you. With that joined the slack.

There is awesome discussion of every episode and the news of the day at acquired.fm slash slack. If you sign up for acquire emails, you will get episode corrections and follow up from previous episodes plus hints at what the next episode will be. That's acquired dot fm slash email. And we have only one sponsor for this interview. Yes, a special conversation deserves a special sponsorship and longtime listeners will know there's only one company in the acquired universe that is truly appropriate because everything they do is modeled after Charlie and Warren.

And that's tiny. Yep. Tiny is the Berkshire Hathaway of the Internet. Really, they are such huge fans that they started a company that makes bronze busts of Buffett and Munger themselves. But more on that in a minute.

Yeah. So Berkshire, as we know, started as a textile mill in Massachusetts nearly 200 years ago and almost 20 years ago, tiny founders Andrew Wilkinson and his partner Chris took their version of an Internet textile mill, the premier design agency metal lab, which designed the UIs for slack, uber, Tinder, headspace, coinbase and others. And they asked themselves, what would Charlie and Warren do if they were us? And that led to the realization that just like Berkshire discovered in the physical world, the Internet also has wonderful niche businesses with great cash flows. In fact, they tend to be even better than the old days of CsKandis and Bluechips stamps because they require zero capital reinvestment, have software margins and can build global brands much faster than the what 50 some odd years it took Cs to expand around the world.

Yep. So Andrew and Chris took the extra cash flow from metal lab and their other businesses and created tiny, the world's first and best permanent holding company for wonderful internet businesses and boy, did it work. Yeah. Fast forward to today and thanks to tiny success, this opportunity is no longer a secret. Many people have called on to the idea that this can really work.

But just like Berkshire itself, no one else has the combination of experience, temperament, access to capital and frankly reputation that Andrew and Chris have built over the past two decades. They're investors and tiny ourselves alongside Bill Ackman and Howard Marks. And just like the two of them, Tiny is really the long term buyer of choice in their niche. Anyone who's looking for a permanent home for their profitable internet business or who needs a capital partner for a co-founder or VC cap table buyout would be lucky to work with Tiny. Yep.

For instance, they just bought the premier social network for Film Buffs Letterbox, which has been the founders baby for 12 years and will stay so within Tiny. And this really reflects Tiny's whole ethos. Work with only the best internet businesses commit to simple diligence, 30 day deals and leave the business alone, either for you to operate or bring in new long term oriented management up to you. Next to Tiny, this is the only sponsor has been said that you'll hear on this episode. And just like Berkshire, it'll be here in perpetuity.

Tiny just became a public company earlier this year. And they can now do deals ranging anywhere from $1 million all the way up to $250 million. So if you want to get in touch, just shoot them a note at high at tiny.com and just tell them that Ben and David sent you. Oh, and one more thing. The Bronze Charlie busts, the perfect daily reminder in your workspace to ask what would Charlie do?

Just head on over to Berkshire nerds.store to buy your own. And they also have plenty of some guy named Warren too. Okay. Now, without further ado, this is not investment advice. David and I may have investments in the companies we discuss and the show is for informational entertainment purposes only and on to Charlie Munger.

Charlie, I was watching the NFL games last weekend and it seems like every advertisement now is a sports betting advertisement. Is this good for America? No, of course not. Are the dog drags and racetracks of America as a casino is good for America? Of course not.

They're just very popular. Unless I'm wearing a got to start though, right? At the racetrack. Well, but Warren never gambled. Emily is a page remover.

Warren, one of the odds in his favor, not somebody else. Right. It's just so simple if you're Warren. You want the house, you want to be the house, not the punter. Listeners, the next topic that came up was retail stock trading and the idea that for many Americans, this is akin to gambling.

Well, it's organized. They don't really know anything about the companies or anything. They just gamble on going up and down the price. If I were running the world, I would have a tax on short-term gains with no offset or losses on anything. And I would just drive this whole crowd every while.

What do you think about the algorithms, like Renaissance and stuff like that? Well, of course, Renaissance is for the first algorithm. It was so simple. It shifted all this data for the past. And what did they decide?

Up, up, for two closing prices and down, down were more common than down, up, up, down. Once they realized that's the way it was for various reasons, even the psychology of madness and man as a natural trend follower, you're going to get a short term and they just use programs and computers to automatically mail buy in one thing on the first update and sell before the end of the second day. And it did a day after day. And every day, my machine would, you know, the central third-engineer would say your check today is $8,500 and $500,000. It's crazy.

You check tomorrow is $9,000,000 and $4,000. Well, what happens is that the ones, the easiest way is to front run what you know what the average is, what the index ones have to buy. You know what it is, exactly. They all know that. And the way they get their returns year after year is taking the leverage, the midday leverage of higher and higher and higher and higher.

So making smaller and smaller profits of more and more volume, which gives them this peak leverage risk, which I would not run myself. And that's the only way they make easy returns is to have this huge leverage. It would make you crazy if you were already rich. I had a good fortune of speaking with someone you know well, Richard Galante at Costco and spending a few hours. It was a lot about it.

He's been there always. Well, it's crazy. I mean, it seems like that's everyone on the weekend. They've all been there at the time. Yeah, I know.

I'm curious. How did you first come across Costco or price club at the time? Right. He was somehow new. So price.

And he said, you have to down me. So I drove down and loaded with three store and talked with us all. And of course, I was a very intelligent guy. So I was an ordinary lawyer in those 39 years of age. Anyway, I'm the former government employees.

Yes, can't come anywhere with him. Was this an effect of this? He was no longer with it. Go. Oh, Fed Mart to the.

Yeah. Yeah. Yeah. And did you get to invest in price club before it merged with Costco? Yes, I did.

But I just bought myself in the market. I was not getting any favor. And so how did you eventually meet Jim Senegal? Well, San Diego asked more on becoming director of Costco. He was looking for somebody with a financial reputation.

As an independent. Yes. And more wouldn't do it. He said, you can get charlotte into it. I want shorter plane rides to directors meetings and so forth.

So that's all that happened. I was the first to be a researcher ever tried to become a shareholder or a choir. I tried to get warned about the French when they left carifor. Ah. And Warren, what do I warn?

Doesn't like retailing. Was it just that he doesn't like retailing? What was the biggest? He's a writer. Gradually everything was much money in retail.

So it's probably gone the big barbers are gone. It's just too damn difficult as far as he's concerned. And he had a bad experience with diversified retail. Right? No, we made nothing but money diversified.

We didn't exactly make it retailing, but we made a lot of money. Wow. And with diversified, most of the money was not on the retailing operation. You made a lot of that money through. What happened was very simple.

We bought this little piss ant. The department started changing Baltimore. Big mistake. Too bad. And it's the ink dried on the closing papers.

We realized it'd be a terrible mistake. So we decided just to reverse it and take the hits to look foolish rather than go broke. We just don't kind of get us out of this. By that time we'd already financed half of it on covenant free debt and so forth. And they had all this extra cash and our own stock's got down to selling it enormous.

We just in the middle of those discussions we bought and bought and bought and bought. All that money went right into those stocks. And of course we tripled it just sitting on our ass. And that led to blue chip. Yeah, yeah, it was part of the earliest success of the blue chip.

Wow. And so you mentioned Warren doesn't like it. And we had something else that people don't know about. We bought a little piss ant savings on the company. Sure, maybe $20 million.

And we left that thing. We had taken out of our little $20 million investment over $2 billion in marketable securities, which went into the rescue insurance companies as far as their bedrock capital. So we had some wonderful early years. And that's what everybody needs. It's wonderful early years.

Wow. So in our Costco episode, we started with the joke at one of the Berkshire meetings probably 10 years ago. Warren told the joke about you were on a plane being hijacked and the hijackers gave you one final request and you said you'd like to give your speech on the virtue. Or me kind of reminding you of it. Yeah.

Yeah. And he said shoot me first. We were hoping could you give us your speech on the virtues of Costco? No, it was getting me for being sore about it on the subject. But there aren't many times in a lifetime when you know you're right and you know you have one that's really going to work wonderfully.

You've five, six times a lifetime. You get a chance to do it. And you go to a few times early all go broke because everything is easy. Its fact is very hard and rare. What was it about Costco that made you realize this is one of those few moments in a lifetime?

Well, they really did sell cheaper than anybody else in America. And they did it in big efficient stores and all the parking spaces were 10 feet wide and 7 feet, 9 or really normally are. They did a lot of right. Yeah. And they had a lot of parking spaces.

And they kept out of their stores. All these people didn't do big volumes you see. And they gave special benefits to the people who get to come to the stores in the way of reward points. The executive membership. Yeah.

It all worked. And the capital late business model, I mean, when we were studying at the difference between the two. Oh yeah. Oh yeah. They have no investment in their move.

They make the suppliers wait until they've been paid and they're scheduled to pay only after they're scheduled to sell. I've got 900 warehouses around the world full of high quality merchandise, none of which they have sitting on their books. That's correct. Yeah. So the planning is that price club went public initially before the merger.

They just listed. They didn't raise any capital. They didn't need any capital. Who knows? It's all kind of like the U.S. kind of offense here.

You like deals. You like this. It's real estate. Like, yeah, but it doesn't make sense. You don't want you got to have raises because you didn't want to screw around with your parking up.

You're bringing up your parking up permanently and stuff. It's not going to pay you very much. Right. You don't want to miss the answer. Have you ever seen another business that takes advantage of the virtue of the low-sku count the way that Costco does?

Well, if you've got lots of them. That little grocery store chain here in Los Angeles, Gelson Brothers, they wanted a hike to our orders in low capital costs. And they never made the least effort to earn any money. They wanted to share their parking lot with anybody. As you reflect back on one of these few great companies in a lifetime that you should bet big on, what advice would you have for David and I as young partners looking for a few of these in our lifetime?

Things to look out for. Well, you may find it five years after you bought it. These things may work into it. You're under own understanding, may get better. But when you know you have an edge, you should bet heavily.

You know you're right. And most people haven't done to each other's business school. It's insane. Of course, you've got to bet heavily on your best best. And how do you develop that level of conviction to know you work out it?

You redo a lot of reading and thinking and visiting. I'm curious that we wanted to ask you. You've had this beautiful partnership with Warren for half a century. We're a decade ago. There was a lot of lagging fruit in the early days of our operation.

You don't have any unclanging fruit that is easy to write. You mean an investment opportunity? Yes, that's right. But your relationship with Warren, like how have you... Well, we were all similar.

We were both one. Do you have family safe and big new good job for investors and so on? We had similar attitudes. Yeah. Did it change over the decades?

No, Warren still cares more about the safety of his purchase over the next year's but anything else. We used a little bit more leverage throughout. We'd have three times as much now. And it wouldn't have been that much more risk either. We just did.

We never wanted to give them at least chances to have our basic shell position. If you had used more leverage, do you think there's some chance that... We would have done a little better, sure. Do you think there's some chance that it wouldn't exist at all, that it would have cost you the franchise? No, I think it would have worked fine.

Just wanted to make that easy. The situation landed softer. You were intelligent. Just, you know, get out. When you leverage them so curious on after we did our...

It's automatically leveraged. You're going to know the story with no capital. Of course it's leveraged. Who wouldn't want to business with it? There's no inventories.

Right. By the virtue of you owe a whole bunch of people money on day one for these goods that... Which turnovers are rapidly. Right. It's interesting.

I mean, that's leverage. It's not debt leverage. How do you think about debt? Like, after we did our virtual series... I want to be able to do it now.

There's a lot of people now who do it who manufacture something. They're just terribly strong. And they're just forcing the suppliers to carry all the humanhood. Isn't like we're the only ones that do that. Back to the point on partnership, David and I are coming up on 10 years as partners in this podcast we do together.

Different than the investing business, but a compounding one nonetheless. After a 50 year partnership with Warren, what advice would you have for us to make for an enduring partnership? Well, it helps if you like one another. We do. Yeah.

But I don't give anyone formula. A lot of partnerships that work well for a long time happen because one thing that one is good is another. They just naturally divide it. And each one likes what he's doing. Now in Costco's case, they had Jeff Rotman who's very smart, but not a retailer.

And Jim Seney, well they divided it up. And they had originally agreed that Rotman would be the chairman and CEO. He was his idea he found the whole thing. But Sunday was I'd know I have to be the CEO. So it was a big unfortunate board meeting, or a big internal struggle.

And Brotman moved aside. Was that after you joined the board? No, before. Do you think you and Warren, not living in the same city, helped your partnership last so long? Well, it may have helped.

But Warren has very close relations with all those people that have lunch every Saturday at Berkshire headquarters. Isn't like he doesn't have a little quarter of people there who are kind of pals from ground up. Do you think it helps that when you do spend the time together, it's special rather than being common? Well, of course we used to spend a lot of time together with young people. We didn't have that much to do.

Now we've got more to do and then it's just the other initiative of life. So it's different. Yeah. It's funny. I feel like we have a lot to do now.

But it's very difficult to invest money well. And I think it's all but impossible to do time after time or time at a venture capital. Yeah, we really wanted to ask your thoughts on venture capital. So the deal gets so hot. But besides so quickly, you're all just sort of gambling.

Do you think the role of venture capital is being properly accomplished in society? No, I think it's very poorly done. Charlie elaborated on this point with a few things that we can't hear, but the topic did turn to Bitcoin. I've heard many comments you've made on Bitcoin. I'm curious if you have a thought on this particular angle.

An easy way to transfer money in between countries, especially when those countries don't have a stable store of value within that country. Is it good to have an independent store of value that is not head to agency? Well, of course it's good to the world as a whole to have a way of having some currency. The way that was solved is for a long time the British bound was the national currency of the investment world. That should have been a dollar and it's still a dollar.

And people like China have these numbers, it's a dollar. The money we make way. Think of the money people give us where we always just print out these pieces of paper. Yeah. And what about the common person in some of these less fortunate countries who don't have access to US dollars?

Well, they do it. They already money. The dollar is very fun. You can always buy one anywhere. I'm curious, back to this point of the role of venture capital in a society.

If you could design a perfect system to fund an individual. I'm a very legitimate business. If you do it right, if you want to give the right people the power and nurture them, help them. You know a lot about the tricks of the games, you can help them run their business, you've got to not interfere with them so much as they hate you. By and large, I have bumped into a lot of people in the businesses with venture capital financing.

I would say the ordinary rule is that people in the business doing the work, they more of them are not the hate to venture capital. They don't feel they're in their partner trying to help them to come and they're only taking care of themselves and so on and so on. How could it work differently? Yeah, well, that's not true in Berkshire. You see, arguably, they know we're not trying to discard them to the highest bid.

You see, if someone has oil investment in my career offers us 20 times earnings or something, it allows you to business. We don't sell. Because if it's a problem, business being never able to fix, we'll sell it. But if they have a decent business, we never sell anything. And that gives us a certification of state with things, which helps us.

And do you think that by and hold, not only mentality, but demonstration is the key thing that aligns investors with managers? Well, it's rare, you see. Everybody else has a standard way of doing things. The lawyers have their standard forms. And everybody just has the same standard form.

And they get the same standard results, subject to the vicissitudes of investment life. You don't want to make money by screwing your investors. And that's what a lot of venture capital do. The world is full of XG Goldman Sachs partners that formed a private fund and they manage a billion dollars or something like that. And they charge two points off the top plus the spibby and that enables them to make very handsome lawyers themselves.

But the endowment's not getting a good return. And do you think it's specifically the fee aspect of fund structures? It's the way it works. And of course, you really shouldn't be in the business of charging extra. But in this, you really are going to achieve very unusual results.

And of course, it's more easy to pretend that you can get good results of this actually given. And so it attracts the wrong people because it was an investment capital term of mine. And if you'll hate the most money at a venture capital, a lot of like investment bankers is that which new area they're going to get in. They're not great investors or great. What do you think endowments and large pools of capital should do then?

Well, they're starting to do it. The endowments have started to say to all these people, the judge, three and thirty or whatever they charge, they say, we'll pay you three and thirty. We're going to put in twice as much money in the next tab, you'll get nothing on it. You're going to ride very fast, you want something on your bed. So the fees go down by 30%.

That'll take a lot of the fun out of it. Fees down by 50%. And that's happening all over America. They feel had misled, irritated. They've looked foolish to their own trustees.

One of the issues I think in investing right now, you mentioned about venture capital, I think it's true everywhere. It's like there's just so much capital and so much competition. We're so far removed from the cigar bud era. We're in the opposite of the cigar bud era these days. Are there opportunities out there?

Somebody will find the big thing, but it gets harder and harder. I would argue one of the easiest ones was when they decided to go to a group around Home Depot, they would copy the Costco Medal and all my improvements. That was basically a good idea and think of the money they made doing. Yeah. Pretty markets.

Yeah. That was a direct copy of Costco. Do you think there are more opportunities to copy Costco? Well, there was another one in Costco. Flooring the car is the current imitator.

It's just this in vinyl, whatever the thing is, vinyl flooring. They're running a Costco model. Huh. And they keep adding this stuff to it too. It's the miscellaneous stuff that'll eventually kill you though.

Well, it'd be simpler if it was all flooring. Yeah, the vertical Home Depot worked so well. But I don't know that it was totally obvious. Part of the appeal of Costco was it was horizontal. It was everything.

Consumers could come, they could make a trip, bring their big wagon, bring their big truck. The people was the same. They copied everything. And famously, Bernie markets came out to visit Sol. Yeah, they came out.

They copied everything. Sol was happy to share the playbook with everybody. I know. Sol was not crazy. He was domineering and so on.

But he was also very intelligent. But there aren't many opportunities like Home Depot and Costco. There aren't very many. Why do you think Walmart hasn't been successful once they saw Costco in competing? They were too wedded by the ideas they already had that everybody's trouble.

They just can't accept a new idea because the place is likely by their own idea. They got in the habit of getting real estate, even though they didn't know they were going to go any little towns or nothing was valuable. So they're always their occupancy costs are like zero. And they knew how to make big division stores. That was their formula.

So I've founded them to go against the rich suburbs in terms of pay out for the good locations and Costco just specialized in the good locations where the rich people live. And while I just let them do it year after year with a terrible one's day. Did you know Sam? Walton? No, never been.

I knew this on one of the sons. And they divided it up, you know, in about six parts very early. Now, Walton, enterprises, they never paid much gift access to anything. The topic then turned to the automakers and the future of the car industry. Look how hard it would be.

You go into the auto business and have some big killing. Who's going to win? Who knows? Well, I think it's been thrown away out of the air by all these electric cars. Yeah.

Those big new capital requirements, different ways of selling cars. And plus they got these tough unions. See, I just don't even look at the auto industry. Do you think it's more investable today than it was 50 years ago because of the disruptive innovation of electric? Well, for maybe for one or two electric cars are really good at it.

Maybe. Let's certainly know what else. So you think BYD was a miracle. But that guy works 70 hours a week and has a very high IQ. He knew the thing you can't do.

You can look at somebody else's auto bar and you can figure out how to make the goddamn thing. You can't do that, you see. Charlie, you invested in a Hyundai. Yes, but that ever do. How was that investment for you?

I lost money. Not much because I was stubborn. I held out and got back to almost what I paid for it. I was old. There's been a lot of discussion about Berkshire's investments in the Japanese trading houses.

Well, but that is a no brainer. Something like that. It is smart as Warren Buffett. Maybe two, three times a century. You had an idea like that.

Interest rates and we're half a percent per year per 10 years. And these trading companies were really entrenched old company and they had all these cheap copper mines and rubber foundations. And so you could borrow over 10 years ahead. All about it. You could buy the stocks and the stock for 85% dividends.

So there's a huge flow of cash with no investment, no thought, no anything. How I would do that, you'll be lucky if you get one or two a century. We could do that, nobody else could. He'd look to track the half a percent, but you couldn't get it. But Berkshire really is credit could.

But on a regular you could get it was very patient and just take away out of the little pieces of that. It took a forever to get $10 billion invested. But it was like, God, just opening a chest and just pouring money under it. It's awfully easy money. It's interesting that it's paradoxical.

You need Berkshire's credit, but at Berkshire's scale, it's actually hard to put enough money to work. That's true. Well, why should it be hard to make money? Why should it be easy? Japanese trading companies reminds me.

We studied another company recently, Nike. That is surprising to me. That's very different company. Did you ever look at it? Style company.

I don't like Style company. To Fadriven? Well, I suppose if the RB Hermes is achieving a price, I'd buy it. But short of that, I mean, everybody is style company. Ooh, that's a good pick.

To the style points. Another one that they covered was healthy on age. What our note has done has been amazing. So what do you make of that company? Well, if you're as good as they are, what they've done, you have a lifetime to do it in every now and then every now and then.

So you're a poor lifetime to do it in. You can create another, but it's not easy. Hermes is on the eighth generation, I think, now. The family running it? It's not a bit easy.

They have meetings every day with equality, equality, equality decisions. They choose the locations one at a time. It's work. It's definitely work. What do you think the durable value is in these, as you say, style companies of the very best one in the world, the Hermes or the LVMH, what makes them enduring?

Well, they just got to brand people trust so much. It took them a century to do it. Our conversation then turned to comparing Kirkland's signature as a brand to Hermes. Kirkland is a brand the way Tied is a brand. And Hermes is a different kind of a brand.

Yeah, Ferrari doesn't make a lot of detergent. No. We've spent a lot of time studying these brands. How do you look at the value of a brand? Well, it's hard for us not to love brands since we were lucky enough to buy this.

You can't eat for $20 million as our first acquisition. And we found out fairly quickly that we could raise the price every year, like 10% to nobody cared. We didn't make the lives go up or anything like that. Just made the profits go up. So we've been raising the price by 10% a year for all these 40 years or so.

Wow. It's been a very satisfactory coming. It didn't require any new capital. So it was a good about very little new capital. We had two big kitchens and a bunch of rental stores.

And we bought it. Now it's got two big kitchens and a bunch of rental stores. Well, Charlie was a playboy and he's brother around the company. He was older brother and dominated it completely. But when he died, Charlie made his brother as a executor.

And now he needs a lot of money to pay death taxes. He doesn't have it. And it's due, you know, eight months or something later. And so they really wanted to sell so they could pay the death taxes. But see, it was only making four million protects and we bought it.

And so that buying opportunity only came about because the family needed liquidity to get the death taxes. We only found out about it because Charlie was on his cruise to Hawaii or something. This guy was a client who doesn't counsel also worked for the Lucha stamps, which is the company that bought him. And anyway, that's how we found out about it. We paid that guy a fine decision.

He never paid one cents. He said that thought it was worth it. Of course. But you don't want to be able to pay fine decision. They're in the world of rebelling all day long.

So what do you think? So there are categories like C's or B with his Nestle and he's filler of it. He's done two or three points better than average, but it's not a bad answer.

After that, our conversation turned to craft hines and why hines is able to have pricing power while craft is not. Very interesting. It's something about the flavor of ketchup. I got the unfried potato. You want to really well change brands over.

They want hines. And so we could raise the price of hines pretty much. But you try to raise the craft cheese and everything goes in about, you know, including the final customer that I also have. Don't care that much of what was the cheese that's grabbing it off. Why do you think that is that some of the sauce flavor is happening elsewhere in Korea.

One guy is a Chinese guy. There are all those sauces. Every single major sauce, at least 95% of them. And it's because sauces have such a particular flavor that no one can imitate the trade secret. Yeah.

Huh. And that gives price. We'll be used to it. Like it. Is that Coca-Cola as well?

Yeah, sure. Charlie, I'm curious. At age 99, what is something that you believe today that 70 year old Charlie would have disagreed with? I think I knew what I was 70. That was my hard, but it's just so hard.

I know how hard it is now. And all these people who are getting this two and 20 year three and 30 or whatever, they all talk as always easy and they get to believe in their own bullshit. And of course, it's not a bit easy. It's very hard. If you were back 30 or 40 years old again today, would you decide to go into the investment business again?

Probably because it's my nature. But I didn't really enjoy the three and 30 business. Once I had enough money on my own, I'd rather just never really my own money. That is a much better way of doing it than. Because of the.

We forced the deal with investment bankers. We forced the deal with investment consultants. We forced the deal with venture capital. The hell with who knows? You don't need other people.

Why do you get rich? So you don't have to need other people. Charlie, if you started with Warren today and you're both 30 years old, do you think you guys would build anything close to what a Berkshire is today? No, we would. We had everybody that has done usually a good result.

Almost everything has three things. They're very intelligent. They worked very hard. They were very lucky. It takes all three to get them on this list.

This is what was successful. How can you arrange? They have to do the answers of good luck. They answer you can start early and keep trying a long time and maybe you'll get one or two. If you were starting again today, do you think insurance would still be the vehicle?

It depends on your temperament. Insurance would be ideal for a certain kind of a temperament. And it takes a very patient person to get rich insurance. Takes forever to get any of the units, gets to get to get a portion of anybody's side. It's very hard to make money.

I've heard you say as soon as you're wealthy enough to self-insure you should. Is there any insurance that you get? Well, that's about everything. Think of all the crumbums of the world that drink too much and then file my claims of insurance coming up. But it's on fire or something.

Why would you want to pay the your share of their stupidity? Not to mention the overhead. Of course, the insurance company needs to pay all the people to work there. Yeah, yeah. No, no, it's crazy.

Is there any insurance that you carry today? I carry no fire insurance anywhere. Do you carry auto insurance? Yeah, I have to. We were legally.

Yeah. That's not being a tech person. How did you think about the Apple investment? And what gave you the conviction to be so big? Whatever he's learned is that everybody needs some significant participation in the 12 companies that do better than everybody else.

And you need two or three of them at least. And if you have that mindset, Apple was a logical candidate to be on the list for which you're going to select your companies. And it's not very hard to come up with that idea. It may be OK. Making the list doesn't sound too hard.

In fact, there are these acronyms, fang or mamma, Microsoft, Apple, Google, Facebook. selecting the one and putting hundreds of billions of dollars into it. To create hundreds of billions of value, that to me sounds hard to pick the one. How did you guys pick the one? We couldn't buy anything else.

Was it valuation or? Yeah, we got you. We got to do about 10 times our earnings with more money. 2015, I believe, was the first. It's fascinating to me this concept of if you look at Distrest debt or you look at any Warren in the last Berkshire letter pointed out, it's been a handful of really good decisions or you look at venture capital that's classically power law distributed.

Any of these asset classes comes down to a few really good decisions with high conviction over an entire career. Yeah, that's exactly what it was. Exactly the way it worked. It's not smooth. There's no asset class where you can repeatedly just do.

No, there's the lanky book for the idiot. It's not gone, but it's very small. You mentioned this idea that when we're talking about Apple, there's a few companies that it's just really important to be in. Do you think these big tech companies being the winners where all of the pensions and Berkshire and university endowments and everyone's 401ks being concentrated in these companies, do you think that was the natural outcome? Did we have to end up this way?

Yeah, it was natural. That's why it happened. It was this one. What caused is that? Well, it's just that's what human nature and competition.

That's what it causes. Will we eventually have one? Eventually, this craziness in venture capital and all that's stupid. That's a natural outcome. Will we have one $20 trillion companies and then the next biggest companies?

I know we're going to have friends we did. They just have them. Will you continue investing in China? What's your position with that? Well, my position in China has been.

Chinese economy has better future prospects over the next 20 years than almost any other big economy. That's number one. Number two, the leading companies of China are stronger and better than practically any other leading companies anywhere. And they're about a little bit cheaper price. So naturally, I'm willing to have some China risk in the money portfolio.

How much China risk? Well, that's not a scientific subject. But I don't mind whatever it is, 18% or something. Whatever's worked out in the money family. So, okay with me.

What about other geopolitical considerations? Like would you hold TSMC at this point? Well, I don't like that as well. I like something with a real consumer brand of its own, like Apple. I'm curious what major companies that haven't been mentioned, do you think people would do well to study the virtues of like studying the virtues of Costco?

Well, I only study two kinds of companies. One, I'm an oven of a grand-gram follower. Something is really cheap, even though it's a crappy company. I'm an oven- It's not like I have a $100 time. So it isn't a bit easy.

A hundred times easy money is almost not existent. One type of company is the cigar bud. What's the other type of company? The companies that people would do well to study the virtues of. Well, the grand companies, of course, are good.

Getting them at the right price. The whole trick is getting them at a few rare occasions. And they're really cheap. But the bank costs go at its price. It may work out all right, but that's getting hard.

For getting the prospects of stock, how do you think about the next 10 years for the business? I think it'll do pretty well. One more question for you in this area. What is your favorite advice to give to young people? Well, I don't give advice to just any young people.

I give it to some. I pay my spots. I don't want to be more of a girl with young people. Yeah. It's getting hard out there.

And there's always bullshit and craziness. Of course, it's going to be hard. Where are the attractive opportunities hanging out anymore? It sounds like everything in the whole world is overpriced. Does that be possible?

Damn near, of course, it could be possible. It's not only possible. It's likely it'll actually happen. How did the world get so rich if we have all this capital for so few opportunities? It's the nature of things.

Look, biology produces a very advanced creature like us. You can sit around and talk and tell all these subjects. But it doesn't by killing everybody all the time, which isn't one of the other for hundreds of thousands of years. In other words, the system nature uses to get smart. It's kind of unpleasant to the people who are losing.

So over the last hundred years, we've brutally shifted all this value from labor to capital and now capital is all competing to get into a very small set of opportunities. Well, capital never, you would, it wasn't if it was all that easy. You'd go back along that. It just was a lot easier. And if it continues to get harder, the natural end is that you have...

Yes, it doesn't blow up with some kind. And God knows what happens after it doesn't blow up with our modern democracy. You would guess that you're like, Europe, which is quite dysfunctional. Isn't too pessimistic of you to say that the world seems to be out of good ideas to match the amount of capital out there looking for good ideas? It was never easy.

It's thoroughly understood it was never easy. It's harder now. Those are the two who are at well. And you pay attention to not your handling of people you deal with. You want to go to a reputation when you're all done in the other bad one.

And I don't think you're saying there are no opportunities whatsoever. I think you're saying there's low expectations and fewer bonanzas. The beauty of it is you only have to get rich once. You don't have to clap this out four times. Just never do it once.

Well, that's sort of your philosophy on both sides. You got to be patient for the great opportunities. But when you got to recognize them when they come and bounce. We turned off the mics to have dinner and then recorded a little bit more later in the evening about Costco and some life advice from Charlie. So one Costco question that I've been wanting to ask you is all the puzzle pieces of the low-skew count and the high inventory turnover.

And there's just so many things that fit together so beautifully. They're pretty obvious though. But how come no one else can pull it off if they're so obvious? It takes a lot of good execution to do it. You really have to set off to do it and then do it with an analysis every day, every week, every year for 40 years.

It's not so damn easy. So you think the success is the magic of the business model and culture? Yes. Hey, as culture plus model is absolutely and very reliable, hard-working, determined execution for 40 years. I mean, they talk about the story of the catch-up that you could increase the price of catch-up by 3% and nobody would notice.

But that would destroy everything if you did that, right? I would say that the central norm was don't raise the market. You gather it low and keep it there forever. Which brings us to the hot dogs. Is it true the story that when Craig took over as CEO, he did try to raise the price of hot dogs?

I don't know. I had no conversations with him. And Jim forbade him. Well, I sure Jim would have forbade it. I absolutely.

There was no board level discussion of the hot dog. No, no. Those two would not have bothered to discuss the price of hot dogs. The one thing that fascinates me about Costco is they seem to only be able to grow at 10% per year because they're not capital constrained. No amount of money if they were to access it for free.

It's hard to open too many stores a year. New store, new manager, new business, new politics. It's hard. Plus a lot of stuff as they learn and bought and bought. And so they didn't want to do more than they can comfortably handle.

Store openings. You mentioned China earlier. Was it 12 to 20 years that Costco had the license to operate in China? Well, anyone out there there, the first store, they tried to open in China. The first store, somebody wanted a $30,000 bribe.

No, a Chinese culture. And that made such a bad impression on Jim's Senegal. He wasn't even talking about getting a China for about 30 years thereafter. So what changed why I finally go in? Well, finally the board started making up noises.

You started agitating. Yeah. Yeah. Who on the board could be excited about the Chinese market? Yeah.

Who can't? Who knows? That's so great. One thing I found fascinating about Costco was the fact that even though they're at the lowest possible prices, their audience skews wealthy. Was that an accident that they figured out over time?

No, it was the right. They figured out to announce. All the way back in the price club days. Yes. You always wanted the rich man to have the same money.

Well, and it's not just that they're the wealthiest customers. They're smart wealthy customers. Yeah, they're picky wealthy customers. On some topics that are outside of Costco, you mentioned in the Daily Journal, annual meeting this year that a young man knows the rules and an old man knows the exceptions. Yeah, that's what I was saying about Peter's.

Oh, is that a Peter Kaufman? Yeah. What are some of the exceptions that you've found the most useful in life? Well, take those goddamn Costco hotdogs. That's an exception.

Yeah, anybody else would have raised the price of hotdogs a long time ago. They just don't do it. They just know that it's sort of half famous. You'll be here, kids, and they know they got something going there. That's worth extra $22, and they just don't destroy it.

I think that I've never fully understood. I know you're a big fan of the company BYD, that of course makes the Chinese company that makes batteries and electric vehicles. Maybe a big fan, but I'm sort of hanging out by a hat while he learns around the track. And they make me nervous. It's so aggressive.

Is that dangerous in a company? No, that's what makes me nervous. Of course it's dangerous. So do you think the companies should try to grow at a lower rate than they're capable of in order to be more durable? Well, of course you do that if it's safer and easier and so forth.

But Costco, where they've done some of these things that are extreme like that, though it's not pleasant. They're smart to not change their ways on one item or two. And it seems like there's a spectrum where on the one side, there's Costco that is just not a fast-growing company because it's very difficult to. And on BYD, like you're saying, they grew like crazy. I mean, you turned to me like this year, so at least two and a half million cars, most of them electric. That's unheard of.

I've never heard of that. That's way more than most 80s friends. More than Tesla, right? Yeah, more than anybody. Yeah.

Lots of troubles and losses. They ran into terrible trouble. They created the wrong kind of day, made lots of mistakes. They were lucky they'd be cutting edge of this electric car business. It's way more acceleration than most people.

So you got a car with more open and most fields with a young macho male. Has a real lively car. There are a lot of things about electric car that really works in some ways that is better. It may get a 90 degree turn. We go right off of our car, you're just moving this way.

Turn the wheels 90 degrees and go in. Yeah. Well, nobody's ever done that. If your car goes flat, you can run 100 miles on the three other wheels. And do they have better economics?

Because they don't have to do as many arts. It's simpler. Have you ever had an investment like that before? I think you invested something like 270 million. That's now worth something like 8 billion in BYD.

Well, very good people have an investment. This is a venture capital type investment. It happened to be a semi-traded public company and we bought it instead of a venture capital company. It was a venture capital type play. And they just went put the foot right in the floorboard and played it hard.

Had they manufactured? By the way, both the way D and we started talking about going into the car business. They're going to buy a bank of a car business and go into the car business. I said, that's a great yard for you. When I was walking through that and he paid no attention to it.

Wasn't it right? Had you invested already when he told this plan? Yes, yes. And it worked. Fabulously.

After huge mistakes, they almost went broke with their early dealership building system. Almost went broke. What captivated you about the way I was a genius? He was at a PhD in engineering and he could look at somebody's party. He could make that part.

Look at the morning. Look at it. I'm going to get naked. I never seen anybody like that. He could do anything.

He is a natural engineer and a good done type production executive. And that's a big thing. It's a big lot of talent to have in one place. It's very useful. He's got all these problems on these electric cars and the motors and the acceleration and braking and so on.

How would you compare him and B.Y.D. to Elon and Tesla? Well, he's a fanatic that knows how to actually make things in his hands. So he has to. He's closer to ground zero in reverse.

The guy at B.Y.D. is better at actually making things than the kind of thing he's done. Charlie, you turn 100, which is an unbelievable statement on January 1st of next year. Do you have any plans? I'm going to party.

Where's the party going to be? The cowboy going. I totally maxed out the room. I can't squeeze another room. What captivates you these days?

What's fun? Well, personally everything is even politics bad as it is. It's kind of interesting. When you look back at your urine warrants time together, when did you have the most fun? It was about the same amount of all the way through.

We're having fun now. Is there a particular era that you remember the most fondly that feels like the good old days? No, we remember. We were saying blood and so those good old days. Oh, I mean, it's all in the room.

Yeah, a lot of close messes. We've got our big problem with Solomon. We could have had a big loss. We could have more problems than just a loss with Solomon, right? Well, actually, when we examined Berkshire Hathaway on our podcast, our takeaway was that the whole franchise was at risk during Solomon Brothers, the entire Berkshire Hathaway name and future.

Would you agree with that? Not so much. What is it like? If you would let the whole investment in Solomon go to zero, it would have been if it all blew up and went to zero, that we would have written up all went gone and done pretty well. What do you consider it to be your finest hour?

Well, we like to remember the close messes, very good. Yeah, terrible problems. Yeah, terrible problems with the vote. No news. The Buffalo Evening News?

Yeah, but yeah, there were two newspapers in that town. And we started a Sunday edition and that started a wholly war. The other guy went broke. We could have a lot of bad people to deal with that. And you were pretty young and enterprising at that point.

You were the one in Charlie of... No, but I was very aggressive about wanting to have a good Sunday edition. I didn't want to have a good Sunday edition. I didn't want to have a paper for 50 years. I didn't want to have a Sunday edition on the other guy.

What made the newspaper business so attractive at that point in history? Was it gold mine? That's attractive. Totally gold mine. Well, and the play in particular with the Buffalo Evening News and the Sunday edition was playing for the local monopoly, right?

You have a game in town and with newspapers, you could do that. Sure. I mean, newspapers for decades had EBITDA margins in the 50-60 percent range, right? No, only the little ones. Only the little ones.

Yeah, the bag went through the last 30 or 40 or 25 years. I said EBITDA on your presence. I apologize. Cash flow margins. Actually, do you still feel that EBITDA is a criminal the way that you've demonized it in the past?

Yeah, I do. I do. So you got to make a big truck company and take the depreciation out of the truck, so I'll be earning share of it lying about the earnings. You witnessed its rise with Malone and TCI and Liberty, when EBITDA was invented as a concept, right? Like, what were you thinking?

Well, I never liked Tom Malone's extreme manipulations. I don't want to be known as the great manipulator like Tom Malone is. He paid less than he come back to us than anybody. He just pushed everything to the drive-out industry. In many ways, EBITDA was the community-adjusted earnings of its era.

Are you familiar with the community adjustment from the working world? We were a whole boy. Medium. Final question to wrap up. What are the set of companies that you think are the greatest that you've ever seen?

Either that you've owned or that you've not owned? Well, there are a lot of great companies. It's an amazing company. It has heyday, General Motors is a great company. It just gradually went to hell one time after the start.

What do you think about the predictability of there were a number of companies back when you started where you could have said this business will be the same in 10 years? Do you think that number is the same today or do you think it's much harder? I think most places have a lot of change and threat in their future. Do you think most places have a lot of change and threat in their future even 50 years ago? And this story is over time.

There's a difference. Some of it I go is specialized in dust, though. And in Burger, there's a lot of them. We have a lot of companies that are quite insulated from really tough competition. Just because they've been so long and there's a good, what they do and there's a good reputation and high value and so on.

What companies can you see today where you can confidently say virtuous or aside, cost go aside. You can confidently say the business will be as good as it is today in 10 years. Well, I think a lot of companies are pretty good, but you can't count. At least they're going to happen. And because you may get something like I, you're in, just wants to push everything and do the right public relations.

So no matter how good the business is, it'll be kind of funny. Charlie, I have a personal question for you. David has a two-year-old and I'm going to have my first child in a month. What advice do you have for us about building families? Well, of course you've got to get along with everybody.

You've got to help them. They're tough times and they help you and so forth. But I think it's not as hard as, like half of the marriages in America work really damn well. And whatever it does as well, I'm both ahead of America. Somebody else, by the way.

Well, you've said that the best way to have great spouses to deserve one. Yeah, sure. As long as both parties feel that way, then it's a recipe for success. Well, of course it is. And you've got to trust with your spouse.

I guess it's like educating the children and so forth. Yeah. I love that. Well, Charlie, thank you. Yeah, thank you, Charlie.

Well, good luck to you. Charlie, this has been a lot of people are going to benefit a lot from hearing this and your wisdom and they're going to learn so much. Sorry. You know, if you're talking about it, it's pretty hard. It doesn't look so damn easy just to go out.

If you go to the ordinary person trying to promote himself as an investment advisor or so. He just thinks he knows everything about everything. And I was a federal reserve should be running and so on. We don't feel that way. I will say with the people we get to talk to who built great things, every single one of them says it was so hard.

It's so hard. You can't build something great without it being so hard. Charlie, thanks so much for doing this with us. Glad to do it. It'll be an interesting life really.

You'll do pretty well. But it's not going to be that damn easy. David, total life experience and complete boot-duckle. I can't believe we got to do this. I'm still pinching myself.

It's now a couple of weeks after it actually happened. I know with autographed copies of Port Charlie's Almanac to prove it. As if the podcast wasn't enough. And actually for those of you who haven't listened back what in 2021, so two years ago, we did a whole three part series just us covering the whole history of Berkshire Hathaway. Part one is on Warren, part two is on Charlie, part three is on Berkshire and Tenantat all the way up through to today.

I assume many of you have listened to that, but there probably are a bunch of folks who haven't. So if you want another nine or 10 hours of acquired content on Berkshire, I really think it's some of it's not our best work. Go check those out. With that listeners, our huge thank you to Tiny for being the sole presenting sponsor of this episode. If you have or you know of a wonderful internet business, you should reach out high at tiny.com and just tell them that Ben, David and Charlie sent you.

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