Tag Archives: munger

Summary Warren and Charlie Borrow with Pride. To be very successful you have to be intelligently different. Disciplined flexibility is a key advantage. Growing up in Nebraska it is no surprise that I was heavily influenced by Warren Buffett, Charlie Munger, and Berkshire Hathaway (NYSE: BRK.A ) (NYSE: BRK.B ). There is a lot to learn from the dynamic duo and there is a significant amount of material discussing their words of wisdom. However, there are a few things I have learned from them that are not as widely discussed as I think they should be or can be seen through a different lens. Borrow with Pride Years ago I used to follow an international telecom company called Millicom International. One of their common sayings was “Borrow with Pride” as they wanted employees to learn from and borrow ideas from one another. I had been borrowing with pride for many years before hearing this, but had never put it into those words. Now I have borrowed their saying as a motto in my life and am proud to Borrow with Price. Of course, Warren and Charlie figured this out years ago. It is widely known that Warren started off by borrowing many of the ideas of Benjamin Graham, then learned from Philip Fisher, and of course from Charlie Munger. For that matter, Charlie Munger’s lattice framework is based on borrowing (learning) ideas and concepts from others. Between Charlie and Warren there really have been few original ideas, but they have borrowed ideas from many people. Even looking at many of the companies Berkshire has purchased, both private and public companies, the ideas came from somebody else. For example, Lubrizol was David Sokol’s idea. The idea of borrowing with pride is really taking another angle on what we already know about Warren and Charlie. The reason why I look at it from this angle is because I know quite a number of very smart people that do not like to borrow ideas from others; they have to be original. At a firm I worked for one associate disliked the idea that I followed certain investors and looked into their holdings. He thought we should be original and find our own ideas through other means. There is nothing wrong with finding ideas that are original, but there is nothing wrong with borrowing either. What I think he missed is that the vast majority of frameworks we use are borrowed and the skills we have are learned from others. There is no shame in borrowing ideas from other smart people. Both Warren and Charlie have made a lot of money from borrowed ideas. Different, but Intelligent “If past history was all there was to the game, the richest people would be librarians.” – Warren Buffett To be extremely successful in investing you have to do something that is both different from the majority of investors, yet intelligent. While most of the ideas behind Berkshire Hathaway are borrowed they way they applied the concepts is original in many ways. This is a huge reason why they were and are successful. For centuries people had been investing insurance float, but Buffett and Munger used it differently. By being disciplined with the float they not only were able to obtain cheap leverage, which had a multiplier effect on their investment returns, but were actually paid to borrow money. The conglomerate structure has been around for centuries as well and Buffett and Munger both learned a lot from Henry Singleton who started Teledyne. However, Berkshire is different than Teledyne and was built to be an enduring company while Teledyne was eventually sold . Of course, if you do something different and it is not done intelligently than more likely than not it will be a failure, unless you get lucky. From Buffett and Munger I have learned to both borrow ideas/concepts and try to apply them in a different yet intelligent way. Apply it to yourself Let’s face it, you are not Warren Buffett or Charlie Munger and neither am I. If you try to completely imitate them you will find that you do not have the skills and attributes they do. However, each investor has their own talents and skills. Buffett and Munger talk about circle of competence and that should apply to both the types of companies you understand as well as the skills that you have. You need to know yourself, what skills you have, and strengths you can improve on to become a better investor. You don’t have to know everything as Warren said , “You only have to do a very few things right in your life so long as you don’t do too many things wrong.” Neither Warren or Charlie tried to be Benjamin Graham, Philip Fisher, or Henry Singleton but they did learn a lot from each of these men. What I have learned from Warren and Charlie is not to try to be them, but to learn from them and apply what I learn to myself. Flexible, Disciplined, Opportunistic Often people discuss the fact that Warren Buffett has changed his stripes over time from being more of a Graham net-net investor to a Fisher quality with growth investor. However, I see Buffett differently as I think he is quite flexible. After the financial crisis he invested in Bank of America Preferred Stock and Warrants. I wouldn’t call Bank of America a high-quality growth company. There was also the controversial derivative investments that have worked out well. In the book “Of Permanent Value” by Andrew Kilpatrick he mentions Buffett and Munger buying silver. When Berkshire Hathaway purchases 100% of a company you can bet that they think the company is a high-quality company. However, some of their partial investments have not been. Buffett and Munger are opportunistic; if they see an opportunity they will jump on it. Yet, they are disciplined in that they only invest in ideas they understand and expect to generate strong returns on. What I learned from Buffett and Munger is to be flexible to all the types of investments that I understand, but to be disciplined in my approach and wait for opportunities.